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GM seeks $5B credit line for slowdown, to repay debt

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GM seeks $5B credit line for slowdown, to repay debt



General Motors is seeking a line of credit of at least $5 billion from banks to enable it to repay debt and prepare for another decline in U.S. auto sales, said a person familiar with the talks.

GM had $23.3 billion of cash and about $14 billion of debt as of March 31, according to its first-quarter financial report. Although the automaker repaid the final $5.8 billion of government loans in April, the federal government still owns a 61% stake. A public stock offering, expected to begin later this year, would enable the government to sell at least some of its shares in GM.

GM's U.S. sales have risen 14% in the first half of this year from a year earlier. Its market share fell to 19.2% from 19.6%, despite shedding four brands -- Hummer, Pontiac, Saab and Saturn. In the first quarter, GM earned an $865-million profit.

The automaker is restructuring unprofitable European operations, but growing in China, Russia, India and Brazil, where most of the auto industry's growth is to occur in the next decade. GM sold more cars in China in the first half of 2010 (1.21 million) than in the U.S. (1.08 million).

It also has given stock valued at $6.66 million to 14 top managers, including $1.33 million worth to Chairman and CEO Ed Whitacre, according to a filing with the Securities and Exchange Commission.

Seeking a new line of credit can prepare GM to operate without government assistance.

"As (Ford CEO) Alan Mulally taught the industry, you can never borrow too much cash," said Rebecca Lindland, an analyst with IHS Automotive. In 2006, Ford borrowed $18 billion, pledging nearly all company assets as collateral.

Lindland also said the credit line could give GM financial flexibility so it doesn't hurry a stock offering before either it's profitable or the world economy is on stronger footing.

GM spokeswoman Noreen Pratscher declined to comment on any talks with banks, but did say that securing a revolving line of credit would be "a prudent decision" that was not influenced by any specific economic data.

Although U.S. car sales have increased nearly 17% so far this year, the annual selling rate in June slipped to 11.1 million from 11.6 million in May. That has raised broader concerns about the U.S. recovery.



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