Isuzu Motors in Talks to Take Over GM's Commercial Truck Business Downunder

TOKYO October 23, 2005; The AP reported that Japanese truck maker Isuzu Motors is wrapping up talks with General Motors to take over the struggling U.S. auto maker's commercial truck business in Australia, an Isuzu spokesman said Monday.

But GM spokeswoman Masako Hamada said nothing had been decided, although GM remains interested in strengthening its relations with Isuzu.

Tokyo-based Isuzu Motors Ltd., which owns 60 percent of Isuzu-General Motors Australia Ltd., will make the company a wholly owned subsidiary by acquiring GM's 40 percent stake, Isuzu spokesman Tadashi Ioka said. Isuzu has not decided on the timing of the move but is in the final stages of reaching an agreement with GM, he said.

"Our plans for Australia are just one part of our long-term global strategy," Ioka said, adding that buying GM's stake wasn't an effort to provide aid to the U.S. auto maker.

GM, based in Detroit, has lost nearly US$3 billion (euro2.5 billion) in the first nine months of the year and announced a tentative agreement with the United Auto Workers last week that will help lower its spending on health care for workers and retirees.

The world's biggest auto maker has been suffering from declining U.S. market share, rising costs for materials such as steel, and a drop in sales of sport utility vehicles, its longtime cash cow.

Earlier this month, GM said it was ending its alliance with Japanese auto maker Fuji Heavy Industries by selling its entire 20 percent stake in the maker of Subaru cars.

At that time, Toyota Motor Corp. of Japan, a company with booming profits and growing U.S. market share, announced it was buying an 8.7 percent stake in Fuji from GM for about US$315 million (euro264 million).

Although both Toyota and GM deny the move is a gesture to help GM at a time when some Toyota officials are nervous about a possible political backlash from Washington because of the auto makers' contrasting fates, the Japanese media and some analysts have speculated that helping cash-strapped GM is at the back of Toyota's mind.

If carried out, Isuzu's taking over GM's truck operations may also fill a similar purpose.

GM Vice President Larry Burns said last week that GM's partnerships with Isuzu, which has important diesel engine technology, and Suzuki Motor Corp., a Japanese auto maker that makes small cars, remain solid, despite GM's decision to end its alliance with Fuji.

GM set up an alliance with Isuzu in 1971, and at once point owned as much as 49 percent of the Tokyo-based truck maker. About five years ago, Isuzu fell into serious financial trouble and carried out widespread cost cuts in 2001 and 2002. Isuzu returned to profitability last year.

Isuzu's Australian joint venture markets the Elf light truck and other vehicles Isuzu ships from Japan, making it a key part of the Japanese company's sales strategy in the Australian market.

Japan's largest business newspaper, Nihon Keizai Shimbun, reported Monday that Isuzu also expects to take a majority stake in a new truck unit to be spun off from a GM subsidiary in South Africa that makes and markets trucks. Such changes will allow GM to concentrate on its critical passenger car business, the Nikkei said.

Ioka said Isuzu was reevaluating its plans for South Africa but denied talks had taken place with GM on the truck operations there. Isuzu, in which GM owns an 8 percent stake, aims to become the core truck producer in the GM group, the Nikkei said.