GM Backs Off From 2010 IPO

Robert Farago
by Robert Farago

GM has jettisoned tens of billions of dollars worth of corporate debt. They’ve folded four out of eight of their U.S. brands (HUMMER, Saab, Saturn and Pontiac). They’ve dismissed white collar workers and contained union health care costs. They’ve shuttered factories, trimmed dealers, revised their marketing strategy and released new products. And they’re still taking in less money than they spend. Until and unless that occurs, or threatens to occur, the chances that the nationalized automaker will de-nationalizing itself are less than the chances that GM lifer and CEO Fritz Henderson will introduce accountability into GM’s cancerous corporate culture. Sure, as mid-term elections approach, the feds may try to game the system, offering some kind of IPO-enabling investor “protection.” But, like a “real” bankruptcy, the idea of a “real” GM IPO in 2010 lies somewhere between utterly preposterous and infinitely delusional. Any investor-pleasing turnaround would require a sudden sea change in consumer confidence in GM’s products and a dramatic, robust recovery in the U.S. car market. And yet, the Boyz at RenCen are talking-up the IPO via Automotive News [sub]. At the same time that they’re playing it down. No surprise there . . .

The board of General Motors Co. will set targets in December that will help determine whether the restructured company is healthy enough to go public in the second half of 2010, CEO Fritz Henderson said.

“Investors will want to know what your targets are going to be, so we need to get that done,” Henderson told Automotive News last week.

On the table, Henderson said, will be targets for earnings, cash flow, debt and other key measures.

Auto market conditions late next year also will bear on a decision to go public, he said — and those conditions are impossible to predict.

So, NOT selling the government’s share to the General’s public is now on the cards. In other words, New GM’s old management is preparing for failure. CYA rules! Again. Still. But accepting the whole leopard non-spot changing thing doesn’t make it any less excruciating to contemplate the simple, inescapable fact that New GM should have sorted their shit out before bankruptcy. That they didn’t, and still managed to hoover-up well over $60 billion in taxpayer subsidies, is a symbol of everything that’s wrong with Detroit and Washington.

“Performance is the most important determinant,” Henderson said. “You can do all the work to facilitate it, but if you’re not performing, you’re still not going to have a successful public offering.”

Notice Fritz’s deployment of the impersonal pronoun: “you” instead of “I” or “we.” It’s a verbal tic used by professional athletes (and others) to distance themselves from failure. Other than, say, the Cadillac CTS Sportswagon. you couldn’t ask for a more ominous sign of impending doom. Signs? We don’t need no stinking signs!

Henderson said an IPO will be governed by the automaker’s financial performance relative to investors’ expectations.

Investors will want GM to “set performance expectations for ourselves and ultimately for investors if we go [public] in 2010, and then perform against it,” he said.

Henderson wants good numbers for earnings, operating cash flow and debt, among other things.

Define “good.” Then riddle me this: good for whom? Fritz and his mob, GM’s Chairman of the Board (“We win!”), the Presidential Task Force on Automobiles (remember them?) or U.S. taxpayers? No? How about a reality check, then?

Through September, GM’s unit sales of 1.5 million were down 36 percent compared with the industry’s drop of 27 percent.

Auto market conditions late next year also will bear on a possible public offering, he said. But conditions are impossible to predict.

Again with the impossible. Mission impossible? Impossible dream? Just so.

Robert Farago
Robert Farago

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  • Pch101 Pch101 on Oct 12, 2009
    Why do you suppose the willingness to let ideology trump analysis is so prevalent? One would suppose that purpose of business school would be to produce grads with the opposite tendencies. I'd like to have a definitive answer for you, but I don't. A business school education provides all the tools needed to do the analysis properly, and it's not as if the case studies taught about GM are particularly kind to the company. I can only assume a few things: -"Analysts" are still ultimately in the marketing side of the banking and trading business. Pissing all over the management of major companies is generally not the done thing; after all, they may be coming to you for future business, and their accounts tend to be large. -It's usually politically easier to parrot the usual story than to tell a new one. The nail that sticks out tends to get pounded. And the old story is that costs are too high and that unions suck. -The auto industry is mature and not particularly exciting from a Wall Street perspective, so I assume that the analysis doesn't get a lot of rigorous scrutiny and the sector may not attract the best of the breed. -They're lazy. Generally speaking, securities analysis isn't very good, anyway. The data can be useful, but the recommendations often aren't. Perhaps I am giving automotive a uniquely critical beatdown because those of us who post here care about it more than most, but honestly, you would have missed the mark about most of these companies most of the time had you relied upon most of the Wall Street analysts for your information.
  • PeteMoran PeteMoran on Oct 13, 2009

    It is with pride that I can say my employer hasn't had a recommendation on GM (or Ford) since 1997 and 1999 respectively. We just stopped researching GM suddenly in 1996 for some reason. No-one I work with knows why and the records are paper before that. Unsurprisingly, there are no takers for starting again either...

  • Calrson Fan Jeff - Agree with what you said. I think currently an EV pick-up could work in a commercial/fleet application. As someone on this site stated, w/current tech. battery vehicles just do not scale well. EBFlex - No one wanted to hate the Cyber Truck more than me but I can't ignore all the new technology and innovative thinking that went into it. There is a lot I like about it. GM, Ford & Ram should incorporate some it's design cues into their ICE trucks.
  • Michael S6 Very confusing if the move is permanent or temporary.
  • Jrhurren Worked in Detroit 18 years, live 20 minutes away. Ren Cen is a gem, but a very terrible design inside. I’m surprised GM stuck it out as long as they did there.
  • Carson D I thought that this was going to be a comparison of BFGoodrich's different truck tires.
  • Tassos Jong-iL North Korea is saving pokemon cards and amibos to buy GM in 10 years, we hope.