TOKYO, Mar 6 (Reuters) Shares in Suzuki Motor Corp. pared most of their early losses on Monday as investors overcame fears about the impact of a possible sale by General Motors Corp. of its stake in the Japanese car maker.
Japanese business daily Nihon Keizai Shimbun reported at the weekend that GM would unload its entire 20 per cent stake in the compact car maker, ending an equity partnership that began in 1981.
Both companies issued a statement on Sunday saying they would not ''fully'' dissolve their capital alliance, leaving open the possibility of a partial sale. GM said any sale of its Suzuki stake would be done in an ''orderly manner'' through an open market repurchase by the Japanese company.
Suzuki said late on Monday it would hold a news conference at 6 p.m. (0900 GMT/1430 IST), with Chief Executive Office Osamu Suzuki and President Hiroshi Tsuda both attending.
While a repurchase of its own shares could weigh on Suzuki's cash reserves at a time when it has budgeted big outlays of 1 trillion yen ($8.6 billion) over the five years to 2010 to expand production capacity and develop new cars, analysts said an end to the equity tie-up would not alter its fundamental strength.
Suzuki had 290 billion yen ($2.5 billion) in cash at the end of 2005 and has forecast an operating profit of 108 billion yen for the year to March 31, its sixth straight year of record profits. At the current share price, GM's stake in Suzuki would be worth about $2.3 billion.
''We're not too worried about the situation, as Suzuki's fundamentals and growth prospects are solid,'' said Christopher Richter, a Tokyo-based auto analyst at CLSA Asia-Pacific Markets.
''Any weakness on this news is a buying opportunity,'' he said, noting also that Suzuki's actual capital spending so far had fallen short of the auto maker's projection.
Shortly after the market opened, Suzuki's shares dipped as much as 4.4 per cent to 2,390 yen. By the end of trade, they had recovered to 2,490 yen, down 0.4 per cent.
Shares in main domestic rival Daihatsu Motor Co. gained 0.18 per cent, also underperforming the transport sector subindex ITEQP, which rose 0.99 per cent.
REPORT HITS ISUZU SHARES Industry watchers had expected an eventual sale of the Suzuki stake by the struggling U.S. auto giant after it sold off its entire one-fifth stake in Japan's Fuji Heavy Industries Ltd., maker of Subaru cars, last year to raise cash.
The world's biggest auto maker lost $8.6 billion in 2005 and is undergoing sweeping restructuring steered in part by new board member Jerry York, an aide to GM's largest individual shareholder, Kirk Kerkorian. York has called for more aggressive turnaround efforts to stop the cash drain.
The latest report also stoked a market reaction to the possibility of a sale of GM's 7.9 per cent stake in Isuzu Motors Ltd., sending the Japanese truck maker's shares down 2.84 per cent to 377 yen.
But Credit Suisse analyst Koji Endo said an immediate sale by GM of its Isuzu stake was unlikely given the stake's modest value of around 35 billion yen ($300 million).
''GM has the strongest synergies with Isuzu among the three firms (Isuzu, Suzuki and Fuji Heavy),'' he wrote in a report, adding that Isuzu is an important supplier, with GM purchasing nearly 200 billion yen worth of diesel engines and other parts from it annually.
GM's unloading of Suzuki's shares would not mean an automatic end to their joint operational projects, and the companies confirmed these would continue regardless of any change in their equity relationship.
The partners jointly own an assembly plant in Canada, where Suzuki is due to start building its first-ever midsize sport utility vehicle (SUV) model later this year, and the Japanese auto maker is due to produce a GM-designed V6 engine at its own domestic plant. Suzuki also builds some cars for GM under the latter's badge.
Suzuki owns 11 per cent of unlisted GM Daewoo Automotive&Technology Co. with GM and others, meaning part of GM's stake in Suzuki could be swapped with the Japanese auto maker's shares in South Korea's third-biggest car maker.
($1=116.43 Yen) REUTERS SD DS1622