Jump to content
  • Greetings Guest!

    CheersandGears.com was founded in 2001 and is one of the oldest continuously operating automotive forums out there.  Come see why we have users who visit nearly every day for the past 16+ years. Signup is fast and free, or you can opt for a premium subscription to view the site ad-free.

Sign in to follow this  

Now's not time to panic over GM

Recommended Posts

Now's not time to panic over GM



Yikes! Stock markets plummet one day and gyrate wildly the next. Does this doom Uncle Sam's chances of ever selling off the taxpayers' 61% ownership of General Motors?

And geez, didn't Big Ed Whitacre, GM's supreme leader, say he was done shuffling top managers? Now he dumps Susan Docherty as GM marketing boss. She was just promoted in October and again in December, only to be demoted in March and landing now in GM limbo.

Should we be worried about whether GM's leadership churn will ever settle down?

And how about the howling that GM's playing a shell game with federal rescue money? And being deceptive in TV ads that tout the repayment of government loans?

Should we all be frantic about GM's future?

Sigh. Take a deep breath. None of the above is cause for panic.

Key numbers coming

The first major meaningful indicator about how much, and how soon, GM will repay U.S. taxpayers comes in a week or two when the company issues its first-quarter financial report.

Until now, trying to make sense of GM's numbers during its bankruptcy and the aftermath has been like reading Egyptian hieroglyphics. Last month, though, GM said it completed its "fresh-start accounting" changes and can now begin to clearly show its operating performance.

Wall Street will want to see at least two clean quarterly reports of sales, operating profits and cash flows before the automaker launches an initial public offering (IPO) of stock. The federal loans GM finished repaying April 21 were only $6.7 billion, or roughly 13% of the total U.S. cash infusion that kept GM alive. The rest is tied up in the 61% federal equity stake and some preferred stock.

Speculative trading in GM's old bonds -- now converted to a 10% equity stake in new GM -- has indicated that GM's value could be more than $60 billion. Which means U.S. taxpayers could get fully repaid by a sale of Uncle Sam's equity.

Note the word is could.

Rational not emotional

Until we see some clean, audited earnings reports, showing real operating profits (preferably $2 billion per quarter) and positive cash flow, there's no reason to be giddy about an impending IPO.

Just as there was no reason to be giddy about the $6.7-billion loan repayment. It was better than asking for more federal handouts, but still just a fraction of the full payback.

Even if a GM stock sale launches in late 2010 or early 2011, unloading the full federal stake will take years.

So now is not the time to get giddy or to panic.

Sometime this month we will see a quarterly report with concrete evidence of where the turnaround stands. And maybe the conversation about GM will become more rational and less emotional.



Share this post

Link to post
Share on other sites

Your content will need to be approved by a moderator

You are commenting as a guest. If you have an account, please sign in.
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Sign in to follow this  

About us

CheersandGears.com - Founded 2001

We ♥ Cars

Get in touch

Follow us

Recent tweets



Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.