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SoCalCTS

GM to sell Truck unit to Isuzu

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International Herald story

Isuzu plans to buy GM stake in Australia
By Naoko Fujimura and Maki Shiraki Bloomberg News

MONDAY, OCTOBER 24, 2005

TOKYO Isuzu Motors, the largest Japanese truck maker, said Monday that it planned to buy General Motors' stake in a jointly-owned Australian truck venture, extending an overseas push that has delivered record earnings.

The company planned to buy GM's 40 percent stake in Isuzu-General Motors Australia, said Kouitsu Mabuchi, an Isuzu spokesman in Tokyo. Mabuchi declined to give price details.

Isuzu may also take a majority stake in a new truck unit in South Africa, to be spun off from a GM subsidiary, the Nihon Keizai newspaper reported Monday.

The Australian sale would be the second in the Asia-Pacific region this month by GM, which is raising cash after posting $3.8 billion of losses in the first nine months and losing its investment-grade credit rating in May.

The deal fits the strategy of Isuzu's president, Yoshinori Ida, who is shifting production abroad to cut costs and to shield earnings from currency swings.

Isuzu shares rose nearly 3 percent in Tokyo on Monday to close at ¥451, and have surged 49.5 percent this year.

"It's good that Isuzu is getting its plan to fruition and executing the plan to expand abroad," said Naruse Shinya, an analyst at Nomura Securities in Tokyo. Japan's "domestic truck sales have become flat," he said.

GM sold 8.7 percent of Fuji Heavy Industries to Toyota Motor on Oct. 5 for $740 million. GM's decision to sell its overseas assets to Isuzu suggests that the U.S. automaker will keep its 7.9 percent stake in the Tokyo-based truck maker, said Atsushi Kawai, an analyst at Mizuho Investors Securities.

"This would confirm that the link between GM and Isuzu is close," said Kawai, predicting that Isuzu's shares would "outperform" the market. "Isuzu wouldn't buy out the venture" if GM planned to end the relationship, he said.

Isuzu, which sells three in four of its vehicles abroad, earned a record profit of $60 billion in its last business year, after taking market share from Mitsubishi Fuso Truck & Bus.

Its global vehicle sales in the quarter that ended June 30 rose 79 percent to 98,617 units, helped by demand from China and Thailand.

The company said last month that it planned to set up a 680 million yuan, or $84 million, joint venture with Qingling Motors in Chongqing, southwestern China, to make as many as 175,000 engines and parts for the Chinese and export markets.

Isuzu in June announced a 624 million Hong Kong dollar, or $80 million, plan to triple its stake in Qingling to 20 percent to build trucks for the construction boom that has started ahead of the 2008 Beijing Olympics.

GM's venture in Melbourne imports Isuzu's N-Series light trucks, F-Series medium-size trucks, and G-Series and Giga heavy trucks. It imported 5,644 units in the first nine months of this year, a spokesman, Campbell Johnston, said.

Isuzu said the venture sold 6,757 trucks in Australia last year, with 21 percent of the market.

The Nihon Keizai newspaper reported Monday that Isuzu would take a majority stake in a new truck unit in South Africa, to be spun off from a GM subsidiary. The paper also reported the Australian acquisition plan.

GM, meanwhile, said that it was in talks with several companies aimed at forming a "strategic partnership" by selling them a stake in General Motors Acceptance, its auto-finance unit. Edited by SoCalCTS
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International Herald story
Isuzu, which sells three in four of its vehicles abroad, earned a record profit of $60 billion in its last business year, after taking market share from Mitsubishi Fuso Truck & Bus.

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Is $60 billion profit a typo, as wouldn't that make Isuzu the most profitable vehicle manufacturer in the world?
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"This would confirm that the link between GM and Isuzu is close," said Kawai, predicting that Isuzu's shares would "outperform" the market. "Isuzu wouldn't buy out the venture" if GM planned to end the relationship, he said.

Errr, and what does he think they'd do if GM did want to end the relationship, sell their truck business to GM? The commerical truck business is heavily cyclical and GM will not be very attached to the business. Beyond the distribution operations in Australia I would expect GM to be interested in selling the manufacturing operations in Nigeria and Kenya, not just in South Africa.

Net profit for FY2005 was just over 60 billion yen - about $520 million, but is forecast to drop to 50 billion yen for FY2006. Market cap has gone from $3billion to $4.6billion with the recent rise in the stock price, compared to $1.9billion for Navistar. The company is still highly leveraged
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