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.

Y2K + X

Heckuva decade. It began with a nervous expectation of a worldwide computer collapse. Y2K -- The Fall of the Machines. But, despite a buildup of angst in the last years of the 1990s, the appearance of thousands of articles, hundreds of books and the media appearances of pundits from every field who predicted catastrophe -- Nothing Happened.

We had been advised to store food and water. To buy generators for electricity. To prepare to defend ourselves against roving bands of desperate people searching for supplies. To buy gold. To sell our homes. To take our money out of banks that would erase the records of our deposits after the computers failed. We were warned to hope for the best and prepare for the worst.

The clocked ticked. New Year's Day 2000 began. It began like virtually every other day that had preceded it for 10,000 years. The Sun came up and the people of the world went about their daily business without a worry in the world. Planes flew, traffic lights changed, ships sailed, elevators went up and down, and computers computed. It was just another day on Planet Earth.

However, unknown to a nation focused on the preposterous non-event of Y2K, trouble was on the way. The DotCom Bubble was inflating to epic proportions. Housing prices were climbing and lending standards were dropping.

The presidential election of 2000 was probably the most controversial election of the preceding century. By the time Gore conceded and Bush was named the winner, the country had divided itself over the outcome, proving that most Americans were intensely and deeply concerned with the election of their president. Claims that Americans were apathetic about politics did not square with the reality of the 2000 election. It was the new Civil War. Brother against brother, family against family.

Then we were hit with a true tragedy, and the madness of Islam was magnified by the madness of some people pointing the fingers of blame.

Shortly after 9/11 the nation was dealing with the appeance of conspiracy theories. The White House Let It Happen. The White House Made It Happen. Vocal nitwits claiming Bush and Cheney and their associates were responsible for 9/11 got attention. Lots of it. The 9/11 Conspiracy Theorists said the attack was perpetrated by Bush and Cheney because they were able to profit from it. They were said to have made money from the collapse of the World Trade Center and from the impact of the attack on world oil prices.

Every event, every transaction following 9/11 was said to have been a source of personal profit for Bush and Cheney and their army of traitors.

To the Conspiracy Theorists, it was irrelevant that Osama bin Laden and al Qaeda had claimed responsibility for the 9/11 attack. It was irrelevant that all 19 hijackers who commandeered the four planes that were converted into weapons of mass destruction were identified. The information was said to be false. Planted by the nefarious agents operating on behalf of Bush and Cheney.

US troops went hunting for offending members of al-Qaeda, They went to Afghanistan where many of the top 50 al-Qaeda leaders were killed. Then our troops went to Iraq to remove a dictator and plant Democracy in the middle of the middle east. Why? To change the culture of the region. Shake it free of its devotion to backwardness and turn it into a forward-looking place where peace are prosperity were given a chance.

Our forces went in and the military and government of Saddam Hussein was smashed in a few weeks during 2003. Since then it has been tought, but the new Iraq is getting closer to the ideal of a muslim democracy. Bush stands a chance of becoming the president who started the process of turning around the middle east.

But domestic problems surfaced. As a result of federal laws relaxing credit standards, real estate prices and home buying went into overdrive. It became possible for almost anyone to buy $500,000 with no money down, no job and no proof of assets. What a country! Who would dare predict that issuing lottery tickets in the form of houses would nearly bankrupt the country?

All a buyer had to do was promise to maintain his loan payments and he could move into the house of his dreams, just like a hermit crab. But for those who made no downpayment, had no skin in the game, what might happen if that owner chose to stop sending in his monthly payments to the bank? The answer -- NOTHING. Okay. Maybe he would lose his house and find himself evicted. But so what?

The owner who made a string of monthly payments was merely paying rent -- with an option to profit if the price of his house were to rise.

When housing prices began to drop, buyers began to get the feeling they had overpaid for their dream homes. If prices were falling, they reasoned, why continue to pay the mortgage? After all, what good is a house worth less than the mortgage behind it? Underwater is no place to be when you own a home.

Despite knowing that high water is a threat, most people in New Orleans decided to stay home when Hurricane Katrina hit. Little did we know how the image of the Lower Ninth Ward -- partially submerged -- was foreshadowing the mortgage crisis threatening the most populated states in the country. When the Credit Crisis hit, suddenly homeowners in the desert of Nevada were financially underwater, with debt far greater than the market value of their houses.

General Motors became Government Motors. When car-buyers spending home-equity money stopped shopping for cars Detroit became the Automakers Graveyard. Taxpayers were tapped to replace car-buyers. Taxpayers were handed the bills for the pensions and medical coverage of GM employees and GM retirees.

But the most striking development of the decade occurred in 2008. After eight years of an administration that aimed to wipe out muslim terrorism -- a huge job -- the nation acknowledged it was weary of this strategy.

Instead, voters chose a former muslim to lead the country, believing the promises of the former muslim who said he knew how to talk to the muslims of the middle east and he assured us they would respect his leadership and the goals he represented. He promised to appease muslim terrorists, and he has been true to his word.

As someone asked, "would anyone in 1999 have believed that by the end of 2009 no one running Iraq would have the name of Hussein, but the man in the White House would"?

Unfortunately for us, the former muslim in the White House is showing the usual signs of muslim incompetence. Someone might believe he has accomplished something with Healthcare Legislation. However, it is already painfully obvious that healthcare legislation will create big cost increases in our national healthcare. Big cost increases. No cost savings, and NO improvement in health.

Moreover, when it comes to managing Homeland Security, the administration of the former muslim has proven it is inept. When Homeland Security cannot respond to a 911 call from the father of a terrorist who has a bomb in his pants and is ready to board a plane heading for the US, the department is guilty of depraved incompetence.

Fortunately, given the low base from which the former muslim's administration has started, there is lots of room for improvement. On the other hand, the administration and the country are also positioned for another devastating drop. Which way will things go? No one knows. But based on the accuracy of predictions ahead of Y2K, it is hard to imagine anyone in the government getting it right.