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General Motors Corp. took a key step toward its downsizing on Tuesday, striking a tentative deal to sell its Hummer brand, while also revealing that it has potential buyers for its Saturn and Saab brands.
Detroit-based GM said it has reached a memorandum of understanding with a buyer for Hummer, though it did not name the buyer or the price. The automaker said the sale will likely save more than 3,000 US jobs in manufacturing, engineering and at various Hummer dealerships.
"We're not today in a position to be able to identify a buyer. It was part of the agreement," GM Chief Executive Fritz Henderson told CBS's "The Early Show." "We believe the buyer is quite capable of closing."
The automaker also said Tuesday that it has 16 buyers interested in purchasing its Saturn brand, while three parties are interested in the Swedish Saab brand.
Chief Financial Officer Ray Young told reporters and industry analysts on a conference call that GM is continuing to pursue manufacturing agreements with a new Saturn buyer.
GM would like to keep the money-losing Saturn brand's dealership network, contracting with the new buyer to make some of its cars while the buyer gets other vehicles from different manufacturers.
At the same time, bridge loan discussions with the Swedish government are progressing, Young said.
GM, which filed for bankruptcy protection in New York on Monday, is racing to remake itself as a smaller, leaner automaker. It is hoping to follow the lead of fellow US automaker Chrysler LLC by transforming its most profitable assets into a new company in just 30 days and emerging from bankruptcy protection soon after.
But GM is much larger and complex than its Auburn Hills, Michigan-based rival and isn't up against Chrysler LLC's tight June 15 deadline with Fiat.
Sharon Lindstrom, managing director at business consulting firm Protiviti, said the companies pose different challenges. But as with Chrysler, she notes that the Treasury Department made sure many of GM's moving parts were in order ahead of time so a quick bankruptcy reorganization might be possible.
"They had a lot of their ducks in a row because the terms of the government financing forced them to get all the parties to the table in a very, very short period of time," Lindstrom said.
In addition to its plan to sell the Hummer, Saab and Saturn brands. GM will also phase out its Pontiac brand, concentrating on its Chevrolet, Cadillac, Buick and GMC nameplates.
Separately, the German government on Tuesday said it paid out the first $425 million in bridge loans to GM's Adam Opel GmbH division. The loans are part of a deal to shrink GM's stake in Opel and shield it from GM's bankruptcy protection filing in the US. Over the weekend, the German government agreed to lend Opel $2.1 billion. The loans are part of a deal in which Canadian auto supplier Magna International Inc. and Russian-owned Sberbank will acquire 55 percent of the company.
A sale of the Hummer brand had been expected. Chief Executive Fritz Henderson had said in April that the automaker was expecting final bids from three potential buyers within the month.
GM nailed down deals with its union and a majority of its bondholders and arranged to sell off most of its Opel operations in Europe in order to appear in court Monday with a near-complete plan to quickly emerge with a chance to become profitable.
The government has said it expects GM to come out of bankruptcy protection within 60 to 90 days. By comparison, the judge overseeing Chrysler's case approved the sale of its assets to a group led by Italy's Fiat Group SpA in just over a month. Some industry observers think Chrysler could emerge as early as this week.
During Monday's hearing GM attorney Harvey Miller stressed the magnitude of the case and the importance of moving GM through court oversight as fast as possible. He noted that the automaker only has about $2b. in cash left.
"If there's going to be a recovery of value, it's absolutely crucial that a sale take place as soon as possible," Miller said in his opening statement.
The automaker wants to sell the bulk of its assets to a new company in which the US government will take a 60% ownership stake. The Canadian government would take 12.5% of the "New GM," with the United Auto Workers union getting 17.5% and unsecured bondholders receiving 10%. Existing GM shareholders are expected to be wiped out.
Attorneys for GM stakeholders packed the stuffy courtroom well ahead of the automaker's first-day bankruptcy hearing. US Judge Robert Gerber moved swiftly through the agenda's more than 25 mostly procedural motions.
Gerber set GM's sale hearing for June 30, putting it on a path similar to that of Chrysler. Objections are due on June 19, with any competing bids required to be submitted by June 22.
Gerber also gave GM immediate access to $15b. in government financing to get it through the next few weeks, and interim approval for use of a total $33.3b. in financing, with final approval slated to be ruled on June 25. The funds are contingent on GM's sale being approved by July 10. Gerber also approved motions allowing the company to pay certain prebankruptcy wages, along with supplier and shipping costs.
The sheer size of GM makes it a more complicated case than Chrysler.
GM made twice as many vehicles as Chrysler's 1.5 million last year and employs 235,000 people compared with Chrysler's 54,000. GM also has plants and operations in many more countries, meaning it will likely have to strike separate deals to navigate the bankruptcy laws of those places.
GM Chief Executive Fritz Henderson said GM has learned a few things by watching Chrysler's case.
GM's filing for bankruptcy protection is the largest ever for an industrial company. GM, which said it has $172.81b. in debt and $82.29b. in assets, had received about $20b. in low-interest loans before entering bankruptcy protection.