Treasury Secretary, New GM CEO To Meet In New York
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New General Motors CEO Dan Akerson will meet Tuesday afternoon with Treasury Secretary Timothy Geithner in New York as the government-owned automaker heads toward a public stock sale.
The Treasury Department says the men will meet briefly for the first time, and details of the meeting likely will not be disclosed. The private meeting will take place as GM draws closer to its initial public stock sale, which is tentatively scheduled for mid-November.
The government got a 61 percent ownership stake in the Detroit automaker in exchange for giving it $50 billion in aid to get through bankruptcy protection. GM has posted two profitable quarters this year and has filed paperwork with the Securities and Exchange Commission laying the groundwork for the stock sale.
At the meeting, the men could discuss the size of the initial public offering and how much common stock the government wants to sell in November. GM has repaid the government $6.7 billion and Treasury hopes to get back its remaining $43 billion with the initial stock sale and several follow-up offerings that could take two or three years.
GM will sell preferred shares in the offering. Preferred shares are more like bonds because they pay a set dividend. They convert to common stock in 2013.
The government likely will sell a small portion of its shares at first, hoping that GM will keep making money and the stock price will rise ahead of subsequent sales.
GM’s 2009 stay in bankruptcy wiped out existing stockholders, but GM emerged with a much lighter debt load. Better sales in the U.S., China and Brazil helped it earn $2.2 billion in the first half of this year.
But dangers loom. GM’s pension plans still fall $27 billion short of their obligations, the company is losing money in Europe, and any slowdown of U.S. car and truck sales in the near future could hurt the stock price and leave the government’s strategy in tatters.
GM and its Wall Street underwriters haven’t said how many shares will be sold or at what price.
The company itself won’t get any cash from the initial public offering of common stock, although it hopes to sell the preferred shares separately to make pension and debt payments.
Ed Whitacre, GM’s chairman and former CEO, has said the company needs to shed government ownership as quickly as possible. The bailout and derogatory “Government Motors” moniker are hurting the company’s sales and image, he said.
Akerson, who took over leadership of the company from Whitacre on Sept. 1, says it could take a couple of years to sell all the stock, and the government’s bailout watchdog says the shares will have to sell for more than $133 each to recoup the taxpayer dollars.
A relatively small initial sale is likely, $10 billion or less.
Securities and Exchange Commission regulators could tell GM within weeks that the company’s plan for an initial stock sale is good to go. That would allow the automaker to go on a worldwide “road show” to officially start wooing investors.
(Copyright 2010 by The Associated Press. All Rights Reserved.)