CHICAGO--(BUSINESS WIRE)--Aug. 16, 2002--Fitch Ratings today
released its comments on the recent restructuring announcement by
General Motors Corp. (GM) minority-owned (49%) Isuzu Motors Ltd.
(Isuzu). In total, Fitch sees these actions as positive for GM, as it
has effectively secured control of the Isuzu assets that directly
impact GM. GM's senior unsecured debt is currently rated 'A-', while
its short-term debt is currently rated 'F-2'. The Rating Outlook for
GM is Negative.
Assuming Isuzu's plan receives approval from its creditors, GM
will inject JPY60 billion (approx. US$500 million) into Isuzu. Of this
total figure, JPY50 billion (approx. US$420 million) represents the
acquisition of interests in existing joint ventures and intellectual
property, while the remaining JPY10 billion (approx. US$ 80 million)
represents an equity infusion. When combined with the required
consolidation of US$ 300 million of existing debt held by these joint
ventures, the total impact on GM's net liquidity will be approximately
As a part of Isuzu's reorganization, GM will purchase an
additional 20% stake in DMAX, Ltd., a joint venture between General
Motors and Isuzu. This joint venture, located in Ohio, operates an
engine plant that is the sole supplier of diesel engines to General
Motor's very profitable full-size truck platform. This engine, the
Duramax 6600 V8 engine, is well regarded by industry followers and has
been key to GM's renewed success in the heavy-duty segment of the
light-truck market. By acquiring a controlling stake in the joint
venture, GM has limited possible supply disruptions that could impact
the sales of its profitable full-size trucks.
GM is also acquiring a 60% stake in Isuzu Motors Polska Sp. Z.O.O.
(Ispol). Based in Poland, this operation makes the small-displacement
engines utilized in GM's European car business. By securing a
controlling stake in Ispol, GM has solidified its diesel engine
position in Europe as it attempts to meet rapidly increasing European
demand for diesel-powered vehicles.
In addition to these two controlling stakes in important joint
ventures, GM is also acquiring the ownership of the technologies
associated with the Duramax and Circle L engines manufactured in these
facilities. GM will also purchase ownership of other vehicle and
engine technologies that it would have otherwise paid for through
royalties over time.
By participating in Isuzu's restructuring GM will not only acquire
valuable assets, but will also help ensure Isuzu's continued
participation in existing joint programs. These include existing
efforts in light and medium-duty trucks. One of the more important of
these programs is GM's upcoming mid-size truck. Developed in
coordination with Isuzu, this truck represents a strong move forward
for GM's truck portfolio. These vehicles (currently named the
Chevrolet Colorado and the GMC Canyon) will replace the existing
Chevrolet S-10 / GMC Sonoma. Similar in size to GM's current mid-size
utilities and possessing engines from the same extremely architecture
as popular in-line six engine family, the increased size and features
of this new product will present much stronger competition to trucks
like the Ford Ranger, Dodge Dakota, Nissan Frontier, and Toyota
In addition to the approximately US$420 million spent on asset
acquisition, GM will infuse approximately US$80M of equity into Isuzu.
Under the current restructuring plan, GM's existing equity (which has
been written down to zero by GM) will be canceled. The US$80 million
equity infusion will represent approximately 12% of Isuzu's new
Support for Isuzu is not limited to GM's efforts, as the current
plan would entail Isuzu's bank group not only swapping JPY100 (approx.
US$ 833 million) of debt into preferred equity, but also providing the
additional loans necessary for the restructuring.
Fitch will continue to monitor this issue for further
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