GM Celebrates its Rebirth as Publicly Traded Co.

Discussion in 'American Cars' started by DownwardSpiral, Nov 19, 2010.

  1. This is actually very good news.

    GM celebrates its rebirth as publicly traded company


    The Associated Press

    DETROIT - The last time General Motors (GM) threw a big party was two years ago, for its 100th birthday. Two months later, its CEO was before Congress, begging for bailout money. Now GM is getting ready for another celebration - this time for its future.

    GM will be reborn as a public company Thursday with a stock offering, ending the government's role as majority shareholder and closing a remarkable chapter in U.S. corporate history.

    The U.S. government should make about $13.6 billion when GM shares start trading on the New York Stock Exchange. The federal Treasury is unloading more than 400 million shares of GM, reducing its stake in the company from 61 percent to about 33 percent.

    The IPO will wind up as the fifth-largest in U.S. history. Investor demand is already so high that the company raised both the number of shares it will offer and the range for the initial price. GM set a price of $33 per common share Wednesday.

    When the U.S. government and other owners sell those shares, they'll raise $18.2 billion in the stock sale. GM will raise $5 billion by selling 100 million preferred shares at $50 each. Together, the sale of common and preferred stock will bring the deal's value to $23.2 billion.

    The stock offering is the latest in a series of head-spinning developments over the past two years for an American corporate icon.

    In September 2008, to mark the beginning of its second century, the automaker celebrated in the grand three-story atrium on the ground floor of its Detroit headquarters. GM had seen a lot of changes in its 100 years, said then-CEO Rick Wagoner.

    "In fact, it's changed a lot in the last 100 hours," he said, referring to the banking crisis, which was just starting to unfold.

    Two months later, Wagoner found himself in front of members of Congress, begging for money to keep GM alive. Four months after that, he was ousted by President Obama.

    By June 2009, GM had filed for bankruptcy. It emerged relieved of most of its debt but mostly owned by the government and saddled with a damaging nickname: "Government Motors." The value of its old stock was wiped out, along with $27 billion in bond value.

    Now GM will become a publicly traded company again and revive the stock symbol "GM." Dan Akerson, GM's fourth CEO in two years, will ring the opening bell Thursday on the New York Stock Exchange, to celebrate the company's rebirth.

    "This is an extraordinarily important moment in the life of GM, along with emerging from bankruptcy," says Steve Rattner, who headed up Obama's auto task force for several months. "It's not the end of the story of government involvement in GM, but it is a critically important step forward."

    Most of the new stock will go to institutional investors, not to everyday investors, following a Wall Street system that rewards investment banks' big customers. GM will set aside 5 percent of its new stock for employees, retirees and car dealers to buy at the offering price. The deadline to sign up was Oct. 22, but the company has not revealed how many people took the offer.

    In the stock offering, the government stands to make $13.6 billion if it sells 412 million shares, as planned, for $33 apiece.

    It will still have about 500 million shares, a one-third stake. It would have to sell those shares over the next two to three years at about $53 a share for taxpayers to come out even.

    The total bailout was $50 billion. GM has already paid or agreed to pay back $9.5 billion. That comes from cash and payments related to preferred stock held by the government.

    The GM debut comes at a time when auto stocks are performing well generally. The stock of GM's crosstown rival, Ford, has risen steadily this year, from about $10 in January to about $16.50 as the GM IPO approached. The stock traded for a dollar in November 2008, and Ford never even took bailout money.

    As for GM, whether bankruptcy actually fixed the company remains an open question. Before the crisis, it was saddled with debt. Pension and health-care costs kept GM's fixed costs high, and contracts with dealers meant it would be expensive to shut underperforming brands.

    Combined, those problems put the automaker in a topsy-turvy world where it made more sense to run plants at full-bore, even if no one was buying cars.

    Bankruptcy fixed much of that. The company closed 14 of its 47 plants, shuttered or sold off its Hummer, Saturn, Saab and Pontiac brands, and slashed its debt from about $46 billion to about $8 billion.

    Union retiree health-care costs are now the United Auto Workers' responsibility, and the controversial jobs program that paid idled workers has been eliminated.

    GM employs 209,000 people in the U.S. today, down from 324,000 in 2004. But it's making money. Before bankruptcy, GM lost about $4,000 per car. Now it makes about $2,000 each. GM says it is poised to earn about $19 billion a year when the car market rebounds.

    GM is a strong player in China, where the auto market is growing exponentially. And customers in the U.S., potentially the most profitable car market in the world, are starting to take notice of GM's cars and trucks again.

    The upcoming Chevy Volt, an advanced electric-gas car, could help GM convince people it doesn't just make gas guzzlers.

    And it's a winner with critics: GM won the Motors Trend Car of the Year award Tuesday for the Volt.

    Still, questions remain. The government remains a big shareholder. And three board members, plus Chairman Ed Whitacre, were all hand-picked by the government.

    Financial problems that plagued the automaker for the past decade still don't seem under control: Despite hiring Chris Liddell, a new CFO from Microsoft, GM says it's still not sure all the financial problems were fixed.

    And leadership questions remain. Akerson has been on the job for about two months. He's from the world of finance and telephones. He was chairman and CEO of Nextel until 2001, and then began working with The Carlyle Group in 2003. The Carlyle Group is known for its private equity expertise, and Akerson was in its powerful buyouts group.

    Tom Krisher in Detroit contributed to this report.

    Copyright © The Seattle Times Company
  2. a shame the americans didn't abort this one.
  3. Why? Everybody should be given a chance to redeem themselves. Unless you live in Uruguay, where it just isn't possible.
  4. ** argument starter **

    Democrats alone saved the American auto industry, and the best part is that now that it's nearly over, not only will it not have cost a thing, it's going to pay them back.
  5. hope ford drops back to 13 or something so i can buy that none-shit stock.
  6. Wrong. GM should have been aloud to file bankruptcy, not get bailed out. The same thing would have happened, they would have fired a good amount of there shitty ass Union workers, shut down some plants, created a new strategy and revamped. Which is exactly what happened in the bailout, expect we could have saved about 50 billion in the process. The bailout was inefficient and a waste of money.

    BTW: The bond holders got screwed in the bailout, and the Government still owns a big chunk of GM. In the IPO, GM only raised the number of shares to be traded.
  7. "It would have to sell those shares over the next two to three years at about $53 a share for taxpayers to come out even"

    Which is unlikely.

    And didn't the auto bailout start under Bush?
  8. seriously. Because they werent allowed to file bankruptcy and restructure their union contracts, theyre going to be heading back down this path in prolly 20 years.
  9. GM should have died.
  10. You have a Chevy Montana.
  11. not yet! but in like two weeks prolly <A BORDER="0" HREF=""><IMG BORDER="0" SRC="pitlane/emoticons/grin.gif"></A>
  12. Democraps put the auto industry in that situation in the beginning. Democraps and the leftist unions.
  13. UGH
  14. How long before investors drive GM back into the ground?
  15. What a shit company, Ford is much much better. Has better vehicles too. Should never have been bailed out.

    Wish I had bought Ford at 1.26 a share
  16. In 6 months.
  17. I mean, who wouldn't want an oldsmobile alero? That piece of engineering warranted a whole companies worth of administrative pay.
  18. what you're missing is that the bulk of payroll is done on borrowed money. and bankrupt companies are like bankrupt people. They don't have leverage. there would be no GM today.
  19. #20 2998ccCSL, Nov 21, 2010
    Last edited by a moderator: Apr 25, 2016
  20. No, not everyone wanted an alero
  21. GM real needed to restructure, they will be back down this road in 15 years. Either that or be sold to China to cover the US debt
  22. #23 2998ccCSL, Dec 5, 2010
    Last edited by a moderator: Apr 25, 2016

    You're welcome <A BORDER="0" HREF=""><IMG BORDER="0" SRC="pitlane/emoticons/smile.gif"></A> let's not get there again though.
  23. There would have still been a GM, it just would not look the same. Bottom line is that Obama couldn't afford to let GM fail because it would have been too large of a failure for unions.

    GM will still fail. Nothing has been fixed.

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