NEW YORK (CNN/Money) -
There is a growing expectation on Wall Street that General Motors Corp. is looking at a major restructuring that could include the sale of all or part of GMAC, its profitable finance arm, according to a published report.
The Wall Street Journal reported Wednesday that the moves could be prompted by the downgrade of the company's credit to junk bond status, as well as the growing investment in the company by financier Kirk Kerkorian, who could become its largest individual shareholder with nearly a 9 percent stake if his tender offer for shares is successful.
GMAC also had its credit rating downgraded to junk bond status, even though it has continued to be very successful in its own right. Last year it earned $2.9 billion, or more than 80 percent of overall company earnings before special items.
The newspaper said analysts now are arguing that selling all or part of GMAC would help GM pay for an overhaul of its money-losing North American auto business -- or allow it to return more cash to shareholders, while at the same time again giving GMAC an investment-grade debt rating that will help its own profitability.
A GM spokeswoman had only limited comment on the speculation about a sale of GMAC.
"We are exploring how we would attain a separate rating for GMAC. We would probably look at and evaluate any and all options that would lead to that," said GM spokeswoman Toni Simonetti. "Whether we would pursue those options, I don't know, but certainly we want to know what those options are."
Some investors told the newspaper that while they would ideally prefer GM to hold onto GMAC, the time may have come for it to take significant action.
"I would hate to see them split off some of their best assets, but at the same time they need to take some strong action to save the company," said Christopher Ailman, chief investment officer of the California State Teachers Retirement System, which owns 737,679 shares of GM, according to tracking service LionShares, which is down 1 million shares from its earlier position.
The newspaper said any proceeds from a sale of part of GMAC's stake could be returned to shareholders rather than reinvested in the company's auto manufacturing operations. Kerkorian has in the past invested in companies and then pushed management to return more wealth to shareholders, the newspaper reports.
Despite problems of declining U.S. market share and mounting losses from its core auto operations, the company's balance sheet is strong and doesn't need a cash infusion from a sale. It had $52.6 billion in cash and marketable securities on its balance sheet at the end of the first quarter, although that was down from $57.7 billion at the start of the quarter.
For more details on Kerkorian's play for GM shares, click here.
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