General Motors Corp.'s decision to sell its 20 percent stake in Fuji Heavy Industries will help the troubled U.S. automaker streamline its business and raise cash, auto analysts said Wednesday, but some questioned Toyota Motor Corp.'s purchase of GM's stake.
Toyota said Wednesday it has agreed to buy an 8.7 percent stake in Fuji from GM for about $315 million. Fuji is a rival Japanese automaker that makes Subaru cars.
GM, the world's biggest automaker, plans to sell its remaining 11.4 percent stake and dissolve its alliance with Fuji, the companies said. GM said "there were not enough collaborative projects" to sustain the alliance and that it planned to find other partners and markets in the Asia Pacific region for its resources.
GM will make around $725 million from the sale of its entire share of Fuji, Merrill Lynch analyst John Casesa said in a note to investors. Once GM's sales are completed, Toyota, Japan's biggest automaker, will be the top shareholder in Fuji.
Troy Clarke, president of GM's Asia Pacific region, resigned as Fuji's director of the board Wednesday.
"We've had a good partnership; however both GM and FHI 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," Clarke said.
Breaking its ties with Fuji is a small step in the right direction for GM, which is in need of a much larger restructuring, Casesa said. The sale will make GM more competitive and provide the company with some short-term liquidity, Casesa said, but it's not a great return on the automaker's investment. GM bought its stake in Fuji five years ago for about $1.3 billion.
Masaki Taketani, who analyzes Asian markets for CSM Worldwide, said Fuji is doing well right now but its future isn't bright in terms of product or its global manufacturing capacity. GM owns more valuable stakes in Japanese automakers Isuzu Motors, a truck maker, and Suzuki Motor Corp., which makes small cars, Taketani said. GM wants to concentrate on bringing small cars to Asia and Eastern Europe, he said.
The sales come in the wake of GM's worldwide losses of $1.1 billion in the first quarter and another $286 million in the second quarter. GM also is in the middle of tense negotiations with the United Auto Workers union to lower its health care costs and with its former parts supplier Delphi Corp., which is threatening bankruptcy.
By contrast, Toyota reported its best ever fiscal year profit in May of 1.17 trillion yen ($10.3 billion) as sales grew in North America, Europe, Japan and the rest of Asia. But Toyota Executive Vice President Mitsuo Kinoshita denied the move was a bailout for GM.
"We absolutely do not have help for GM in mind," he told reporters at a Tokyo hotel, where he appeared with Fuji Heavy President Kyoji Takenaka to announce a new alliance between the Japanese automakers.
Tsuyoshi Mochimaru, auto analyst with Deutsche Securities in Tokyo, said the move showed that GM and Fuji both saw that their alliance wasn't bearing fruit.
"In that sense, GM's alliance efforts with Fuji failed," he said. "But it will take time to assess whether synergies can grow between Fuji and Toyota."
Access to Fuji's plants could be a way for Toyota to raise its production capability at a time when its sales are on a roll, but Mochimaru said Fuji, a relatively niche market player, only runs one plant in North America and is unlikely to deliver much of a boost in production for Toyota.
Erich Merkle, a senior auto analyst with the consulting company IRN Inc., said the alliance will give Toyota access to Subaru's all-wheel-drive technology. Even more significantly, it will give Fuji access to Toyota's hybrid technology, Merkle said.
Merkle said GM failed to leverage its partnership with Subaru. GM had plans to use Subaru's all-wheel-drive technology but never did, Merkle said. GM also should have taken advantage of Subaru's expertise in the growing crossover segment, he said.
GM will continue work with Fuji on one production vehicle, the Saab 9-2x, GM said. But other projects will end, including the joint development of a crossover vehicle, announced last year.
Toyota is paying 520 yen ($4.60) a share for the roughly 68 million Fuji shares it is buying from GM. That is below the closing price for Fuji shares of 540 yen ($4.70) on Wednesday before the deal was announced.
The price of GM's remaining 89 million shares will be determined in the marketplace as GM offers the shares back to Fuji as part of Fuji's open-market share buyback program and through market sales. That stake was worth about $418 million at Wednesday's closing Fuji price.
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.
Toyota shares, which have held steady over the past year but gradually rose since May, dipped nearly 1 percent to close at 5,250 yen ($46) before the deal was announced. GM shares were down $1.45, or nearly 5 percent, to close at $28.63 on the New York Stock Exchange.