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Last Updated: Wednesday, 15 March 2006, 21:07 GMT
GM 'may sell its financing arm'
General Motors vehicle
GM is trying to turnaround its fortunes
Struggling US car giant General Motors (GM) may be planning to sell a majority stake in its financing arm GMAC, media reports have suggested.

According to press speculation, GM has received a $12.5bn (7bn) bid for a controlling stake in GMAC from private equity firm Kohlberg Kravis Roberts.

The bid is rumoured to rival an earlier offer from hedge fund Cerberus Capital Management.

GM said it did not comment on "speculative stories".

The firm is, however, seeking funds to aid its ongoing turnaround efforts.

Profitable unit

Earlier this month GM announced plans to raise $2bn through the sale of 17.4% of its stake in Japanese carmaker Suzuki.

While GM has struggled with large losses in the face of falling sales and tough competition, its GMAC finance arm has remained highly profitable.

Last year GMAC earned $2.8bn, compared to GM's overall loss of $8.6bn.

Analysts speculate that GM wishes to sell a stake in GMAC both for the immediate cash injection, but also to improve GMAC's credit rating, which has been dragged down by GM's own "junk" score.

This would enable GMAC to borrow additional funds at a cheaper rate.

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