By on November 16, 2010
With news that GM’s IPO price could be headed as high as $33/share (only $10.67 more per share to taxpayer payback!), boosting the offering to some $12b, some might think that the decks have been cleared of skeptics. Not so. Though GM has emphasized its international flavor during its IPO pitch, it’s stayed away from the fact that its overseas operations haven’t been immune to trouble. Take Opel (please). Though invaluable as a development center for GM’s upscale global products, Opel is miles of bad road away from actual profitability. Just ask the guy who tried to buy Opel back when the General was trying to fire-sale its European operations.
There is a lot of euphoria about the IPO, but if you dig into the numbers, they still have a problem in Europe. They are doing worse than when we looked at them two years ago, and it’s going to take a lot of cash to fix Opel. That’s my concern on the IPO.
And Thomas Stallkamp of Ripplewood Holdings was telling Automotive News [sub] the dirty truth: without Opel, GM would be rich. Concerns over Opel have figured heavily into pre-IPO speculation, but unlike most commentators, Stallkamp has had a look under the Opel skirts. And speaking of peeks under skirts, nobody really knows exactly what’s going on over at Daewoo either. Daewoo’s boss calls operational profit this year “solid” but the real results will be lost in the GMIO accounting shuffle which lumps Korean results with Chinese and even African results. Meanwhile, creditors keep rolling over a cool billion ($1.02b) in Daewoo’s maturing debt month-to-month, presumably to keep from having to send a collections letter to the US Treasury Department.
GM just pumped $413m into its Korean branch last October, and even now it’s preparing to take on another billion in debt from its pushy creditor, the Korean Development Bank. And no wonder: Daewoo builds one out of every four Chevrolets sold worldwide, and develops and designs everything from the Cruze and the Aveo to the interior for at least one GMC pickup.But how long that cash infusion will keep Daewoo’s creditors from the door isn’t clear. Both Opel and Daewoo likely need billions of dollars to sustain the hugely important roles they play in GM’s global product strategy, and it’s fascinating that GM has chosen not to address them prior to an IPO. But then, the crowds of clamoring investors seem to prove that this was the right choice.
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12 Comments on “GM IPO: Go Ask Opel (Or Daewoo)...”

  • avatar

    As a retired GM employee I would love to purchase some “New” GM stock but once again GM is proving it’s disregard or dislike for it’s employees/retirees. Let me explain first GM employees have a PSP or personal savings plan where we can have money invested through Fidelity. Fidelity used to have an investment option for purchasing GM stock. To keep employees and retirees out there is evidently no plan to have an option so we can use the monies in our PSP’s. This limits employees and retirees to coming up with “NEW” monies and the cost of a broker or stock trading platforn like Scott trade and of course there’s no “Discount” on the stock prices either like many companies have for employees/retirees. Bottom line  GM now has billions more dollars since unloading their retirees pensions and health care but I don’t think much has changed in managment. I guess the retirees are to be forgoten like the corvair, the 8-6-4 Cadillac, the olds diesel, the Vega, and numerous other GM creations that flopped that they really don’t want to talk about. Beautiful! 

  • avatar

    People have gone to prison for pump and dump schemes like this. The individual investors who buy this in the secondary market are suckers who probably deserve to lose their money. But the people behiind this ought to be put in prison or worse. They deserve it.

  • avatar

    So what? If the entire organisation is profitable then that is what matters not if certain parts are and parts are not. Losses come and go. Opel has made much smaller losses (or profits) in the past so just because this part year or two has been bad does not mean it will continue. Plus the development aspect that Opel provides is worth a lot of money.
    Ford is profitable but not really in Europe – anyone moaning about that?
    Toyota makes no money in Europe either due to limited sales.

  • avatar
    John Horner

    More news on the IPO front: GM and its bankers are increasing the number of shares being offered by 31% in order to meet demand.
    Yes, Opel remains an issue. That doesn’t mean that the whole thing is going to come tumbling down. Remember what was being said here on TTAC just over a year ago about Ford?
    May 25, 2009: “Ultimately, Ford had no choice but to develop an EV on the cheap. Although it enjoys short-term sales prospects that its rivals can only dream of, it’s highly unlikely that Ford will see profits soon enough to spend any more on long-term development.”
    Well guess what, Ford is making robust profits even though the US auto market is less than two thirds the size it was at the last peak.

    • 0 avatar
      Telegraph Road

      It’s hard to believe that the Ford Death Watch series was still going in May 2009.  It should have been tossed with RF.

      (Actually RF had the prescience to exit just as the anti-Detroit bubble burst.)

    • 0 avatar

      RF made his predictions based on the then available information. Subsequently, Ford made great strives and changed their fate.

      Just as RF was right about GM dying but how could he have imagined the unprecedented non-market govt resuscitation schemes to un-fail the big failure.

  • avatar

    My last hideous, evil little Chevrolet rental finally made me do it.

    I finally told Hertz that my last rental was a miserable little car with malfunctioning controls and an uncomfortable ride, so my next rental can be anything EXCEPT for a general motors car.

    And that will be in Detroit.

    No, I will not be buying GM stock.  Maybe I can short it right at the beginning of the IPO instead…

    Oh drat, I forgot to tell them no Chrysler vehicles either.  Excuse me; I have a phone call to make!

  • avatar
    Telegraph Road

    Congrats to the guys in the RenCen–and I’m not talking about GMAC–on turning things around.   The Economist from London recently apologized to the supporters of the bailout in an editorial.  It’s good to see that someone has come to their senses.

    I would probably buy some stock myself from Schwab, but that would be a conflict of interest.

    [Full disclosure: I work for a large auto OEM in Dearborn.]

  • avatar
    Mike Kelley

    Here’s a good article about the IPO:

  • avatar

    Buy Buy Buy. This may very well be the hidden gem we’ve been waiting for. And right under our noses the whole time. When Big Brothers’ watching over you threats can be kept at bay and good things are bound to happen. And Big Brother has deeeep pockets.

    • 0 avatar

      And you honestly think that Big Brothers best interests will be the shareholders? No fricking way. 
      The fishy smell coming from GM’s IPO isn’t just being smelt on blogs like TTAC, the mainstream media is getting a good whiff too. There is a whole article in the Globe and Mail entitled ‘Why investors should skip the GM IPO.’
      My prediction? Short GM stock like hell when it finally hits the open market. You may get a day or two of the price rising, but after that a downhill slide.

  • avatar

    Keep an eye on just who buys these shares…I will wager 10 oz of gold that the Federal Reserve Commercial Banks are the big buyers…Money created out of thin air and handed to the commercial banks like they just did with $600B of government bonds.

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