GM sells old plants, land to raise money

Automaker unloads assets to help weather sliding sales, tightening credit market.

Robert Snell / The Detroit News

General Motors Corp.’s decision to explore selling a French parts plant is one of many moves aimed at thinning its global real-estate portfolio, cutting costs and raising millions of dollars to survive the worst vehicle sales market in 15 years.

The Detroit automaker has sold hundreds of acres of land in recent months — including a plant where World War II fighter planes were built — and has several blockbuster deals in the works to sell shuttered facilities and land nationwide to net millions for the company. That’s money GM desperately needs to fund vehicle development and manufacturing, pay bills, and weather a credit crunch that has prevented some buyers from financing new cars, analysts said.

Selling the automaker’s Hummer brand is the sexy and headline-grabbing side of GM’s fund-raising effort, but unloading surplus land and shuttered factories is another lucrative way GM is raising cash while vehicle sales sag.

GM’s sales are down 18 percent this year; September vehicle sales will be announced today.

GM is hoping this year to close on a deal to sell 513 acres near an assembly plant in Spring Hill, Tenn., and the automaker is looking over four bids on a 165-acre plant in Doraville, Ga., that ceased production last week.

"What GM is doing is looking to build up as big a cash cushion as it can," said Joe Phillippi, principal of New Jersey-based AutoTrends Consulting Inc. "Sales are down enough as it is, and if the credit crunch gets worse, they’re going to need every penny."

GM isn’t alone in trying to sell assets and raise cash. Chrysler LLC has sold about $500 million in real estate and non-core assets — including Brazil’s Tritec Motors and Pacifica Advance Product Design Center in California — and is halfway toward its goal of shedding $1 billion in unneeded land and facilities, spokeswoman Shawn Morgan said. And Ford Motor Co. announced in June it was selling a closed 122-acre assembly plant near Atlanta and a 155-acre SUV plant near St. Louis for undisclosed sums.

While GM routinely tries to sell real estate, the deals take on added significance since GM Chief Executive Rick Wagoner has pledged to raise $5 billion through asset sales and borrowing.

"When we can sell surplus property or get it off our books, there are certain benefits from a business standpoint," GM spokesman Dan Flores said. "It allows us to reduce our operating costs. But our real estate strategy does not drive the business. The company’s focus is to generate cash. We’re not doing anything different than what we always do."

In North America, the recently shuttered Doraville plant could provide a huge cash injection. The Georgia plant closed Friday, idling about 1,000 workers, and there has been strong interest in redeveloping the site, about 16 miles northeast of Atlanta with great access to citywide rail system and an interstate.

"It’s going to raise a lot of money because of its location," Doraville Mayor Ray Jenkins said. "It’s just prime."

GM would not disclose its asking price. But two years ago, one of the four finalists bidding on the Doraville site paid $66 million for 50 acres a few miles closer to downtown Atlanta, said George Petkovich, an Atlanta appraiser specializing in commercial properties.

The Doraville site, which could become a mixed-use development of shops and homes, has better access to Atlanta’s rail system and interstate, but the credit crunch and recent Wall Street financial crisis could impact the sales price, Petkovich said.

A GM spokesman said a deal could close by the end of the year.

But for every Doraville plant, there are many properties selling as slowly as sport utility vehicles because they are in low-rent towns such as Flint and Anderson, Ind.

Generally, the properties GM is selling are a small part of the 280 million square feet of space it either owns or leases in the U.S.

But several plants are selling for big-ticket prices at a time GM can most use the cash. The automaker posted a $15.5 billion second-quarter loss.

Among the deals:

• In December, GM sold a 100-acre plant in Linden, N.J., to an investment trust for $77 million. The former assembly plant, where F4F Wildcat fighter planes were built for Grumman during World War II, operated for nearly 70 years and employed 6,000 workers at its peak in the mid-1980s. The plant closed in 2005 and has been demolished. The site will be redeveloped into industrial and retail uses, said Joel Reuter, a spokesman for the developer.

• Last week, GM closed on a deal to sell an abandoned 400-acre assembly plant in Oklahoma City for $54 million. The deal with Oklahoma County, approved by voters last spring, involves leasing the land to Tinker Air Force Base. About 2,400 workers produced extended versions of Chevrolet TrailBlazers and GMC Envoys before the plant closed in February 2006.

• Last week, GM Treasurer Walter Borst said the automaker may sell its transmission plant in Strasbourg, France, which was built in 1967 and employs 1,100.

• A deal to sell 513 acres of vacant land near a vehicle assembly plant in Spring Hill is under contract for an undisclosed price and GM is hoping to close by the end of the year. The deal with SLF Acquisitions will help GM shed surplus land that could have accommodated future expansion.

"Looking at our current operations, that’s not necessary," Spring Hill plant spokeswoman Kate Neary said. "We’re just trying to define what assets are necessary. Cash is king, and we want to be able to sustain the business and put the money toward research and development."