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U.S. to ease oversight of GM; Treasury wants no surprises


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U.S. to ease oversight of GM; Treasury wants no surprises

David Shepardson / Detroit News Washington Bureau

Washington — The Obama administration's top auto adviser said the government will reduce its oversight of General Motors Co. after the company's return to public trading.

In a wide-ranging 45-minute interview Friday in his office at the U.S. Treasury Department, "car czar" Ron Bloom said the government will "tick back our engagement" with the Detroit automaker, and continue to shrink its role as the government sells more of its GM stock.

The government took an active role with GM during the run-up to its initial public stock offering Thursday, helping to determine how much stock to sell and what price the underwriters should pay.

Bloom said there will still be calls between the Treasury and GM Chief Executive Daniel Akerson, as well as occasional financial briefings, but those things are likely to be less frequent.

"With the public owning more shares than we own, I think it is fitting and proper ... that we tick back our engagement," Bloom said.

Since GM emerged from bankruptcy 16 months ago,it provided the Treasury with "regular, detailed" briefings on its financial condition.

Treasury officials will attend GM's first annual meeting as a public company, and will vote the government's shares on key issues Bloom described as "selling the company sort-of stuff."

Treasury officials, he said, also will keep an eye on the government's still hefty stake in GM, which shrunk to 37 percent from 61 percent after the IPO, and could drop as low as 33 percent.

"We're going to stay informed," Bloom said. "We're going to maintain the 'no surprises' rule." Akerson "clearly understands that no major decisions get made without telling us before they are implemented."

Bloom, a former investment banker and adviser to the United Steelworkers, joined the Treasury's auto team as the No. 2 official in February 2009 and took over as head in July of that year.

Akerson said Thursday he expects that he and Bloom will continue to chat on a regular basis, and praised the Treasury for staying out of the boardroom.

Bloom said the government's track record shows it hasn't told GM what to do since July 2009.

"I've got 16 months of no meddling," he said. "I've got a huge piece of evidence (in the IPO) about leaving.

"The more people don't see the government as driving the company, the more the rest of our stake will be worth."

U.S. 'exit plan' since 2009

Amid speculation that the government pushed for an early IPO, Bloom denied that the government exerted any pressure. However, he said the government has had an "exit plan" since July 2009 to get out as fast as can be practically done.

"It is a good thing that the company wants to not have us as their largest shareholder — because we don't want to be their largest shareholder," Bloom said.

GM approached the Treasury in the spring with hopes of launching the IPO by year's end. But GM and its underwriters quickly realized they had a small window — if the IPO didn't get done in mid-November, it would get pushed back to February, after the holidays and fourth-quarter earnings were announced.

Bloom said the government told GM it didn't want to write the offering, or take part in the "road show" to sell it to investors. The Treasury didn't "tell GM how to tell their story," he said.

"This is not a process that we wished to lead," Bloom said he told GM. "It's not appropriate.

He noted that there was a lot of interaction between the government and GM around the IPO itself. "We were assuring ourselves that they were doing a good job getting ready without telling them how to tell their story," Bloom said.

The government reviewed the IPO prospectus before it was released to ensure that where the Treasury was mentioned, "it was mentioned accurately," he said.

The size of the deal, the pricing and the fees to be paid to underwriters — about $118 million, a quarter of normal fees — was in the government's purview. "Those are our shares and you can't take them from us without our permission," he said. Bloom called the launch of the IPO "a very good day for America."

The government ultimately sold more shares than it previously had planned — 358 million of its 912 million shares at $33 a share.

It will need to sell its remaining shares at an average price of $52.80 to break even.

GM's stock rose Friday closing at $34.26, up 0.2 percent, or 7 cents on volume of 108 million shares. The stock briefly hit a low of $33.11, just above the $33 offering price, before rebounding.

Praise for GM board

Bloom praised GM's reconstituted board of directors, which includes six government appointees, headed by Chairman Edward Whitacre Jr.

"The board was hugely supportive of Ed's effort to shake up management," he said. "Remember, we stepped back. Who did we really put our faith in? We put our faith in the board."

He also praised the board's decision to name two CEOs — first Whitacre, then Akerson. He called Akerson an "A+" CEO.

"This management wants to push harder and isn't satisfied," Bloom said.

David Cole, chairman emeritus of the Center for Automotive Research in Ann Arbor, said the government has kept its promise to let GM run its operations.

"They basically let GM go do its work, and that was the right thing to do," Cole said Friday.

What went wrong at GM

Nearly 21 months into his auto assignment, Bloom reflected on what went wrong at GM, which had lost $88 billion in the four years leading to its bankruptcy.

"Of the seven deadly sins, I think hubris is the deadliest and I think General Motors got self-satisfied," he said. "They were a great, great corporation. They dominated the global auto industry. But the world doesn't stand still."

GM did three things to "give this company a second lease on life," Bloom said.

They were: Fixing the balance sheet, wiping more than $80 billion in debt off the books.

Making key changes, including reducing labor costs, improving factory utilization and shrinking the dealer body. Changing the culture.

"The story's not over," Bloom said. "There are chapters to be written. But there's been a bunch of progress."

From The Detroit News: http://detnews.com/article/20101120/AUTO01/11200371/U.S.-to-ease-oversight-of-GM--Treasury-wants-no-surprises#ixzz161JhKooA

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