Nov 28, 2008

Business - GM eyes €200m European asset sale

John Reed

General Motors has asked Jones Lang LaSalle, real estate agent, for help in raising up to €200m ($257m) from the sale and leaseback of some of its European offices and other property assets.

The mandate is part of a global push by the carmaker to raise up to $4bn from asset sales and capital market transactions as it runs critically short of cash.

In the US, the company is looking to sell and lease back the Renaissance Center, the Detroit skyscraper complex that serves as its headquarters.

When it reported third-quarter financial results, GM said it was studying additional ways of generating cash, one of which would be the sale of non-manufacturing assets. It is also trying to sell its Hummer brand, a transmission factory in Strasbourg, and its AC Delco carparts business.

GM would not comment on which assets it was seeking to sell in Europe, but a person familiar with the company’s plans said these might include the offices of its Saab brand in Sweden and the Vauxhall headquarters in Luton, England.

“We have engaged Jones Lang LaSalle to advise us on certain non-manufacturing assets,” Denis Chick, director of communications for GM UK and Ireland, said. “It would be premature to disclose any details as we are still assessing which assets would possibly be targeted for sale.” Jones Lang LaSalle confirmed it was advising GM, but declined to comment further.

GM is looking to dispose of real estate during one of the worst periods in recent memory, especially in the US and the UK, where many of the properties are located. Commercial property prices have dropped about a quarter this year. Property Week, a trade publication, reported this week that GM was looking to raise $500m from selling and leasing back the Renaissance Center.

Given the tough markets, analysts have expressed doubts about GM’s ability to meet its $4bn target for asset sales and new financing. Even the full amount would do little to turn the tide; GM burnt through $6.9bn in the third quarter.

“The original plan was $4bn,” said Bob Schulz, of Standard & Poor’s. “Even if they were to somehow get that tomorrow, it’s only a short period of additional liquidity, and the capital raising seems out of the question, given the state of the markets.”

Fritz Henderson, the carmaker’s chief operating officer, told the Financial Times in October that GM might use its South American manufacturing operations as collateral.