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IPO for GM? If it can perform

IPO for GM? If it can perform

Jamie LaReau
Automotive News | October 12, 2009 – 12:01 am EST


DETROIT— 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.

The keys: Sales and profits

He acknowledged that the key issue for GM is cranking up sales and profits.

"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."

The primary advantage of going public is clear: Henderson will free his executive team of government oversight.

But the task is daunting. GM’s sales through nine months this year fell faster than the catastrophic U.S. industry average. Many consumers were turned off by GM’s bankruptcy and taxpayer bailout. The company is working through plans to cut 1,350 dealerships in the next year over the objections of the dealers and many members of Congress.

Board will set the plan

In the next two months, executives will review GM’s business plan and budget with the board, Henderson said. The board will complete a plan for 2010 and 2011 in early December.

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.

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.

Said Henderson: "I think you can get your performance together and be ready to go. All of our shareholders want the company to go public."

The private company that emerged July 10 from federal bankruptcy is now 60 percent owned by the U.S. government. The other owners are the UAW, which owns 17.5 percent; the governments of Canada and Ontario, 12.5 percent; and unsecured bondholders, who own 10 percent.

The stigma of bankruptcy and a new nickname — "Government Motors" — is not lost on Henderson.

He thinks, though, that GM’s corporate image was damaged more than the image of the four surviving brands: Buick, Cadillac, Chevrolet and GMC.

Henderson said the brands have largely recovered.

"It’s kind of back to what’s the product?" he said. "What’s the value proposition? Are we delivering on the promise? Is it meeting the needs of the consumer? Is the brand something that’s desirable? It’s the basics of the business."

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