GE to peddle influence -- buying cars from the government

Talk about apple-polishing. General Electric wants to look its best when it seeks more government contracts. Okay. That's good. But this time the grooming depends on buying overpriced cars from Government Motors. Not good. Stockholders should speak up.

GE to buy 25K electric fleet vehicles

GE said Thursday it will buy 25,000 electric vehicles for its fleet through 2015 in the largest-ever purchase of electric cars.

GE will begin with an initial purchase of 12,000 vehicles from General Motor Co., starting with Chevy Volt in 2011. The conglomerate said it "will add other vehicles as manufacturers expand their electric vehicle profiles."

The first Chevrolet Volt is expected to roll off production lines later this month.

GM confirmed the announcement with CNN Money.com.

Government Motors to Unload Some Stock

As of today, the US government owns 61% of GM. Later this month, after the pending stock sale, government ownership will drop to somewhat less than 50%. Big deal. The reduced ownership will maintain the government's dominant position. Our CEO-in-Chief, Obama will still hold the cards, still have the power to call all the shots and the public will continue to see GM as an agency of the government. Because it will be. And it will be an agency with plans to sell people a $41,000 electric car they do not want.

The Obama administration will have the same success it had selling electric cars as it's had staging an economic recovery. Meanwhile, to restore its potential for growth, the newly restructured GM must look for foreign markets. Mainly China. For that it must reduce domestic operations and put its limited capital into new facilities outside the US. Here, the UAW is still running the factories and there's no evidence the bankruptcy enlightened those UAW members who remain employed.

Sources: GM IPO expected to raise $10 billion; US taxpayers to reduce stake in automaker

Monday November 1, 2010

DETROIT (AP) -- The sale of General Motors stock is expected to raise about $10 billion in an initial public offering that will reduce the U.S. government's stake in the automaker below 50 percent, three people briefed on the sale said Monday.

GM common stock is expected to sell for between $26 and $29 a share when the IPO takes place around Nov. 18, according to the three people, who asked not to be identified because they are not authorized to speak on the matter. That would value the company at more than $46 billion -- roughly on par with crosstown rival Ford Motor Co.

U.S. taxpayers, who bailed out GM last year, would see their ownership stake drop from 61 percent to around 43 percent, not including any extra allotment of shares bankers could offer to satisfy strong demand, the people said.

GM has wanted to shed government control, contending that it hurts the company's sales and public image. The government will get the lion's share of the $10 billion and recoup another chunk of the cost of bailing out the automaker.

GM will not make any money from the sale of the 365 million common shares that make up the IPO. Instead, it will sell roughly $3 billion worth of preferred stock that will convert to common stock in 2013, the people said. Preferred shares pay a set dividend and are considered more like bonds. GM will use the money from the sale of preferred stock to repay loans and make pension payments.

Terms of the sale are not final because GM's board could still change them, one of the people said.

GM and its bankers will begin a "road show" to woo investors in the IPO later this week. The show, which could begin as early as Wednesday, will be aimed at hedge, pension and mutual funds, but presentations are expected for individual investors. Common shares worth roughly $2 billion would be sold to investors in the Middle East, Europe and Asia, one of the people said.

The expected price range of the IPO is higher than a forecast given by GM Chairman Ed Whitacre last month. He said each share would sell for about $20 to $25.

Bankers leading the sale are recommending that the final share price be revealed Nov. 17 and the sale take place a day later, according to the people.

Companies generally hope that shares offered in an IPO rise to the high end of the range or above it, showing strong investor appetite.

Once the IPO begins, GM shares can start trading on the New York Stock Exchange, where the company symbolized America's industrial might for more than 92 years. GM was booted off the exchange last year as financial troubles sent it into a government-funded bankruptcy.

GM is now a private company that's owned by the U.S. government, a United Auto Workers health care trust, the Canadian and Ontario governments and former GM bondholders.

The Canadian governments are expected to cut their stake from 11.7 percent to 9.6 percent, while the UAW retiree health care trust would sell less, cutting its stake from 17.5 percent to 15 percent, two of the people said.

U.S. taxpayers became GM's biggest shareholder when they gave the automaker $50 billion to survive bankruptcy restructuring and emerge as a smaller company with far less debt.

GM has either repaid or has plans to repay a total of $9.5 billion, and the government hopes to recoup its remaining $40 billion investment with the initial stock sale and several follow-up sales.

The four owners hold about 500 million shares total, and the U.S. government's stake is about 304 million.

But the total shares for sale in the IPO and subsequent stock sales will be increased through a move called a split that would give the owners three or four shares for every one they currently hold, one of the people said.

The split, which will take place before the IPO, will create roughly 1.6 billion shares of GM common stock, one of the people said.

GM -- Wants employees to become owners

These days management and the US Treasury want GM employees to show some good will and buy stock in the restructured car company. Other than buying a token amount, why would employees stick their necks out now, when the company has unfunded pension liabilities of $27 billion? Is $27 billion of company IOUs supposed to mark an improvement?

Is this new company willing and able to fund those debts? Or is the company more or less back to where it was?

Is there any reason to believe the new GM is a venture with good long-term prospects?

GM workers get chance to buy stock in public sale

General Motors gives workers, retirees and dealers chance to buy GM stock in public stock sale

October 12, 2010, 5:35 pm

DETROIT (AP) -- General Motors' employees, retirees and car dealers will get a chance to invest in their company when the automaker's stock is sold to the public.

GM sent letters to workers and dealers in the U.S. and Canada on Oct. 5 giving them the opportunity to buy shares when the initial public offering takes place. The deadline to register for the sale is Oct. 22.

Employees and dealers will be able to buy the stock at its offering price, which has not been set. A government watchdog's estimate is $133 per share, although the stock will most likely be split and offered at a cheaper price. Workers, retirees and dealers must invest more than $1,000 to buy stock, but the minimum and maximum number of shares a person can buy is still being determined, the letter said.

Like other investors, employees and retirees can sell their shares at any time after GM's stock starts trading in markets. GM has about 600,000 employees and retirees in the U.S and Canada.

The automaker is planning to hold the IPO in mid-November, but no firm date has been set.

News of GM's letter became public on Tuesday, the same day that new GM CEO Dan Akerson met in New York with Treasury Secretary Timothy Geithner. Both men emerged from the meeting in the afternoon without talking to reporters.

The U.S. government is GM's largest owner. It holds a 61 percent equity stake in the company, which it got in return for giving GM $50 billion to get through bankruptcy last year. The government hopes to get its money back by selling shares in the IPO and through several follow-up offerings. GM has repaid the government $6.7 billion, but it may take several years for the government to recoup its remaining $43 billion investment.

GM's other shareholders -- the Canadian and Ontario governments, a union health care trust fund and GM's old bondholders -- also can sell stock in the initial stock sale. Just how many shares each owner intends to sell has not been made public.

The automaker's letter to employees says no shares can be bought or sold until U.S. and Canadian regulators sign off on the stock sale plan, which is under review. Once regulators accept it, GM will go on a two-week worldwide "road show" to officially start wooing larger investors such as mutual, hedge and pension funds.

GM needs to get a strong showing of interest from employees, retirees and dealers to help sell its IPO to big investors as well as individual investors, said Scott Sweet, managing partner of IPO Boutique, a stock offering research firm.

"They can parlay that into a very strong statement that (GM) employees believe in management and the product, and through all that they've gone through, they're still with (the company)," Sweet said.

GM employees will probably have to pay the entire amount of their IPO investment about the time of the sale, Sweet said.

The government likely will sell a small portion of its shares at first, hoping that GM will keep making money and the stock price will rise ahead of subsequent sales.

In New York on Tuesday, Geithner and Akerson left their meeting at the Federal Reserve Bank of New York just before 3 p.m., steering clear of reporters assembled outside.

Ron Bloom, the Obama administration's senior counselor for manufacturing policy, also left the building around the same time.

The Treasury Department said Akerson and Geithner met for the first time at GM's request. Both Treasury and GM said there would be no comment after the meeting.

It's likely the men discussed the size of the initial public offering and how much common stock the government wants to sell in November.

Ed Whitacre, GM's chairman and former CEO, has said the company needs to shed government ownership quickly. The bailout and derogatory "Government Motors" moniker are hurting the company's sales and image, he has said.

Akerson, who took over leadership of the company from Whitacre on Sept. 1, has said it could take a couple of years to sell all the stock. A relatively small initial sale is likely, $10 billion or less.

GM will not sell common shares, but it plans to offer preferred stock to raise money for pension payments and to retire debt. Preferred shares behave like bonds because they pay a set dividend. They will be converted to common shares in 2013.

GM's old shareholders were wiped out when it went through bankruptcy protection last year after piling up billions in losses. The automaker has shed much of its debt and old factories. The new GM earned $2.2 billion in the first half of the year and is expected to have a profitable third quarter.

Still, problems remain. GM's pension plans currently are $27 billion short of their obligations.

GM Stock Offering -- No Longer a Big Deal. Now a Compact

Does the government really believe the market value of a Large Cap stock is as easy to manipulate as the shares of a Micro-Cap issue in the hands of a Pump-and-Dump brokerage? Or has it dawned on the Obama team that GM is miles away from producing the metrics that are needed to push the stock to the $134-per-share breakeven price the government is sweating for?

U.S. Is Said to Rein in G.M. Stock Offering

By NICK BUNKLEY and MICHAEL J. de la MERCED

September 23, 2010

DETROIT — The initial public stock offering by General Motors will be smaller than previously suggested, and the federal government will most likely sell a relatively small portion of its 61 percent stake in the company, according to people with knowledge of the preparations.

To fetch the highest possible price for the government, G.M. is planning an overall offering of stock valued at $8 billion to $10 billion, which is lower than previous internal targets, according to the people, who spoke on the condition of anonymity because of restrictions on public comments before an offering.

Earlier, there were suggestions the stock offering could rival the largest in United States history, when the credit card giant Visa raised more than $19 billion in 2008. G.M. and its bankers had been pushing for the largest possible offering because that would mean higher fees for the bankers and a larger pool of investors for G.M.

But the Treasury Department has made it clear to G.M. and its underwriters that the government is more interested in setting the highest price possible for the stock rather than maximizing the size of the offering. While both G.M. and the Treasury still hope to reduce the government’s stake in the company to less than 50 percent and rid the company of its Government Motors nickname, that goal may not be met, one of the people said.

The market for initial public offerings has been weak this year, causing concern by Treasury officials that the G.M. stock sale would struggle if it were too large.

Auto analysts are increasingly projecting that G.M. shares could be priced high enough for the government eventually to get back most or all of its remaining $43 billion investment in the automaker. But everyone agrees that will take years.

The offering, which is expected as early as November, will set a benchmark for the stock’s value.

In order to recover all of the government’s investment, the Treasury would have to sell its 304 million shares at an average price of $133.78 a share, before any splits, according to Neil M. Barofsky, the special inspector general for the Troubled Assets Relief Program of the Treasury.

Mr. Barofsky cited that figure in a letter last month to Senator Charles E. Grassley, Republican of Iowa, who asked Mr. Barofsky to audit the stock sale.

In the letter, Mr. Barofsky pledged to review G.M.’s stock offering after its approval by federal regulators to ensure that it produced “the highest return for the American taxpayers.”

The price cited by Mr. Barofsky might not be unrealistic, said David Whiston, an automotive equity analyst with Morningstar in Chicago. Mr. Whiston said on Thursday that a G.M. share could be worth $134, though he believed it would sell for less than that.

He said that G.M., after last year’s government-sponsored bankruptcy, had made changes that would help it thrive as demand for new vehicles recovers from today’s levels, which most industry experts consider to be unsustainably low.

“It really is a new G.M.,” Mr. Whiston said. “The cynics of this deal, I don’t think they really understand the billions of cost savings that G.M. has made.”

G.M.’s stock peaked in April 2000 at $94.63 a share.

Although President Obama has said he wants the government to divest as quickly as practical, the Treasury is expected to sell off its interest over at least two to three years. That would allow it to take advantage of increases in the value of its shares, assuming G.M. operates profitably.

“If G.M. continues to improve and the industry continues to improve, they have a shot at getting it all back,” said Michael Ward, an analyst with Soleil Securities.

There is considerable interest about the G.M. offering among potential investors, and the sale is likely to do well, Mr. Ward told members of the Society of Automotive Analysts on Thursday in Southfield, Mich.

“Wall Street is going to be in love with General Motors,” he said.

The size and the price of the stock offering have not yet been decided, the people with knowledge of the preparations said. But the Treasury intends to reserve a large portion of the stock for retail investors.

As part of that push, G.M. intends to split the stock so that it is priced about $20 to $25 a share, these people said.

The Treasury has also declined to set specific limits on where the stock will be sold and to whom. In a statement last week, the Treasury said it expected the bulk of the stock to be sold in North America.

The government would not expressly restrict sales to foreign buyers, these people said, but they added that acquisitions by foreign investors would be limited.

In a related matter, G.M. filed an amended version of the registration paperwork for its offering with the Securities and Exchange Commission on Thursday, but it did not reveal details.

The filing included a letter to the Treasury in which company executives committed to using “commercially reasonable best efforts” to manufacture at least 1.6 million vehicles in the United States this year and an increased number in each of the next four years.

The figures are 90 percent of what G.M. had previously agreed to produce under its loan agreements with the Treasury.

The letter also says that AmeriCredit, a subprime financing company that G.M. is buying, plans to sell its private plane in accordance with restrictions placed on companies that received aid from the Treasury’s bailout program.

Free Money for Rich Car Buyers

The winners in the electric-car sweepstakes are undoubtedly those who own tow trucks.

Welfare Wagons: The new electric cars are powered by taxpayer credits.

Congratulations. You're about to buy a fancy new Nissan Leaf or Chevy Volt . . . for someone else.

This is news masochists will want to grind their faces into after sending a big check last month to the IRS. GM's Volt is expected to arrive on the market first, in November. Nissan, whose all-electric Leaf will roll out in December, landed a preliminary blow last month, announcing a surprisingly modest price for an electric car of $25,280. That's after a $7,500 federal tax credit is counted.

Buyers will also have to spring for a $2,200 charging station, but another tax credit cuts the cost in half. Wonder why Nissan aims its first deliveries to California, Georgia and Tennessee? Those states will chip in additional consumer tax credits as high as $5,000.

GM originally floated a price of $40,000 for its Volt, but it certainly is rethinking that now. Neither car will make a profit for its maker. In their mental if not actual accounting, both undoubtedly will charge part of the cost to corporate marketing, since they hope the cars will lend a shine to their entire lineups. Both will mentally charge some of the cost to their pickup and SUV operations, since electric cars will create headroom under EPA rules to sell more of their bigger vehicles.

But understand something else: By pricing low and going for volume, Nissan's CEO Carlos Ghosn is making a calculated grab for the lion's share of the available tax dollars—and also pressuring Washington to extend the program when the money runs out.

And here's how much subsidy I will need . . .

Mr. Ghosn has made no secret of his expectations—"We are negotiating with the U.S. government to make sure we have a reasonable return on our investments and continue to develop the technology," he said last year.

And so a boondoggle is born. Last month, after a meeting with White House Car Czar Ron Bloom, the Alliance of Automobile Manufacturers produced a multipoint proposal for how the handouts can be made to flow more or less in perpetuity.

Let's concede that the Leaf and Volt will be nifty gadgets, but not unless we're going to start subsidizing Ferraris for the tiara set is it possible to imagine a more regressive tax subsidy.

In particular, the Leaf is a car for a wealthy hobbyist, good for a trip of 100 miles after which it becomes an inert lump at the end of your driveway (or behind a tow truck) for the many hours it will take to recharge.

The Volt at least is a car someone might live with, since it can run indefinitely on gasoline once its 40-mile battery charge runs out. Nonetheless, GM continues to make startling claims that the car will get 50 mpg in gas-powered mode and will have a 300-mile range—even as the company strangely declines to specify how many gallons the gas tank will hold.

Never mind. iPad lust applies to cars too, and early adopters can be expected to line up around the block. But it is insane to subsidize these vehicles with taxpayer dollars.

Even if you believe saving gasoline is a holy cause, subsidizing electric cars simply is not a substitute for politicians finding the courage to jack up gas prices. Think about it this way: You can double the fuel efficiency of any car by putting a second person in it. You can increase its fuel efficiency to infinity by refraining from frivolous trips.

These are the incentives that flow from a higher gas price. Exactly the opposite incentives flow from mandatory investment in higher-mileage vehicles. You paid a lot for a car that costs very little to operate—so why not operate it? Why bother to car pool? Why not drive across town for a jar of mayonnaise?

Though as eager as any to clamber aboard the electric-vehicle bandwagon, German parts maker Robert Bosch notes with rare honesty that electric cars may end up responsible for more CO2 than their conventional counterparts in regions (like much of the U.S.) where electricity is produced from coal.

Saving a certain magical amount of gasoline won't allow the U.S. to disentangle itself from the Middle East. It wouldn't allow the U.S. to walk away from its global policeman labors. We could convert all our cars to electricity and the U.S. would not willingly relinquish its military hegemony.

Unwillingly, of course, is a different matter. Tax handouts for electric vehicles are emblematic of an alarmingly childish refusal to take account of circumstances. The U.S. government is deeply in debt. In people and nations with their backs to the wall, one looks for signs of rationality. Running up more debt to subsidize electric runabouts for suburbanites is not such a sign.

Saab Story

Obama is showing the world what happens when the government buys 61% of a bankrupt motor vehicle manufacturer. GM is having no luck selling Hummer, Saturn and Saab. But why should Obama worry? Or GM? The bill goes to the taxpayers.

However, since almost all Saab's employees are in Sweden and GM cannot sell the company, you would hope that GM would simply give the business to the employees -- for free. Let them have a go at running it. However, that might be a frightening scenario in the socialist paradise of Sweden.

Saab likely to close as GM fails to sell car brand
GM sale of Saab fails; car brand likely to close down after Swedish buyer pulls out of deal

DETROIT -- A deal for General Motors Co. to sell Saab to a specialty carmaker has collapsed, leaving the storied Swedish brand born from jets in 1947 close to extinction.


Koenigsegg Group AB, a consortium formed by Swedish luxury sports car maker Koenigsegg Automotive AB, said Tuesday it pulled out of the deal in part because it was unable to agree with investors on how best to move the brand from mass-market to premium.

For GM, it was the third time this year that a deal to shed one of its brands fell apart as it tries to recover from a stay in bankruptcy protection by focusing on a core of four: Chevrolet, Buick, GMC and Cadillac.

The next move is up to GM's board, which will decide Saab's future in a few days. But with no apparent backup investors and the Swedish government refusing to buy Saab, GM may follow through on a contingency plan to let the brand die.

That jeopardizes the jobs of Saab's 4,500 employees, most of them in Sweden.

Joran Hagglund, a senior official at Sweden's Ministry of Enterprise, said the government will continue talking with GM, but the only solution for Saab is for another company to buy it.

"We have been very clear from day one that the government will not be the owner," he told reporters in Stockholm.

GM, which earlier this year conceded it has never made money with Saab, is unlikely to keep the brand, and industry analysts said any potential investors likely stepped away when Koenigsegg emerged as the buyer.

Matts Carlson, automotive analyst at Gothenburg Management Institute in Sweden, said Chinese automakers or Italy's Fiat Group SpA may still be interested, but he acknowledged there is a substantial risk that Saab could be closed for good.

The chairman of the Koenigsegg consortium told The Associated Press Tuesday that financing had been worked out, but as negotiations with GM and investors grew lengthy, it appeared less likely that Koenigsegg would be able to make money on the deal.

Analyst Carlson said the financial condition of Saab, which went into a court-protected restructuring Feb. 20, worsened since Koenigsegg announced plans to buy it in June.

"Saab's situation, they are losing market share all the time, could have given Koenigsegg cold feet," he said.

Koenigsegg, a tiny company that makes only a dozen high-performance luxury cars a year, was formed in 1994. Its headquarters and factory -- which produces cars that cost more than a $1 million each -- are at a former air force base in southern Sweden.

Earlier this month, GM's board decided to keep its European Opel unit rather than sell it to a group led by Canadian auto parts maker Magna International Inc.

In September, auto dealership chain owner Roger Penske scrapped plans to buy Saturn after an agreement to get cars from France's Renault fell through. The GM board decided to phase out Saturn, a possible fate for Saab.

But GM will keep and restructure Opel, which unlike Saab, is considered critical to GM's international operations. GM was worried that Opel technology would wind up in rivals' hands.

All three GM deals fell through because few people realize how difficult it is to unravel years of complex integration by global automakers, said Michael Robinet, a vice president at CSM Worldwide, an auto industry consulting firm near Detroit.

Disputes arose over use of technology, use of common parts and factories, and who would make cars after initial agreements expire.

Financing also had been a problem for the Koenigsegg group, which in August said it lacked about 3 billion kronor ($417 million) for the Saab deal. But in September, the consortium struck a deal with Beijing Automotive Industry Holdings for a minority stake to raise more money.

It will be difficult for Saab, founded as a Swedish aerospace company, to recover from Koenigsegg's decision. GM has been selling off existing inventory and preparing to end its role with the company, which would be hard to reverse.

Through October, GM sold only 7,441 Saabs in the U.S., a 62 percent drop from the same period in 2008. Two models, the 97-X SUV and the 9-3 sports sedan, make up most of the company's U.S. sales.

Analysts say GM, which bought half of Saab in 1990 for $600 million and the rest for $125 million in 2000, was unable to differentiate the brand from its other products or find a sales niche.

GM has one more chance to sell a brand. A deal for Chinese manufacturer Sichuan Tengzhong Heavy Industrial Machinery Corp. to buy Hummer still must be approved by the U.S. and Chinese governments.

The Koenigsegg decision comes as the fate of another Swedish automaker, Volvo Cars, remains up in the air. Last month, Ford Motor Co. announced that it had picked a consortium led by China's Geely Group as the preferred bidder, but the deal hasn't been completed.

Bizarre Car Czar

The government has informed taxpayers of two developments. First, that it will begin operating its newest department -- Government Motors -- June 1, 2009. Second, that the money originally loaned to the old GM has been declared a gift. No repayment required. Thanks America. You're the greatest.

When the company gets into full swing, it will probably introduce a model named Cameleopard, a daring hybrid that will combine the best aspects of bicycles, solar energy, sailing and electric lawnmowers. It is also expected that the United Auto Workers will receive substantial ownership in Government Motors, eventually.

Giving workers a stake in the means of production is a step that is coming way too late. Sad. The old GM was a company with a relatively small equity base. It would have been easy and smart for UAW members to have accumulated a substantial stake in the company over the last 60 years. They would have had an important place on the board of directors for decades if they'd been smart.

Instead, workers formed the opposition and forced the company down a path filled with compromises that have led to the pending bankruptcy.

What lies ahead for the newest state-run enterprise? Think Amtrak. Part of that railroad business works well enough to produce an operating profit. But most of it is a loser, providing rail service that survives on government funding. Government Motors will become another make-work program for auto-workers who will build a lot of cars no one buys.


GM bankruptcy plan eyes quick sale to government

NEW YORK, May 19 (Reuters) - General Motors Corp's plan for a bankruptcy filing involves a quick sale of the company's healthy assets to a new company initially owned by the U.S. government, a source familiar with the situation said on Tuesday.

The source, who would not be named because he was not cleared to speak with the media, did not specify a purchase price. The new company is expected to honor the claims of secured lenders, possibly in full, according to the source.

The remaining assets of GM would stay in bankruptcy protection to satisfy other outstanding claims.

GM has about $6 billion in secured debt, including a secured revolving credit and bank debt.

The government's plans include giving stakes in the new company to GM's union and bondholders, although the ownership structure of the company is still being negotiated, said the source who is familiar with the company's plans.

In addition, the government would extend a credit line to the new company and forgive the bulk of the $15.4 billion in emergency loans that the U.S. has already provided to GM, the source said.

The government has given GM until June 1 to restructure its operations to lower its debt burden and employee costs.

If those talks failed, the company has said it would follow rival Chrysler LLC into bankruptcy.

Setting up a new company to buy the healthy assets is aimed at reassuring consumers who might not be willing to make a major purchase from a bankrupt company, fearing it would not honor warranties or provide service.

The board of the new company would be established with the tacit approval of the government. Fritz Henderson, who took the helm of GM earlier this year after the government pushed out Rick Wagoner, would likely head the new company, the source said.