GM yard sale to take time, yield little

NEW YORK - General Motors Corp is about to open the door on the biggest garage sale in U.S. industrial history.

But even as buyers line up to get a deal on some of the heavily discounted assets, industry analysts and bankers say it could take several years for GM to offload everything it wants to sell or liquidate.

GM, which filed for bankruptcy on Monday, plans to put all the assets it wants to get rid of in an old company while retaining everything else in a New GM.

Assets in the old GM include Hummer, Saab and Saturn brands, as well as some plants the automaker plans to shut down as it seeks to align production with shrinking demand.

The process allows automakers from emerging countries such as China, India and Russia to pick up brands, equipment, or technology at fire sale prices.

The asset sales will take a bit longer than usual in a bankruptcy process, as the court would have to approve every sale and creditors would have the right protest any of them.

Also, an Everything Must Go sign on the entire old company is sure to hurt asset prices. Investors will be able to buy these assets for cents on the dollar, Pete Hastings, a credit analyst at Morgan Keegan, said.

But the auctions of GM assets that were already on the block will probably not be affected too much.

These assets were already distressed, one banker involved in one of the auctions said, requesting anonymity because of the confidential nature of the sales processes. The added layer of bankruptcy doesn't really impair their value in bankruptcy, because those values were already at zero.

HUMMER, SAAB

GM's iconic gas-guzzling brand, Hummer, has been up for sale for nearly a year as the automaker has struggled to find a buyer. On Monday, GM said it was getting close to financing some agreements with a possible buyer.

GM had originally said it would decide by the end of March whether it would sell or fold the brand, but it was unable to meet that self-imposed deadline.

A source familiar with the matter told Reuters on Monday GM would announce a decision on Hummer in the next few days, adding that the two final bidders were buyers from overseas.

Investment bankers do not expect Hummer to fetch more than $100 million in cash. Bankers had initially estimated that Hummer could fetch between $500 million and $750 million, considering it a distressed asset.

But as the months have passed by, that valuation has been hurt by the weakening economy, continued tightness in credit markets and a lack of interest.

GM is also running an independent auction for its Swedish brand, Saab, which sought protection from creditors in February to survive the current economic downturn and buy time to find a new owner after GM decided to cut its ties with the brand.

A source familiar with the matter told Reuters that Swedish luxury carmaker Koenigsegg and U.S. financier Ira Rennert and his Renco Group were in the final round of the auction.

GM bought 50 percent of Saab in 1990 for about $700 million. It paid $125 million and assumed debt for the remainder of the unit in 2000. But with auto sales at record lows -- Saab sales fell 35 percent in 2008 -- any likely buyer is expected to take over the brand at a heavy discount.

I'd be surprised if any cash changed hands, aside from government guarantees, another banker said, also requesting anonymity because of involvement in confidential deals.

Saab said it lost about $340 million in 2008 and projected a similar loss this year due to slack demand, an aging vehicle line-up, overcapacity and high costs.

PLANTS F0R SALE

As part of its restructuring efforts, GM plans to close or put on standby several plants in Michigan: Grand Rapids, Pontiac, Orion, Livonia, Flint and Willow Run.

Other plants up for closure or standby are in Tennessee, Delaware, Indiana, Ohio, Virginia and New York.

While some Asian automakers have informally talked about plants in the past few months, no formal sale processes have begun, two sources familiar with the matter said.

One of them said interested parties are waiting for United Auto Workers union employees to move out of the plants before considering anything seriously. As part of its restructuring, GM will lay off 18,000 to 20,000 hourly workers.

Still, both sources said it would be nearly impossible for GM to sell all the plants that are up for closure, as every automaker is cutting production due to lower demand.

GM said it is working toward breaking even at an annualized industry sales rate of 10 million units, down from more than 16 million in 2007.

But a source close to the company said on Monday that a Chrysler bankruptcy and the threat of a GM bankruptcy had hurt sales, bringing the current sales rate to about 9.5 million.

GM's Chapter 11 process is expected to hurt sales further.

What you'll see is many foreign automakers, particularly Asians, rummaging through the items and picking up pieces here and there, a banker said. But it'll take a long time.

(Reporting by Jui Chakravorty; Additional reporting by Chavon Sutton; Editing by Gary Hill)