General Motors revs up for stock market return
General Motors, whose bankruptcy in 2009 marked the nadir of a crisis in the US car industry, readied itself for a return to the stock market by declaring itself restored to financial health and installing a new chief executive to woo Wall Street.
In a series of coordinated moves, the company announced a quarterly profit of $1.3bn (£835m), privately tied up an important credit facility with a consortium of banks, and prepared to publish a plan for what could be the second-largest US flotation of all time.
And finally, in a moment of theatre, halfway through a conference call with Wall Street analysts to discuss GM's figures yesterday, Ed Whitacre said he would stand down as chairman and chief executive by the end of the year. His replacement will be Dan Akerson, currently a non-executive board member and, like Mr Whitacre, an appointment from outside the car industry.
The flotation of GM, the details of which will be revealed in a regulatory filing that could come as early as today or Monday, is the most important step towards unwinding the $50bn taxpayer bailout that kept GM operational through the credit crisis. The company is expected to announce it will sell between $12bn and $16bn of stock, but the exact amount, and the proportion of that figure which comes from the US Treasury's shareholding, will depend on the reaction of potential investors, as will the company's valuation.
GM hailed its second-quarter results as evidence that it is now sustainably profitable, having left unproductive plants and billions of dollars of its debts behind in a rump "old GM" that still languishes in bankruptcy. The so-called "new GM" posted a 44 per cent surge in revenues and $1.3bn of net income, compared with a $12.9bn loss in the same quarter last year.
The North American business recorded an operating profit of $1.6bn, having slimmed down to reflect lower demand, shed dealerships and cut production. The European operations remained a drain, but reduced their losses to $160m from $477m the year before. Strong sales in the UK, where the company owns Vauxhall, were a highlight, and GM's market share in the UK jumped from 12.0 per cent to 13.7 per cent in the quarter.
The US taxpayer threw a lifeline to GM late in 2008 to avoid a liquidation that threatened tens of thousands of rust-belt jobs and the solvency of numerous suppliers across the US.
In bankruptcy, $6.7bn of the money was converted into a formal loan, which has been repaid, but most of the rest was converted into a 61 per cent equity stake in "new GM".
Mr Whitacre, 68, was lured out of retirement to chair GM and inserted himself visibly into efforts to portray a new face to investors and the public. He fronted GM television ads, and last December he fired the chief executive, Fritz Henderson, and took on the chief executive role himself. After finance department executives had taken analysts through GM's second-quarter results yesterday, Mr Whitacre came on the line to declare: "My public duty was to help return the company to greatness and I didn't want to stay a day longer than that."
The 61-year-old Mr Akerson is a veteran telecom industry boss, like Mr Whitacre, and since 2003 he has been a managing director of the private equity giant Carlyle. The iconoclastic appointment was designed to assure Wall Street that cool business heads are in charge, marking a sharp break with GM's traditional practice of hiring chief executives from within the automotive industry.
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