GM to sell stake in Suzuki to raise cash

TOKYO (Reuters) - General Motors GM.N will sell back its 3 percent stake in Suzuki Motor (7269.T) for $232 million (155 million pounds) as part of the struggling U.S. automaker's efforts to raise cash.

The move comes as the U.S. Congress debates a bailout for money-losing car makers that some say will give the firms a chance to restructure and save jobs while others say it only throws good money after bad.

Suzuki, which entered into a capital tie-up with GM in 1981, said it would pay 1,363 yen per share -- the price at which its shares closed on Monday -- to buy back the 3.02 percent stake.

The two firms, which together own a factory in Canada for the North American market, plan to continue to co-operate on developing hybrid cars, and there may be tie-ups in emerging markets, Suzuki said.

Suzuki, a maker of compact cars with a lead in the growing Indian market, held 456 billion yen (3.16 billion pounds) in cash and cash equivalent at the end of March and can afford to help GM, analysts said.

GM, which held as much as 20 percent of Suzuki in 2000, sold back a 17 percent stake in March 2006 to Suzuki. Suzuki will now own 20 percent of itself, and it said it will continue to hold its shares with the understanding that GM will consider a share re-purchase in the future.

"Suzuki needs someone -- they don't have the scale to develop next-generation cars," said Kurt Sanger, auto analyst at Deutsche Securities. The pickings are slim for alternative partners: Toyota already has its minivehicle unit Daihatsu (7262.T), and Nissan (7201.T) is slashing jobs as it reels from slumping sales.

Even if Suzuki is forced to retain the shares, the cash-rich firm is buying them at an attractive price, and can eventually resell them at a profit, or can cancel them at little cost to shareholders, Sanger said.

(Reporting by Mayumi Negishi; editing by Sophie Hardach)