Investment Banking

General Motors Corp. agreed to sell a majority of its finance unit to a group led by Cerberus Capital Management LP for $7.4 billion as Chief Executive Officer Rick Wagoner raises cash to rescue the world's largest automaker.

The sale of a 51 percent stake in General Motors Acceptance Corp. will help Wagoner buy out workers and invest in new cars and trucks to win back buyers lost to competitors such as Toyota Motor Corp. GM will get $10.1 billion from the sale this year, including a $2.7 billion distribution from GMAC, and expects to get another $4 billion over three years.

GM shares had their biggest drop in three months. Investor enthusiasm was muted because GMAC is unlikely to quickly regain its investment-grade credit rating under Cerberus, a New York- based private equity firm. Moody's Investors Service and Standard & Poor's said GMAC's debt probably will remain at junk levels.

``Without the investment-grade rating, it means it was good news, but not great news,'' said Pete Hastings, a fixed-income analyst at Morgan Keegan & Co. in Memphis, Tennessee. ``We still applaud GM for being able to effect a complex transaction that should benefit them in the long run.''

The deal, which includes equity from Citigroup Inc., caps Wagoner's five-month quest to reduce the cost of auto loans by separating GMAC from its parent. It's scheduled to be completed in the fourth quarter.

Wagoner still must resolve the automaker's crisis with former parts unit Delphi Corp., whose workers are threatening to strike if a bankruptcy judge allows labor contracts to be thrown out. He's also struggling to rebuild U.S. auto sales. GM announced a 14 percent decline in March sales today.