GM to sell Fuji Heavy stake No more Saabarus like the 9-2X, nor will the Swedes get the chance to make the B9 Tribeca actually look good By Shawn Langlois, MarketWatch Last Update: 4:59 PM ET Oct. 5, 2005 WASHINGTON (MarketWatch) -- General Motors Corp., faced with runaway healthcare costs and being asked to bail out its top auto parts supplier, said Wednesday it is selling its stake in Fuji Heavy Industries Ltd., a move that could raise about $1 billion. GM's entire equity position in Fuji Heavy, a Japanese conglomerate best known as the manufacturer of Subaru automobiles, was acquired in 2000 and amounts to about 20%. Toyota Motor Corp., GM's fiercest rival and threat to take the top car-seller crown, will pay $315 million, or $4.60 a share, to acquire about 8.7% of this interest. GM said it plans to divest the other 11.4% through an open-market buyback program and via market sales if necessary. The total proceeds depend on market conditions over the next three days. The divestiture is expected to be completed in the fourth quarter. GM will also end its alliance with Fuji Heavy, bringing to an end their Saab crossover vehicle development program. Instead, GM will work with its other strategic partners in Asia. Both companies "came to the conclusion that there were not enough collaborative projects to sustain the alliance and that each of our interests could be better served through a different approach," said Troy Clarke, GM's group vice president and chief of its Asia-Pacific operations. GM, in the midst of a wrenching restructuring program, said cash proceeds received and any potential gain on the Fuji Heavy sale will be recorded in the fourth quarter. Also Wednesday, GM will make a Securities and Exchange Commission filing describing a restatement of second-quarter financial statements to reflect a reduction of $700 million to $800 million in the carrying value of its Fuji Heavy stock. Meanwhile, GM and the United Auto Workers are close to striking a deal that would cut the automaker's health-care costs by $1 billion, according to the Detroit News. That's about a sixth of 2005's estimated health-care bill, which is pegged to approach $6 billion. Such a deal would affect both GM's current staff and covered retirees, but the Detroit News report noted that people familiar with the talks say they could still fall apart. Goldman Sachs later in the day said major health care concessions, contrary to the reports, are unlikely, as long as GM is paying a $2 dividend and has ample near-term cash and liquidity. Noting the stock's current valuation, analyst Robert Barry said the upside from the possible concessions is already priced in and further gains would not be justified. Shares of GM lost their footing in late trade, closing down $1.45, or 4.8%, at $28.63. Analyst Himanshu Patel of J.P. Morgan was much more sanguine about the prospects of an agreement. He also noted that the cash infusion from the sale of Fuji Heavy could help General Motors offer a bailout to Delphi Corp., which is reportedly close to filing for bankruptcy. "This timing of this pending divestiture cannot be overlooked, in our view," said J.P. Morgan analyst Himanshu Patel. "We would argue that proceeds from this sale could be used to partly finance employee packages at Delphi." ------ Toyota Buys Stake in Fuji Heavy From GM Wednesday October 5, 6:50 am ET By Yuri Kageyama, AP Business Writer TOKYO (AP) -- Toyota has agreed to buy an 8.7 percent stake in Japanese automaker Fuji Heavy Industries from General Motors Corp., officials from both companies said Wednesday, in a deal that will make Toyota the top shareholder in the company that makes Subaru cars. GM and Fuji agreed to dissolve their alliance and capital relationship, said Toyota executive vice president Mitsuo Kinoshi ta and Fuji Heavy President Kyoji Takenaka at a joint news conference. GM will sell its remaining 11.4 percent stake in Fuji in the market. Toyota Motor Corp. and Fuji are setting up a steering committee to try to reach an agreement on future collaboration as soon as possible, the companies said. Toyota has been on a roll lately, boosting sales in North America, Europe and other parts of Asia and recording booming profits. GM, based in Detroit, has been in trouble, losing $1.1 billion in the first quarter. GM and Toyota have a long-standing partnership to share environmental technology, and they run a car assembly plant in California together, although the ties do not involve holding stakes in each other. Toyota Chairman Hiroshi Okuda has expressed worries lately about a possible political backlash from U.S. automakers because of Toyota's bright results at a time when GM and Ford are faltering. He even suggested Toyota raise the price of car models in the United States. Toyota raised prices soon after, but denied the move was to placate U.S. automakers. Toyota, based in central Japan's Toyota city, holds stakes in two other Japanese automakers, Daihatsu Motor Co., which makes small cars, and Hino Motors, which makes trucks.