Topic: GM gains in return to New York Stock Exchange

[Jeffy]

GM gains in return to New York Stock Exchange

David Welch, Lee Spears,Craig Trudell, Bloomberg News

Thursday, November 18, 2010

General Motors Co., which went bankrupt last year after almost a century on the New York Stock Exchange, advanced in its return Thursday to public trading after an initial public offering that raised more than $20 billion.

President Obama celebrated the return of GM, saying it shows some of the "tough decisions that we made" during the financial crisis were beginning to pay off.

"American taxpayers are now positioned to recover more than my administration invested in GM, and that's a good thing," Obama said, speaking of his administration's $50 billion taxpayer-backed rescue of the venerable automaker.

The stock rose sharply at first, rising to almost $36 per share from the $33 price GM set for the initial public offering before pulling back and closing at $34.19.

The trading - more than 400 million GM shares traded hands during its premiere on the Big Board - helped reduce the federal government's stake in the company from 61 percent to about 36 percent. For the United States to break even on its investment, it must sell its remaining stake for about $50 a share.

The automaker's owners sold $15.8 billion of common shares at the $33 price tag in the second-largest U.S. IPO on record. The company's offering of $4.35 billion of preferred shares and an overallotment option may boost the total to $23.1 billion, more than the $22.1 billion raised by Agricultural Bank of China Ltd. in the biggest IPO of common stock in history.

It's also the biggest U.S. IPO since San Francisco firm Visa Inc.'s $19.7 billion sale in March 2008, according to data compiled by Bloomberg.

The offering from GM came 16 months after it emerged from bankruptcy and brings CEO Dan Akerson closer to his goal of returning the $49.5 billion the automaker received in a taxpayer bailout last year. The Treasury, which will get as much as $13.6 billion from the IPO, will have to sell its remaining GM shares at an average of about $53 each to make back its total investment, Bloomberg data show.

Even though all eyes were on GM, stocks bounded higher Thursday thanks to a jump in manufacturing activity and growing confidence that Ireland will resolve its debt crisis.

The Dow Jones industrial average rose 173.35, or 1.6 percent, to close at 11,181.23. The Standard and Poor's 500 index rose 18.10, or 1.5 percent, to 1,196.69. The technology-focused Nasdaq composite index rose 38.39, or 1.6 percent, to close at 2,514.40.

The Associated Press contributed to this report.

http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/11/18/BUQB1GE8V1.DTL

[chrisfranklin]

Don't hold me to it, but going long on GM is probably a pretty safe play for the next 2-6 years (notice how the years are in sync with the next presidential election + duration of possible second presidential term...).   

For starters some of their products look half-way decent -- Camaro looks good at least; idea of Volt is liked by some (me, I'd buy one and never charge it myself; course then the batteries would just be dead weight  ). 

GM is also supposed to be moving towards focusing on pushing their remaining brands/brand models instead of "GM" which would seem to make sense.   And, with the Feds in their corner for the time-being, GM may find they have some unexpected inroads in to new markets abroad (not to mention probably easy press thanks to Volt demand)

But my guess is that, for political reasons, the big player in GM -- the current administration -- will find a way to keep the GM stock price, for the most part, on the up and up for at least the next 2-6 years.  And this is even if (and after) they divest the U.S. public from GM.   

[Mozman68]

I like the Volt a lot.  If I could get a charging station at one of my offices (about 45 miles away) I would be set.

[chrisfranklin]

Moz, you can fully charge the thing from empty using 120V AC -- just need a wall socket and 10 hours.  The "fast" charge 240V setup is the one you'd need a special unit for; but it'll charge the batteries more than twice as fast.  Depends on your office setup, interior/exterior; if there's outdoor outlets around where you park there, then you could probably run an extension cord and grab a partial charge during the day no problem.  I'd bet that it'll probably be five or ten years before companies get inclined to start billing employees for the cost  of charging vehicles at work;  even then businesses will, in many cases, probably keep it a free-bee, perk deal.

[Jeffy]

I saw the Volt today.  It looked OK but and that's a big BUT, I wouldn't buy one.  With cars like the Ford Fiesta, Mazda 2, Chevy Aveo, Toyota Yaris, Mini Cooper and Fiat 500, which get into the 40's, I can't see spending more for something that may never pay for itself.  TDI Golf gets high 40's as well.  Then there's BMW's Dynamic Motion, etc...  not to mention they are more fun to drive.

I'm more interested in the Cruze and the next gen Aveo then the Volt.  I think these will still be the majority of GM's money makers as they have been for years.  The Prius is a bit more of a status symbol then anything else.  If someone asks you what you drive and you say a Volt, you still won't get the smug-cred you would with a Prius.  

[chrisfranklin]

It's probably likely that the Volt isn't going to be a direct money-maker for GM right off the bat, if ever.  Wouldn't be surprised if each Volt coming off the line cost hundreds of thousands, if not more, for GM to manufacture at present (had heard rumors that 90s era EV-1s were running GM around a million dollars a unit -- in mid-90s dollars --to make)

And I don't guess that buyers necessarily want the thing for the looks or the mileage. 

Dealers are probably going to add huge markups to the sticker on Volts -- hard to believe, but a $40k (minus tax credit) Volt could end up selling for $80k+ in some instances  Seriously, if you want to get your hands on a Volt as a private buyer, it'll probably cost you about the same as 2-3-4 of the current Prius (es). 

I'd also potentially count on the GM's Volt assembly-line to be running "unusually slow" -- the demand for the Volt is already out there, so GM will probably keep people waiting as long as possible (probably for the publicity and to keep people talking about the car). 

[Jeffy]

I don't think they will slow down assembly to make a false demand.  I think they will sell fairly well.  There are still a lot of people who want to buy 'Merican' and won't buy a foreign made car even if it's made in the US.  Doing something like that with an actual demand would mean loss of potential buyers and money.  If they cam keep up with the demand, they will do OK.  Perhaps the 2nd or 3rd Gen might overtake gas engines.  The Prius is on the 3rd Gen.  GM knows they screwed up with the Saturn EV1's.  Everyone knows they screwed up which is why they canned the lease idea they were going to do.  The EV1's were all leased and so when the leases were up GM collected all of the cars.  I believe only 4 examples exist.

I see the EPA has given it a rating.  If you're driving less then 35 miles and plan to be there for a few hours I might be worth it.  But the more you drive it, the less the car makes sense.  Most of the cars I've mentioned will do 40 or better.  Although they do give it a combined rating of 60MPH.  Still, like the Nissan Leaf's 99MPG, it has to do more with math then anything remotely like driving.

[sharpxmen]

that $600 vs $1300 is relative, does not include the cost of the batteries  - from what i heard (but just word of mouth and not anything that i read somewhere) they need to be replaced every 5 years and it costs something like 5 grand, so i don't know...

[Jeffy]

that $600 vs $1300 is relative, does not include the cost of the batteries   - from what i heard (but just word of mouth and not anything that i read somewhere) they need to be replaced every 5 years and it costs something like 5 grand, so i don't know...

The $600 is not vs. $1302.  The $600 only gets you 35 miles at a time.  After that you're running $1302.

[chrisfranklin]

I don't think they will slow down assembly to make a false demand. 

I don't think they will either per se.  My guess is more along the lines of GM won't immediately start running the Volt assembly line for three shifts, 24 hours a day, or otherwise step up the number of Volts produced per some unit of time should customer interest vastly exceed GM's current expectations.   

It would appear too good an opportunity for GM (post-federal controlling interest and maybe at federal direction) to turn to private investors and effectively go: "Man, we sure could give all those apparently interested buyers out there the Volts they want if we just had the private investment to step up production...folks, why don't you get your cash off the sidelines and buy GM corporate bonds -- right now they yield as well as "junk" but they're actually as safe as any AAA-rated corporate debt issue... And don't forget equities - get yourself a piece of the new GM and buy GM shares. "   

Personally, I'm figuring GM's bankers will emphasize GM's common stock issue.  Don't think GM has the dough or business yet to service debt (in the form of interest payments of any sort to hypothetical GM bond investors)

[Mozman68]

While I agree with every point Jeffy makes, you are miss. One key thing that doesn't necessarily apply to you; the Volt is 4 doors and a much more cushier ride than those cars you listed.

If it was just me driving around I'd be out picking up a GTI or an Impreza right now (would probably lean towards all wheel drive....stupid Michigan...)

Gotta consider hauling the rest of the family around and longer trips I take.

[Jeffy]

While I agree with every point Jeffy makes, you are miss. One key thing that doesn't necessarily apply to you; the Volt is 4 doors and a much more cushier ride than those cars you listed.

If it was just me driving around I'd be out picking up a GTI or an Impreza right now (would probably lean towards all wheel drive....stupid Michigan...)

Gotta consider hauling the rest of the family around and longer trips I take.

It's the same size as a Cruze, Focus, Mazda 3, etc...  You're still looking at 33-40's.  I doubt it will ride better then a VW, Mini or even the Fiat.  I've driven the Cavalier as well as the Cobalt and they ride a bit rough.  Because of the low-profile tires they have quite a bit or road noise.  If your kids are getting tall, they will outgrow the back seats quickly.  The Cruse and the Volt have marginal headroom in the back.   The Volt I saw had an ugly interior.  There is a lime green section in the middle of the seats which are otherwise black.  Green door cards on the front too.  I guess this is to prove it's 'green'.  Base price on the Volt is $41,000 for my area while the Cruze is $19,500.  The Prius is $22,800 and the Nissan Leaf is $33,220.  The Volt and Leaf has a $7000 tax rebate though.

Don't you have three kids though?  You've outgrown the car already!  Joe would be cramp.  You'll have to put him in the trunk.

Oh and the new WRX looks really nice.  More STI then previously.

[Mozman68]

Subaru it is....I just needed someone to push me over the edge.

[Jeffy]

Subaru it is....I just needed someone to push me over the edge.

Sell the Jeep.  

The WRX looks good with the bulging fenders.  The wheels are 17" instead of 18" but I honestly think 17's are better.  I don't like the ever increasing wheel size.  Older STI's and WRX's used 17's.

[chrisfranklin]

Sell the Jeep.  

The WRX looks good with the bulging fenders.  The wheels are 17" instead of 18" but I honestly think 17's are better.  I don't like the ever increasing wheel size.  Older STI's and WRX's used 17's.

I like the WRX too.  Even more now that it comes from the factory running about as fast as the more expensive STI version (thought I read somewhere that the latest iteration of WRX had actually tested faster than the STI model!).  And I also know that its performance would help me to lose my drivers license.  You maybe have a racetrack near where you live Moz?  That might help you keep your foot out of it on the streets maybe