GM sees no snag in closing Hummer deal

DETROIT (Reuters) - General Motors Corp does not expect U.S. regulatory scrutiny to hold up its tentative agreement to sell Hummer to a Chinese machinery maker, GM Chief Financial Officer Ray Young said on Wednesday.

GM also expects the reorganized company that will be created from its fast-track bankruptcy process to emerge with more than $10 billion in liquidity, a projection that the U.S. Treasury has endorsed, Young told Reuters TV in an interview.

"When the new General Motors emerges we expect to have very healthy cash balances, well in excess of our minimum requirement of $10 billion," Young said.

Under its reorganization plan, the U.S. government will have a 60.8-percent stake in the new GM. The government will provide $50 billion in total financing to GM and $33 billion in bankruptcy financing.

Young said the GM cash projection for the leaner company expected to be sold out of bankruptcy by August took into account the need for the automaker to close plants and pay early retirement incentives to a share of its 54,000 remaining hourly workers.

"We've worked through these numbers with the U.S. Treasury," Young said. "They're very comfortable with our numbers. And we expect that this liquidity will be sufficient to get us through this downturn."

In its first announcement of an asset sale since entering bankruptcy, GM said on Tuesday that it had reached a deal to sell the Hummer brand of gas-guzzling SUVs to Sichuan Tengzhong Heavy Industrial Machinery Co, a little-known heavy machinery maker with no experience in the auto industry.

"We don't expect any problems in terms of the sale process," Young told Reuters TV. "In fact, we're feverishly working to finalize agreements."

He added: "We're very excited that this will allow the Hummer brand to continue both in the United States and globally. Also, we are hopeful that this will preserve over 3,000 jobs here in the United States."

The deal to sell Hummer after a year-long auction process is expected to generate less than $500 million for GM, but it has attracted widespread attention because it marks the first time that a Chinese buyer has connected with one of the cash-strapped U.S. automakers.

Some cross-border deals involving Chinese buyers have run into difficulty. In 2005, U.S. regulators vetoed the sale of Unocal to China's offshore oil specialist CNOOC.

NARROWING THE LIST ON SATURN

GM is also trying to sell its Saturn distribution network. Young said GM believed it had a set of "serious investors" interested in Saturn and was working to narrow the list of potential partners.

GM said this week that 16 investors had expressed an interest in Saturn, a brand that GM launched in 1990 in a failed bid to take on Japanese automakers in the passenger car market.

In a break from established practices in the auto industry, some Saturn dealers have lobbied for opening the network to overseas automakers who could supply low-cost and fuel-efficient or electric-drive vehicles.

Penske Automotive Group, the No. 2 U.S. dealership group, has said it is interested in acquiring Saturn.

An investor group that includes private equity firm Black Oak Partners LLC and some Saturn dealers said it approached GM about buying the assets of the brand.

"We want to make sure that we make money and the prospective purchaser of Saturn makes money as well as the Saturn dealers," Young said. "We need to make sure that when we have a deal it satisfies the objectives of all three parties."

In one of the more controversial aspects of its planned restructuring, GM plans to cut the number of its U.S. dealerships from near 5,200 to near 3,600 by the end of 2010.

U.S. auto dealers, who are independent businesses operating under franchise with GM, have objected to that plan and faster-moving cuts at bankrupt Chrysler, saying it will hurt sales at both automakers.

Young said that GM's target of 3,600 U.S. dealers would still be three times the number of Toyota Motor Corp dealerships and could end up being higher once final decisions are made.

"There may be some wiggle room there," Young said. "It's more art than science."

(Editing Bernard Orr)