GM to sell 3 per cent in Suzuki for $230 million

General Motors Corp, seeking a federal bailout as its cash dwindles, will raise 22.4 billion yen ($230 million) by selling its 3 per cent stake in Suzuki Motor Corp.

The Hamamatsu, Japan-based company will use cash to buy back its own shares on Tuesday at 1,363 yen a share, it said in a statement on Monday.

“We are responding to GM's need to let go of its stake to raise funds,” said Suzuki Chairman Osamu Suzuki in the statement. “This will not have an impact on our management policy.”

The US carmaker is selling its stake in Suzuki as it seeks to avoid a collapse that would cost the government as much as $200 billion, according to IHS Global Insight Inc. GM, Ford Motor Co and Chrysler LLC are struggling with mounting losses amid their worst sales year since 1991.

“We highly value our strategic relationship with Suzuki,” said GM Chief Executive Officer Rick Wagoner in a separate statement. “This action will have no impact on our existing bilateral business relationships.”

GM first invested in Suzuki in 1981 and held as much as 20 per cent of the Japanese carmaker after doubling its stake in 2001. In 2006, GM raised almost $2 billion by selling a 17.4 per cent stake at 2,490 yen a share.

At that share price, GM would have raised 40.8 billion yen for the stake it will sell on Tuesday. As of September 30, Suzuki had 119 billion yen in cash on its balance sheet.

Suzuki has a joint venture with GM in Canada producing the XL7 sport-utility vehicles. Suzuki said on November 5 it would halt production of the model by the end of this year as industrywide demand slumps. Suzuki produces the Escudo SUV at GM's plants in Argentina and a V6 engine designed by GM at the Japanese carmaker's Sagara plant in Shizuoka prefecture.