General Motors (NYSE: GM, GMH) confirmed today it is in discussions with Isuzu Motors Ltd. and Isuzu's banks, including Mizuho Corporate Bank, Ltd., regarding a comprehensive operational and financial restructuring of Isuzu.
Isuzu announced the framework of its new three-year restructuring plan earlier today. The principal components of the Isuzu restructuring package include the following:
- GM would acquire a majority ownership of certain Isuzu diesel engine businesses and other assets strategic to GM, and complete ownership of certain diesel engine technologies, for about Y50 billion (U.S.$420 million). GM would appoint a senior executive to support Isuzu management. Isuzu would retire GM's existing equity in Isuzu Motors, and GM would purchase new equity for about Y10 billion (U.S.$80 million), representing a 12-percent ownership stake.
- Isuzu's broad financial restructuring would include: A debt-to-equity swap in which Y100 billion (U.S$833 million) of Isuzu debt would convert to preferred equity; new funding from lenders sufficient to execute the operational plan; and the rollover of certain of Isuzu's current debt.
- A comprehensive operational restructuring under which Isuzu would rationalize under-performing operations as well as its overall employment levels.