JAPAN SUZUKI GM
Koji Sasahara  /  AP
Suzuki Motor Corp. CEO Osamu Suzuki speaks during a news conference in Tokyo Monday. Struggling General Motors will sell a 17.4 percent stake in Suzuki, scaling down its share in an effort to gain sorely needed cash, but the partnership between the automakers will continue, both sides said.
updated 3/7/2006 3:25:39 PM ET 2006-03-07T20:25:39

General Motors Corp.'s board met for the first time Monday with new member Jerome York, an adviser to investor Kirk Kerkorian and an outspoken critic of the company's turnaround efforts.

In its one-day meeting, the board was expected to consider GM's planned sale of a majority stake in its finance unit, General Motors Acceptance Corp., as well as its ongoing negotiations with Delphi Corp., its former parts supplier. Delphi, which filed for bankruptcy protection last fall, is seeking an agreement with GM and its unions which would help it lower its labor costs.

A GM spokeswoman said the company doesn't comment on the board's agenda or discussions.

GM's board met the same day the struggling automaker announced the sale of a 17.4 percent stake in Japan's Suzuki Motor Corp. for $2 billion.

Merrill Lynch analyst John Murphy said the Suzuki sale may have been accelerated by York's arrival. York has called for GM to reconsider some of its noncore brands in order to amass cash for its restructuring. The Detroit automaker plans to cut 30,000 jobs and close 12 facilities by 2008.

The sale also could indicate progress in talks with Delphi, JPMorgan analyst Himanshu Patel said in a research note. Patel said $2 billion accounts for around half of what GM may have to spend on bailouts for Delphi workers.

But Patel said the Suzuki sale also could mean that a GMAC deal is a long way off and that GM wants to go ahead and use the $2 billion from the Suzuki sale for its North American restructuring instead of waiting for money from the GMAC sale.

"We do not believe the market would view this as entirely surprising," Patel said.

The automaker wants to sell the stake in order to improve GMAC's junk debt rating, which hurts the division's ability to borrow money.

"GMAC bondholders would be delighted to see a transaction of some sort take place," said Pete Hastings, vice president of corporate fixed income at the investment firm Morgan Keegan. The alternative is that GM fails to sell GMAC and is punished even further by the ratings agencies, he said.

Hastings predicted GM could reach terms of a sale within 90 days and close the GMAC deal by the end of this year.

GM shares rose 59 cents, or 3 percent, to close at $19.80 on the New York Stock Exchange.

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