Michigan Cheers GM IPO
General Motors returned to Wall Street to the cheers of traders and the loud growl of a Camaro’s engine. Back home in Michigan they celebrated, too, but the cheer was tinged with regret for what brought GM to this moment and worry for what lies ahead.
“This is the start. It’s the turnaround. It’s what’s happened because of doing the right things,” said Mike Green, a local union president in Lansing, Mich., whose family includes four generations of GM workers. “But you can’t just sit back and rely on it. You’ve got to keep doing the right things day in and day out.”
A little more than 18 months ago, Michigan watched in shock as the unthinkable happened: GM filed for bankruptcy protection and was rescued with a $50 billion infusion from taxpayers. The state cringed as GM was mocked as “Government Motors” and its leadership replaced with industry outsiders.
The company has emerged leaner and more profitable. Where it used to lose $4,000 per car, it now makes $2,000 each. It cut four brands, closed dealers and slashed its debt from $46 billion to $8 billion.
Investors have responded with enthusiasm. On Thursday, GM’s shares began trading at $33 and closed at $34.19.
The government, meanwhile, is on its way to getting the bailout money back. On Thursday, it made $11.8 billion by selling 358 million shares at $33 apiece, and reduced its ownership stake in GM from 61 percent to around 36 percent. It stands to make $13.6 billion – and lower its stake to 33 percent – if bankers exercise options for 54 million more shares.
But that success was achieved, in part, by closing four Michigan plants and laying off thousands of workers, and it will take Michigan many years to get over that trauma. The state’s unemployment rate, one of the highest in the country, recently dipped under 13 percent but remains above the 10 percent national rate. Michigan has lost nearly 860,000 jobs – more than half in manufacturing – since seasonally adjusted nonfarm employment peaked in June 2000.
The state so inextricably tied to the auto industry has soared when that industry is profitable. In 2000, when SUVs were profit machines and GM earned $5 billion, Michigan announced a plan to buy laptop computers for 91,000 teachers. Now, it faces a projected $1.5 billion budget deficit starting in October 2011.
“The bottom line for us is we’re climbing out of this very, very deep hole that we were in,” Michigan Gov. Jennifer Granholm said. GM’s public offering, she said, “is a very important rung on that ladder out.”
The devastation is everywhere. Lansing, which had more than 20,000 GM workers in the late 1970s, has fewer than 6,000 today. In the same period, Flint – the automaker’s birthplace more than 100 years ago – has seen its GM employees drop from 80,000 to 6,000. The Detroit suburb of Pontiac, which employed 20,000 GM workers two decades ago, has seen its GM jobs dwindle to just a few hundred.
Those who still are employed can no longer count on the kind of money they used to make. Last month, the United Auto Workers agreed to halve the wages of some workers at a GM plant in the Detroit suburb of Orion Township. The workers will now make $15 an hour.
That’s why Roberto Flores, 36, the son of a Ford autoworker, said the state won’t necessarily benefit if the automakers get healthier.
The average autoworker “having a nice house, an RV, a truck, motorcycles and things like that – those days are long dead,” said Flores, of Michigan Center, who works for a parts maker that serves the medical and aerospace industries.
Still, Flores purchased 350 shares of GM stock Thursday, and said he’s optimistic about the company’s future.
“It has to be getting better, because I don’t think it could get any worse than what it was,” he said.
The stock offering is the latest in a series of head-spinning developments over the past two years for the American corporate icon.
In September 2008, to mark its 100th birthday, GM celebrated in the grand three-story atrium on the ground floor of its Detroit headquarters. Two months later, then-CEO Rick Wagoner found himself in front of members of Congress, begging for money to keep GM alive. Four months after that, he was ousted by President Barack Obama, and by June 2009, GM had filed for bankruptcy.
The GM IPO could wind up as the largest in history. Earlier this week, GM raised the high end of its initial price range from $29 to $33 and increased the number of shares it was offering from 365 million to 478 million common shares because investor demand was so high. Counting preferred stock issued by the company, the deal’s value could top $23 billion.
On Thursday, GM again threw a party in its atrium for hundreds of employees, this time to celebrate the public offering. There was catered food and a band played the Beatles’ “Drive My Car.” But even CEO Dan Akerson said GM’s work is far from over, striking the wary tone that many in Michigan feel.
“We need to work hard to repay that confidence and that trust that has been placed in us,” he said.
(Copyright 2010 by The Associated Press. All Rights Reserved.)