Jump to content

Things are looking up


NINETY EIGHT REGENCY

Recommended Posts

Things are looking up

Goodbye to 'Government Motors'?

David Barkholz

Automotive News -- November 22, 2010 - 12:01 am ET

Ohio dealer Chris Haydocy heard it even at dinner parties: "Government Motors."

In conservative Buckeye country, it meant a fat "no, thank you" to vehicles from General Motors Co., whose majority stakeholder was the federal government.

But after last week's smash-hit initial public offering of GM stock, he and others think the stigma of government ownership has been largely erased.

The IPO, which created buzz way beyond Wall Street, is casting GM's four brands in a new light for consumers. Some dealers now expect buyers turned off by Government Motors to return to Buick, Cadillac, Chevrolet and GMC.

Steve Girsky, GM vice chairman for corporate strategy, said last week that government ownership hurt sales. "Our studies showed that consumers knew it going into the showroom," he said.

Girsky said huge demand for GM shares validated the theme senior executives had pitched to investors: GM has competitive products, renewed finances and global growth opportunities. "This largely puts the Government Motors moniker behind us," he said.

The IPO ballooned to $23.1 billion last week after GM increased the size of the offering and repriced the common shares to $33 per share instead of the original estimate of $26. The stock closed Friday afternoon at $34.26 a share.

GM's four surviving brands have rebounded nicely this year from a dismal 2009, aided by substantial fleet sales representing 29 percent of total U.S. sales through October.

Chevrolet rose 18 percent through October, compared with an 11 percent gain for the U.S. industry. GM, though, was up only 6 percent, mainly because it shed four brands in last year's bankruptcy.

RETURN ON INVESTMENT

The initial public offering allowed the federal government to recoup about one-fourth of its GM bailout last week.

• Original investment in GM: $49.5 billion

• Amount received in IPO: $13.6 billion*

• Equity stake before IPO: 60.8%

• Equity stake after IPO: 33.3%*

*If overallotment options exercised

Texas Chevrolet dealer Carroll Smith said he won't be happy until the government has sold its stake in GM. The IPO reduced U.S. ownership from 61 percent to about 33 percent.

Smith, who will sell about 1,600 new vehicles this year at Monument Chevrolet in Pasadena, Texas, is convinced that the stigma of government ownership cost him sales.

He said he has heard at the country club, especially from his Republican friends, how Ford Motor Co. deserved praise for not taking federal bailout money. "It's not quantifiable, but I'm sure it's happened," Smith said of lost sales.

He said he bought the maximum 800 shares of GM common stock offered at the IPO price to GM dealers, employees and retirees.

Tom Durant, a Dallas-area Chevrolet dealer and member of both the GM and Chevrolet dealer councils, said product will determine GM's future. With improving sales and a bankruptcy-scrubbed balance sheet, GM will have more money going forward to invest in product development, he said.

"We had new product coming out during bankruptcy and lots afterward," said Durant, owner of Classic Chevrolet. "That's what this game is all about."

This year, GM has launched the Chevrolet Cruze compact, the Chevy Volt plug-in sedan, heavy-duty full-sized pickups and the Buick Regal mid-sized sedan.

Ohio dealer Haydocy -- whose Haydocy Buick-GMC will sell about 500 new vehicles this year, about the same number as 2009 -- said nothing succeeds like success.

He said the good vibe from the IPO is likely to make some consumers curious again about GM vehicles, which should boost showroom traffic. Haydocy also owns a small Chevrolet, Buick and Cadillac store in Bucyrus, Ohio.

Said Haydocy: "People aren't investing because of civic pride; they want to see the story behind the success."

WALL STREET BLESSES GM

Raised in GM's IPO, including preferred shares: $23.1 billion if overallotment options are exercised

IPO share price: $33

Share price at market close Friday, Nov. 19: $3

Share price needed to make U.S. taxpayers whole: $53

What IPO means:

• Helps GM shed Government Motors stigma.

• Indicates auto industry and economy are rebounding, albeit slowly.

• Lets Obama administration cast auto industry bailout as a success to skeptics of government bailouts.

Comments last week

"The government particularly wanted to pursue [the IPO] now and also so did management, which does not think being heavily owned by the U.S. government is a great place to be in terms of consumer perception."

— Steven Rattner, former chief of Obama auto task force

"We have to celebrate on the run here. It's a big day to become a public company again, but we have got to just hit the ball out of the park here every day on product."

— GM North America President Mark Reuss

"We've still got a long road ahead and a lot of work to do to rebuild this economy. We are finally beginning to see some of these tough decisions that we made in the midst of crisis pay off."

— President Barack Obama

Read more: http://www.autonews.com/apps/pbcs.dll/article?AID=/20101122/OEM01/311229962/1178#ixzz162vbl1GM

Link to comment
Share on other sites

Join the conversation

You are posting as a guest. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
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.



About us

CheersandGears.com - Founded 2001

We ♥ Cars

Get in touch

Follow us

Recent tweets

facebook

×
×
  • Create New...