Toyota buyout of GM...more bad news
Off the wire.
Japan's biggest company embarked this week on what experts say is the biggest stock transfer action in American-Japanese financial history. Due to massive losses and an unprecedented decline in market share, General Motors is officially on the chopping block. Shareholders in Toyota voted by an overwhelming majority Friday (March 31) to approve the company's proposed merger with General Motors, whose shareholders likewise gave almost unanimous support to the deal the same day. The next step in carrying through the merger, Toyota officials announced Monday (March 27), will be to persuade shareholders to exchange their Toyota stock for new Toyota-GM shares.
The more who do so, the better for everyone. At least three-quarters of Toyota shareholders have to participate voluntarily in the trade-in for the merger to proceed according to the terms of the deal, a provision made with an eye to the potential tax burden on GM's shareholders. If, as Toyota officials hope, 90 percent or more of its shareholders participate, the merger would qualify as a pooling of interestsť under U.S. accounting regulations, which would allow the new corporation to avoid taking a charge against future earnings for the premium Toyota is paying above the value of GM's assets. With a target of 90 percent-plus in sight, Toyota outlined plans Monday for a month-long campaign to spur shareholders to action.
Hitting that target certainly looks to be possible, going by shareholder support for the merger. In Friday's vote, the owners of 99.89 percent of Toyota's stock backed the merger. GM's stockholders gave their assent with a hardly less compelling 97.5 percent pro-merger vote. If the merger goes ahead as planned, GM's shareholders will receive .6235 shares of Toyota-General Motors stock for each share of GM they now hold. In all, they will own approximately 42 percent of the new company. Toyota's shareholders will receive Toyota-General Motors shares at a rate of one-to-one, but they will receive a bonus of .005 of a share per share - an extra share for every 200 they currently own - if the 90-percent trade-in goal is met.
Together, Toyota and General Motors expect to produce a total of 4.4 million vehicles this year and to take in DM 260 billion in revenues. The new company, which will have its headquarters in Osaka, Japan and an administrative seat outside Detroit, will be the world's largest auto-maker, trailing only Ford in output (global sales). The combined Toyota-General Motors work force will number approximately 428,000, and all employees, Toyota and General Motors officials have been insisting, can expect to hold on to their jobs with the exception of the largest lay-off, job buyout in history offered by General Motors in late March. The goal of the merger, they say, is to reap savings by cooperation in developing new products and new technologies, not by slashing payrolls.
This merger will have an immediate impact on product line offerings. Toyota announced the Monte Carlo, Grand Prix, and Corvette will be phased out of production over the next three years due to excessive build cost and slow sales during a period of record fuel costs. A new super car based on the Supra will replace the long standing Corvette as a blend of ultra high fuel efficiency and power. Other model lines are slated for replacement or termination through 2010.
Toyota will retain the current General Motors dealer networks until new contracts are offered in 2009. It is rumored this is sure to kill any return of the famed Camaro nameplate in the near future.
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