General Motors IPOGeneral Motors' pending initial public offering has the hallmarks of being a success. With the shares nearly ready to begin trading on Wall Street, today GM increased the size of the IPO to 478 million common shares, up 31% from the previously planned 365 million shares. Just yesterday, the auto giant boosted the range of the common share price to $32 to $33 a share from the initial range of $26 to $29 a share.

GM did so, according to news reports, in response to strong investor demand, a positive sign that may quell critics who have argued that the Detroit automaker acted too quickly in cobbling together its IPO. They say that to ensure greater revenue from the offering, GM should have instead logged a few more profitable quarters. But, as has been widely reported, GM's stock sale is as much politics as it is business.

The Obama administration is anxious to get out of the car business, and GM is eager to shed the epithet critics have ascribed to the company -- "Government Motors." And while Thursday's stock sale won't eliminate government ownership by a long shot, the U.S. Treasury will no longer hold a majority stake in the company, reducing its claim to about 40% from the current 61%.

Still Needed: Customer Loyalty


The nearly $14 billion offering isn't the end of the road for GM's problems, however. Though the company has managed to return to profits after years of losing money, the U.S. auto market remains intensely competitive. And as Toyota Motor's (TM) numerous recalls have revealed, a company is never far from a devastating misstep that can damage even the most well-cultivated brand. Toyota's image for quality and safety has taken a hit (as have its U.S. sales). Still, the Japanese automaker enjoys a commodity GM hasn't yet regained: customer loyalty.

To accomplish that, GM must continue to make cars, trucks and other vehicles that customers want and to build them well. Recent product introductions, including the revised Buick LaCrosse sedan, new Chevrolet Cruze compact and refashioned Chevrolet Equinox small SUV, show promise, but they aren't the best in their respective classes. Asian automakers and crosstown rival Ford Motor (F) continue to churn out superior products that better appeal to discerning consumers and critics alike.

GM must also wrestle with the fallout from its decision to slash thousands of dealers from its franchise network. When it exited bankruptcy in July 2009, the automaker had about 6,000 dealerships in the U.S. A plan to cut that to about 3,600 fell about 900 short after Congress intervened last December by requiring GM to institute a formal appeals process. GM ended up with 4,500 dealers after all the cuts were finalized in October, a number many experts say is still too high.

Still Needed: A Leader Who's Passionate About Cars


GM will also soon have to renegotiate contracts with the United Auto Workers union. The bankruptcy process eliminated antiquated work rules and excess job classifications that kept union labor employed even in times of slack demand. But the union rules were a drain on GM's finances. With contract negotiations in the offing next year, the UAW will likely demand some givebacks now that GM is once more profitable.

Less pressing but nonetheless important is GM's need for a leader who exhibits a demonstrable zeal about the cars and trucks the company designs and manufactures. Ford's Alan Mulally and Sergio Marchionne at Chrysler Group are far more charismatic and enthusiastic about the auto industry than GM CEO Daniel Akerson, who's too-buttoned down to be a "car guy."

Akerson, who has deep experience in private equity as a former director at Carlyle Group, may prove to be effective at leading GM through its IPO, but the automaker's longer-term prospects require the passion for automobiles of someone like Bob Lutz, who oversaw design at GM for more than eight years before being relegated to an advisory role last December by then-CEO Edward Whitacre.

Akerson's tenure as CEO is expected to be longer than that of Whitacre (10 months) and Whitacre's predecessor, Frederick "Fritz" Henderson (eight months), but whether the 61-year-old Akerson can produce results long-term isn't yet clear.

GM in the last year has made a remarkable comeback. Though the company's survival seemed highly uncertain at points, the federal government's decision to step in and save GM and Chrysler -- and thousands of jobs -- may go down as one of the best policies it has ever pursued.

"It shows that despite all the criticism, at times you do need [to help] ... those entities that are critical for a country's economy to function," says Jesse Toprak, senior analyst at TrueCar.com.

Whether U.S. taxpayers will receive full repayment for the nearly $50 billion loaned to GM through the government's bailout remains to be seen. For now, at least, the nation's largest automaker appears on its way to a brighter and more profitable future.


Increase your money and finance knowledge from home

Reading a Stock Quote

Learn to read the ingredients of a stock.

View Course »

Investing in Startups

The lucrative and risky world of startups.

View Course »

Add a Comment

*0 / 3000 Character Maximum

91 Comments

Filter by:
bill

**** GM NO MORE BAILOUTS GM HAS SCREWED THE AMERICAN CAR BUYER FOR YEARS. I AM URGUNG EVERYONE TO BUY ANOTHER BRAND..ANY OTHER BRAND. THEY DROPPED OLDSMOBILE ,, THE TRAILBLAZER.....AND NOW PONTIAC......I HAVE 93 OLDS 88 ,JUST GOT RID OF 2 TRAILBLAZERS I HAD FOR MY 2 SONS ...I TRADED THEM FOR FORD EXPEDITION AND A HUMMER ( **** GM) TOOK A LOSS CAUSE THEY DONT MAKE TRAIL;BLAZERS ANY MORE .AGAIN **** GM....I HAVE 2007 GRANDPRIX GTP WITH SUPERCHARGER ..FULL SIZE CAR GETS 34MPG ...GUESS WHAT GM DROPPED PONTIAC ...**** GM ..WHAT IS MY CAR WORTH NOW .......I HAVE 1979 PONTIAC TRANS AM 6.6L T-TOPS THE WORKS .....GUESS AGAIN GM DROPED PONTIAC......**** GM AGAIN HOW MUCH FINANCIAL LOSS CAN ONE FAMILY STAND BY BUYUNG GM I THINK GM SHOULD GIVE ME WHAT I PAID FOR MY CAR ON A TRADE IN IF THEY ARE GOING TO **** ON US THIS WAY.

November 29 2010 at 4:30 PM Report abuse rate up rate down Reply
enuliv

Be very very cautious of buying the "New GM Stock". The major parts suppliers are using lower quality materials to keep their costs down. My prediction is that there will be recalls of GM vehicles in about 5 years that will make Toyota's look minor.

November 18 2010 at 8:56 PM Report abuse rate up rate down Reply
John McBaine

So, the GM IPO is in demand today and will be the largest IPO ever. People don't seem to realize, or care, that shares of the "new GM" are being sold by the Federal Government to large US investment firms. The same investment firms that were guilty of nearly destroying the financial systems in the United States if not the world. The same investment firms that will be promoting these shares of "New GM" in hopes of getting the bump up in share price, typically seen with IPO's, so they can quickly take their profits. This is not the "long term investor" crowd. This is a hit and run. And, no one seems concerned that the Federal Government and the UAW, "owners" of 70% and 20% of the new stock are positioned to sell massive amounts of this stock in the months and years ahead. Selling several hundred million shares that they still "own" after today will help the stock value increase on the open market? How does that work? I find it extremely frustrating, as a GM salaried retiree, that my investment in the "Old GM stock" over a 38 year career was rendered completely worthless as the Federal Government pushed GM into a "Managed Bankruptcy" and forced CEO Wagoner out the door. In a short span of months instead of years, GM was allowed to walk away from their obligations to investors, suppliers and dealers. My hard earned retirement savings in GM Stock were zeroed out so that the White House and UAW could, somehow, end up "owning" 90% of "New GM" stock. How does that happen? I watched from ring side for many years GM's annual sales revenue of $200 Billion resulting in profits of only one percent - $1/$2 Billion. The positioning is already underway to declare that a much smaller GM, with their major debt and obligations wiped from the slate thanks to the special bankruptcy process, earning upwards of $20 Billion a year. If that's true, then here's a novel idea: How about taking taking some of these dollars and making the the major stakeholders whole. The former GM Stock owners, suppliers and dealers that GM walked away from should receive equal financial consideration as the White Housee and UAW did. If that novel idea doesn't fly, I'll tell you what happens if a smaller GM goes from a $1 Billion yearly profit to $20 Billion. We will witness the largest increase in Executive Compensation perhaps ever seen by any company in the world. Remember where you heard it. John McBaine, jmcbaine@aol.com

November 18 2010 at 2:01 PM Report abuse rate up rate down Reply
Gumby

Invest in PulteGroup, Inc (PHM) . Pulte owns Del Webb retirement communities with golf courses, etc.. They are catering to upscale retirees who has too many retirement checks and can afford the nice amenities offered by Del Webb . They are filthy rich snots , alright.. Invest in PHM and spoil their pleasure! Now only at $6.75 a share, it is a steal , alright!! Jump in NOW!!!!!!!!!!!!

November 17 2010 at 5:39 PM Report abuse rate up rate down Reply
Gumby

GM collapsed under the weight of too much pension obligations as well as health costs for retirees, etc. There is many corporations in similiar situations as GM and you can look for more GM style bankruptcies coming up. What is SEC going to do to protect the shareholders from the follies of managments and unions?? Nothing??? Hmmmmmmmmm!???????????Interesting!! The picture looks very bleak ahead, indeed! Governments are already sinking under pension obligations. Government and company unions dont think that Social Security is good enough so they piggyback on SS with pensions.. They forgot who is paying for those, us consumers and taxpayers! If things dont change, we will see more of those silly Del Webb retirement communities popping up for those retired snotty ol' geezers drawing pension checks on top of SS checks!!

November 17 2010 at 5:36 PM Report abuse rate up rate down Reply
Gumby

Pension obligations is already the biggest reason that companies, governments, etc is in deficit. Everyone is already entitled to Social Security , yet some workers still want more . Social Security is the most fairest of all entitlements. Pensions is more like private Social Security that anybody can name the monthly checks as seen to be fit. it is corrupt! There is many large corporations already saddled with impossible pension obligations and they are assuming that shareholders will be the one holding the bags!! Corporations should cut back pension obligations now!

November 17 2010 at 5:31 PM Report abuse rate up rate down Reply
feasbie

Gm keeps sending mail calling me "GM Family" and wanting me to buy a GM car. Right. GM cancelled my insurance and now wants me to buy a GM car??? I can't afford to buy my meds or go to the doctor. I have two more years until I can get medicare. Then I'll start thinking about a new car but it won't be a GM. I'll be looking at Hondas and the Toyota.

November 17 2010 at 4:09 PM Report abuse rate up rate down Reply
cao252

Re: GM IPO. How stupid can people be? The old GM stock is worthless. GM goes bust, shareholders lose everything. How do you think GM lost its debt? Now the suckers are lining up to buy into the "New GM". Duh! Fool me once, shame on you..... Where is the remedy to help those who had GM stock and got crushed? Let me back in for $1 a share? Not a chance. You'll see.

November 17 2010 at 3:59 PM Report abuse rate up rate down Reply
Jetncat

Rip off! GM is not worth more than $2.00 IPO. they still have the same problems with the UAW only now they have tax payer money to float them for a while. This company is super over price

November 17 2010 at 3:25 PM Report abuse +2 rate up rate down Reply
Big Bob

Americans never learn. Pay a little more and buy an American made car. Keep the money in America regardless of what you think about foreign cars. The world laughs at Americans because we take care of everybody else but ourselves. BUY AMERICAN MADE PRODUCTS !!!!

November 17 2010 at 3:02 PM Report abuse +1 rate up rate down Reply
1 reply to Big Bob's comment
bill

BUY A HONDA **** GM BUY AYHTING BUT GM EVEN TOYOTA GM IS SUBSTANDARD TO FORD AND CHRYSLER. IF YOU BUY AMERICAN THEN GO FORD OR CHRYSLER

November 29 2010 at 4:34 PM Report abuse rate up rate down Reply