2010 GM And Chrysler IPOs Looking More Likely

Edward Niedermeyer
by Edward Niedermeyer
2010 gm and chrysler ipos looking more likely

Chrysler crowed over its 9.1 percent market share in its Q1 results conference call yesterday, and though CEO Sergio Marchionne refused to be pinned down on an exact time frame, an IPO this year looks more likely than ever. Similarly, BusinessWeek reports that GM’s Ed Whitacre has hinted that a Q1 profit is likely, as is an IPO in Q4 of this year or early next year. This improvement in both bailed-out automakers was underlined by former Presidential Auto Task Force head Steve Rattner, who said the two firms were “meeting expectations,” at a Detroit-area conference. But Rattner also put his expectations into some context by saying

When we did this restructuring we never expected a full recovery of our investment. If it ends up costing us $10 billion we should consider it a success. For about $10 billion we avoided economic and human calamities… I would suggest that that’s a pretty effective cost of government stimulus

That assessment is down considerably from Rattner’s last prediction, which expected a taxpayer profit on the auto bailout.

Current auto task force boss Ron Bloom echoed the IPO optimism, as the AP reports that Bloom is “hopeful” that GM will be able to swing an IPO by year’s end. However, as the Detroit Free Press reports, Bloom refused to make a concrete prediction, saying

We’re not putting a firm line in the sand; we’re hopeful they’ll be able to do it by the fourth quarter

Where exactly GM stands financially won’t be clear until Q1 results emerge later this month, but Chrysler’s performance was surprisingly strong given the challenges it is facing. Despite a reported 40 percent fleet sales mix in April, Chrysler’s Q1 results showed a $27,800 average transaction price, up considerably from Q1 2009’s $25,400 level. That growth is clearly tied to improved incentive discipline, with about $3,500 average incentive cost compared to $5,000 in Q1 2009. Average transaction prices were down from Q4 2009 levels however, when they reached $28,100.

Marchionne claimed that its guidance of $40b-$45b net revenue for 2010 and $0-$200m operating profit were “conservative,” saying that he expected the company to “blow the lid off” its current projections. The firm will re-visit guidance at the end of Q3. However, at $9.68b net revenue in Q1, revenues do seem to be a bit shy of where Marchionne wants them to be. Given both the fleet mix and reductions in much-ballyhooed Ram truck sales Chrysler saw in April, there’s certainly a chance that Q2 results are already behind the curve to meet those goals. Marchionne did say that fleet sales would continue to be an important part of Chrysler sales, saying its mix (at the end of Q1) was in line with its Detroit competitors.

Marchionne did say though that Chrysler was focused on an IPO, saying that it needed to be ready for a “plug-and-go” floating of Chrysler equity. To make that happen though, Chrysler needs to stick religiously to its numbers. Moving towards a late-2010 IPO will likely require an improvement in the revised guidance at the end of Q3, and an improved outlook for 2011. And with $2.3b of debt maturing in 2011, securing that improved outlook won’t necessarily be easy. But with most of Chrysler’s new products dropping all in the fourth quarter of this year, it looks like Marchionne is envisioning a blitzkrieg attack starting in October. By flooding the market with new and revised products, Marchionne will begin Chrysler’s move towards a public offering with a distinct break from its current PR radio silence.

In the meantime, Chrysler will keep its spending relatively low and will probably maintain a low profile. If it stays quiet and hits its numbers for three more quarters, there’s a chance that a late-2010 IPO is more than an impossible dream. But building up the confidence to launch an IPO is no guarantee of a successful IPO. Chrysler is clearly working with a cleaner balance sheet than ever before, but there’s still a lot of work to be done.

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  • Wsn Wsn on May 11, 2010

    Obama can simply order pension funds to buy GM shares. It's not like he never abused his presidential power before. Do the right thing. Short GM 6 month after IPO.

  • Lumbergh21 Lumbergh21 on May 11, 2010

    It's interesting to see how these bailed out car companies which were able to dump a large portion of their obligations/debt in bankruptcy court are twisting themselves into a pretzel like a mob accountant inorder to make it appear that they are a) making a profit and b) paying back their government loans. Then you have Ford who is actually making a profit and paying down its (admittedly mountainous) debt.

  • Kwik_Shift It was an annoying feature on my 2018 Nissan Sentra SV. Bugs, leaves and snow would disable it. Should have been a better design .
  • Master Baiter A regulator's job is never done, so yeah, bring on the next level of regulations.
  • DedBull The automatic braking system in my wife's 2019 Tiguan is easily defeated by the slightest amount of solid precipitation, which is not uncommon here in western Pennsylvania. Fortunately we have regular speed-holding cruise control, because the active cruise control uses the same sensor and becomes inactive in the same conditions. It was infuriating in our loaner. I've had a few false-positives over the years, plus a couple where it didn't like my rate of deceleration. Interestingly it did not intervene at all when I had a deer strike a couple years ago. I don't mind the application of the tech, but I think they are setting a pretty high bar going forward. I'm also cautious of over-reliance on tech in vehicles.
  • FreedMike The AEB system on my car has actually engaged only once in the two years I've owned it, mainly because I actually pay attention. But not everyone does...thus, this proposal. If everyone was as diligent as I am, I'd say there's no need, but we all know how that movie ends.if it keeps some moron in a Tahoe who's busy f**king around on TikTok from laying waste to my car from behind, I'm all for it.
  • Lou_BC I've seen photo's of plates that spell "azzhole" when viewed in the rear view mirror. There was a fellow in Canada who's last name was "Grabher". They wouldn't let him have that plate.