GM stock has been delisted, dumped from the Dow, and is pretty much
worthless. But with government backing, as they say, even pigs can fly.
Indeed, just days after filing for bankruptcy, General Motors Corp. is
already plotting a path beyond Chapter 11, including the sale of stranded
assets and even an offering of new stock.
The principle shareholders of any new GMthe U.S. Treasury, Canada’s
federal government and the United Auto Workersare keenly interested in
getting GM stock back into circulation. “There is a lot of interest from
the future stake holders… to start the process of selling down the shares.
All agree that it’s important to make General Motors a publicly traded
company,” says Ray Young, GM’s chief financial officer. The earliest it
would happen, Young projects, is around the first or second quarter of 2010.
Meanwhile, United Auto Workers president Ron Gettelfinger, who is
concerned about the cash drain on the union’s health care trust, or VEBA, is
eager to sell the shares as soon as possible. He may have to wait, however.
The timing of the sale will be up to outside advisers, and there would be
at least threeone for the U.S., one for Canada and one for the UAWwho will all have to reach consensus on a strategy for maximizing value. That most
likely means a gradual release of the shares once an IPO of the new GM has
occurred. After that, adds Young, “it could take years to unwind the
government and union positions.”
The union got slightly more flexibility in the stock-sale terms negotiated
for the Chrysler VEBA. Those terms say the VEBA can start selling stock
within six months of any Chrysler IPO, or if Fiat becomes the majority
owner, or by June 30, 2012. Though the VEBA could sell its stake anytime to
Fiat in a private deal, Gettelfinger has suggested he would like to see an
IPO as the best way to maximize the value of the shares.
So how will GM deal with investors during it’s long journey back to public
life Says GM’s Young: “We’re still working through the issues of what form
of disclosure we will have.” He acknowledges that GM will be making
significant changes to its balance sheet by writing off assets and
re-valuing others. Such activity will be done as openly as possible, adds GM
spokeswoman Renee Rashid-Merem. “We will provide an adequate level of
detail,” she says. “It’s not our intention to be a secretive company.”
However, GM is an exceptionally complex enterprise with 400 separate
subsidiaries all over the world, some of which are consolidated and some of
which are not. In fact, going forward GM’s huge European operations,
including its burgeoning business in Russia, will no longer be consolidated.
It also appears that GM could withhold information on pension obligations,
which are separate from the VEBA, even though that will remain with the new
“You now have an inherent conflict where the new GM is a private company
and will argue they do not have to disclose financial information,” says
Brad Coulter, a consultant with O’Keefe & Associates in Bloomfield. “But
the new GM’s major shareholder is the U.S. Government, or essentially you
and I, and I think the taxpayers and Congress should demand public filings
of financial information just as they did when GM was a public company.”
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