GM earnings to impress

Aug. 6, 2010

GM earnings to impress

Whitacre expects good 2nd-quarter results




General Motors Chairman and CEO Ed Whitacre said Thursday that the company’s second-quarter earnings will be impressive and will help prove that the automaker is heading in the right direction as it prepares what could be the largest public stock offering in U.S. history.





"If you liked our first-quarter financial results, stay tuned for our second-quarter financial results next week," Whitacre said at the Center for Automotive Research Management Briefing Seminars in Traverse City. "You will like it. … It will be impressive."

GM earned a profit of $865 million for the first three months of the year.

Whitacre also said he wants GM to issue its initial public offering as soon as possible so it can shed the stigma of having the federal government as a majority owner.

GM exited bankruptcy last July with about $50 billion in federal funding and with the U.S. Treasury as a 61% owner. However, some experts warn that the company might be better off waiting until it has a longer track record of profits.

‘A lot to prove’

"GM is an untested entity," said Linda Killian, portfolio manager of Renaissance Capital’s IPO Aftermarket Fund. "I think GM has a lot to prove."

Reporting another quarter of strong profits should help make GM’s case to investors.

Whitacre also said GM is in far better shape now than a year ago when dealers were mad about the company’s decision to terminate 1,100 franchises, suppliers were frustrated and communities were angry about plant closures.

Now, Whitacre said, dealers are upset because GM can’t build enough cars, trucks and crossovers to meet demand and suppliers are stressed because of increased production and GM may restart a plant. "If you’ve got to have problems, these are the problems you’d rather have," he said.

In fact, Whitacre said GM may restart one of its U.S. plants but declined to say which one. GM placed two plants on standby last year. Those plants are in Janesville, Wis., and Spring Hill, Tenn.

The scale of GM’s IPO could be enormous. Most analysts expected that GM’s public offering would only be a portion of GM’s total equity. But on Thursday, Whitacre said, "Our anticipation would be we’d roll it out there all at once."

GM said later that the final decision on the number of shares sold will depend on market conditions and ultimately by GM’s shareholders, the largest being the U.S. Treasury.

"Exact timing of the offering will be determined by GM in light of market conditions and other factors, but will not occur before the fourth quarter of this year," the U.S. Treasury said in a statement.

It typically takes at least three months for the U.S. Securities and Exchange Commission to review a required regulatory filing. GM is still drafting it. "We’re going to go as fast as we can go," Whitacre said in an interview with the Free Press.

Whitacre said it could be the largest IPO in U.S. history.

"Sure it could be," said Brian Krasicky, of O’Keefe & Associates in Bloomfield Hills. "But it depends on the number of shares sold and if they are able to maximize their market value."

To be the largest in U.S. history, the offering would have to top Visa’s $17.9-billion offering in March 2008, Renaissance Capital said.



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