NEW YORK (CNNfn) - General Motors' Hughes Electronics Corp. is reportedly seeking bids for its defense and aerospace businesses, which together could command $8 billion.
The Wall Street Journal said Thursday that McDonnell Douglas Corp., Northrop Grumman Corp., and Raytheon Co. are expected to bid on the operations, which contributed about 41 percent of Hughes's $14.7 billion in sales in 1995 -- and about 39 percent of its profit. They include defense electronics, missiles, information systems and air-traffic-control equipment.
Sources close to GM caution that, while Hughes Chairman C. Michael Armstrong is actively looking for buyers, there is a possibility that no sale will be made, the paper said. Among other considerations, GM could decide to keep the defense business if it can't find a solution to complex tax issues relating to its Class H shareholders, who have dividend claims but no equity interest.
But Armstrong and senior officials of GM have for more than a year been intensively studying strategic moves to reshape Hughes.
Divesting the company of its defense assets would allow Armstrong to focus the company on its growing role in the satellite-communications industry, the paper said.
GM is already moving toward merging Hughes's automotive-related operations, grouped in Delco Electronics, with its own Delphi Automotive Systems parts-making business.
People familiar with GM's strategy say all this is part of a broader goal by the No. 1 auto maker to become a pure automotive play, shedding the bulk of its noncore operations, the Journal said.
If Hughes does complete an auction of its defense operations, it would mark the biggest and most significant move this year in what is a time of consolidation in the aerospace and defense industry. The trend was accelerated in 1995 by the merger of Lockheed Corp. and Martin Marietta Co., and followed by the combined company's $9.1 billion acquisition of Loral Corp. in the spring.
Boeing Co. also joined the frenzy by agreeing to acquire the defense operations of Rockwell International, and Texas Instruments Inc. has been holding an auction of its defense units.
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