#HighFinance

Digging through the finances of a company as large as GM is never an easy task, especially when the balance book in question was recently wiped clean in a bailout-bankruptcy. Luckily, Bloomberg columnist Jonathan Weil has the chops to do the task justice, and he’s come up with a fascinating insight: through the power of an accounting tool known as “Goodwill,” Weil claims that GM has juiced its assets and liabilities during its “fresh start.” He notes with TTACian zeal:

It’s as if a $30.2 billion asset suddenly materialized out of thin air. In the upside-down world that is GM’s balance sheet, that’s exactly what happened.

The short version: GM undervalued some assets and overvalued some liabilities during its “fresh start.” The scary result: improvement in GM’s performance and creditworthiness could actually lead to writedowns on its Goodwill… which is currently The General’s largest non-current asset. Oh yes, and without that $30.2b in Goodwill, GM would have about an equity value of -$6.3b. Welcome to the new General Motors…

We can’t pretend to be overly enamored with former “car czar” Steve Rattner, who oversaw the auto bailout before being disgraced for his role in a New York pension fund pay-for-play scandal. Still, the guy was in the thick of things during last year’s negotiations over Detroit’s rescue, so he knows where the bodies are buried. And in his new book, Overhaul, which has been released to select outlets ahead of its October 14 publication, he tells a whole lot of stories about the months of bailout proceedings that led to the rescue of GM and Chrysler. Of course, Rattner has an agenda in all this, namely proving that

The auto rescue remains one of the few actions taken by the administration that, at least in my opinion, can be pronounced an unambiguous success

so he’s not necessarily an unbiased source. But with grains of salt at the ready, let’s dive into his spilled guts and see if what secrets lie beneath.

Another day, another story detailing the political nightmare that is the GM IPO. The WSJ reports thatThe U.S. Treasury is concerned about how many overseas…

From a week deep in our “How The Hell Did We Miss That” file comes a Reuters report that shows GM considered floating its IPO on the Hong Kong Hang Seng index. GM’s interest in a Hong Kong float has obvious roots: the company is extremely well-positioned in China, where high savings rates and the prospect of steady local sales growth could have helped bring in both private investors and GM’s partner firms. But according to a Reuters source, GM rejected the idea because it would have delayed the IPO past its Thanksgiving deadline

I don’t think signaling goodwill toward Asia is likely to be a significant enough argument for all the cost and complexity. I don’t want to overstate the cost and complexity but it’s not insignificant

Think GM has a tough sell for its coming IPO? Chinese battery/automaker BYD is preparing its own $420m stock offering, likely to be floated on the Shenzhen A-Shares exchange, in the midst of a Chinese-market downturn, and an ongoing lawsuit with electronics manufacturing giant Foxconn. And all this comes after a long run of good news for the Hong Kong-listed BYD, which had been running strong on optimism generated by Warren Buffet’s major investment in the firm nearly two years ago. So, is BYD in real trouble of having its overvalued stock burst, or is the company strong enough to weather the storm that’s swirling around it?

We’re hardly shocked by the idea that Chrysler won’t turn profit this year. After all, Auburn Hills has barely made its minimum monthly sales volumes (at best, and with rampant incentives and fleet mix) this year, and lost $50m+ in “industrial inefficiencies” on the Jeep Grand Cherokee launch alone [ Q2 results analysis here]. With plans to close out the year with a non-stop barrage of product launches and attendant media spending, it would take a minor miracle for Chrysler to break even. But we’ve essentially known this all for some time… what’s truly shocking is that Chrysler’s CEO Sergio Marchionne actually admitted to the media that Chrysler won’t turn a profit.

Thanks to one of the most popular Top Gear segments ever, the Peel P50 is now well-established in the minds and imaginations of the world’s automotive cognoscenti. After all, how often does Clarkson say that “if [car X] had a reverse gear, I would describe it as the absolute ultimate in personal mobility”? But now there’s another reason to pay attention to Peel: having been bought a few years back by Gary Hillman and Faizal Khan, the British microcar maker is set for a comeback that’s being funded by Sonny Coreleone himself, actor some British investor named James Caan (born Nazim Khan… cheers to colin42 for the British pop culture lesson, and apologies for unwittingly making the story better than it is).

Some of the world’s biggest automakers are relying on continued strong growth in the Chinese market in the face of sluggish US and European sales, but those plans are facing a challenge as Chinese sales have slowed this summer. Total vehicle sales grew 14.4 percent over July 2009 levels last month (sales grew 70 percent year-over-year in July 2009), the lowest rate of growth the Chinese car market has seen since March of last year. China’s government is doing its part, instituting a $443 subsidy for cars with 1.6 liters displacement or less in the beginning of July. But that doesn’t seem to be helping much, as the percentage of cars with 1.6 liter engines or smaller actually declined last month. What’s a growth-addicted automaker to do (besides slash prices)? The same thing they do in every other market: extend credit in hopes of boosting sales and upselling customers on more expensive cars.

Editor’s Note: With GM’s S-1 IPO filing hitting the web today, every IPO and auto industry analyst is weighing in on the offering, and the state of GM. Here’s a collection of some of today’s more notable comments.

It looks to me that GM should be worth no more than Ford. If that’s the case, then the taxpayers will lose about 50% on their investment.

Francis Gaskins, president of IPOdesktop.com, commenting in the WSJ [sub] on GM’s IPO. More analyst commentary on GM’s just-released S-1 filing after the jump.

The most interesting section of every S-1 filing is undoubtedly the “risks” section, in which companies are legally compelled to disclose all possible material risks associated with investing in their IPOs. Unfortunately, these risks are typically overstated, as no firm on the verge of going public wants to run into trouble with the SEC for under-reporting risk. As a result, many of the risks disclosed are fairly mundane, everyday risks in the world of business (currency, commodity price, and other economic fluctuations, etc). At the same time, companies rarely give reporters a full tour of their major risk areas the way these sections do, so they’re usually worth a read. GM’s just-released S-1 filing is no exception…

GM has filed its S-1 paperwork with the Securities and Exchange Commission. Read the entire document here.

With GM’s IPO S-1 now set for a Wednesday filing, The General is announcing a joint engine development project with its Chinese partner SAIC, spurring on rumors that the Shanghai-based automaker could buy into GM’s forthcoming IPO. Reuters reports that GM and SAIC have signed an agreement to develop a new range of 1.0-1.5 liter direct-injection, turbocharged engines in the vein of Ford’s EcoBoost mills. The ground-up joint engine development is significant because, as the WSJ [sub] reports

it marks the first time when GM and SAIC – partners for more than a decade already – are going to develop “base” propulsion technology, going a step further than simply integrating existing engine and gearbox technologies into automobiles.

GM has already moved much of its advanced technology development to new Chinese R&D labs, and this attack on Ford’s EcoBoost technology is likely to become a global engine. But what does the ever-increasing cooperation between GM and SAIC (which recently bought out GM’s controlling interest in their Shanghai GM joint venture) portend for the GM IPO?

GM’s IPO filing still has yet to appear on the SEC’s EDGAR database, but while we wait for the S-1 form to clear, Reuters has some details on what to expect from the sale. The big news:

GM is mulling a plan under which sovereign wealth funds or pension funds would serve as “cornerstone investors,” a technique often used for large initial public offerings to show that key investors are supporting the deal, four people said…

Each cornerstone investor would likely be asked to commit to buying 2 percent to 10 percent of the IPO and cornerstone investors would likely account for 10 percent to 30 percent of the total IPO, one of the sources said.

On the other hand, another source says GM is targeting 15 percent of its equity towards cornerstone investors, with 20-25% is aimed at the retail investment market. Either way, Reuters points out that another recent large IPO of a government-owned business, the Agricultural Bank of China, relied heavily on cornerstone investors… but that the politics of such a strategy could be risky.

Redflex Traffic Systems of today reported to the Australian Securities Exchange that it had rebuffed the $275 million offer from toll road giant Macquarie Bank for outright control of the company. The Australian red light camera maker believes that it can spark a bidding war to drive up the purchase price and enrich shareholders.

Reuters [via ABC] reports that GM has completed its S1 filing and will file Monday, after a Friday the 13th filing was delayed in order to

add a management risk factor after Chief Executive Ed Whitacre announced on Thursday he would step down and be succeeded by Dan Akerson effective September.

And that won’t be the only “risk factor” warning to investors in GM’s S-1. Bloomberg found a number of analysts ready to support the headline

GM’s Akerson to Struggle in Proving to IPO Investors Europe Fixable

Any bets on the number of times the word “Opel” appears in tomorrow’s filing?