GM IPO Underscores Company’s Resolve

Quick! What unflattering label haunting General Motors is the company trying to lose? That would be Government Motors, a term coined by some following the Obama Administration-led bankruptcy filing on June 1, 2009.

Though GM quickly emerged from bankruptcy mere weeks later, their survival came at the expense of American and Canadian taxpayers whose governments poured more than $50 billion into the automaker in order to save it. Those monies plus a loan that has already been paid off by GM comprised a historic bail out of what still is one of the largest companies in the world.

Ever since restructuring, GM has been on a mad dash to remake itself and, apparently, is doing a good job of it. Cadillac, Buick, GMC and Chevrolet are the four remaining US brands with Saab sold and Hummer, Pontiac and Saturn retired. Of course, shareholders of the old GM have been left with worthless stock, seeing their once lofty investments turn to dust.

GM finds itself in a very uncomfortable position, thus its plan for an Initial Public Offering (IPO) of stock in order to raise $12-16 billion. On the one hand, the company is grateful that President Obama stepped in to save it. On the other hand, Obama’s poll ratings have tanked and this election cycle promises a power shift to the right.

Put off the IPO until next year and an emboldened Congress could put GM in an uncomfortable spotlight. GM is desperate to sell its cars and lose its government dependency label.  Though the IPO won’t erase that label entirely, it should help GM demonstrate that it is a private corporation and an important contributor to American (and Canadian) manufacturing.

GM also needs to get this stock offering going sooner rather than later as the economy threatens to retreat once again into a recession. The official unemployment figure is 9.5 percent, but that number does not include people who have stopped looking for work or others forced to work part-time until something better comes along.

GM also knows that the current 11 million annual U.S. car sales are a far cry from the 16-17 million units pushed in recent years, which means that the automaker must find a way to stay profitable with less. The automaker has proven that it is viable even during challenging times, an important edge GM does not want to lose.

GM stock, anyone?

Related Reading

Fortune: GM’s IPO: High Hopes and Deep Fears

The Wall Street Journal: Successful GM IPO Won’t Be Enough To Rev Up Entire Market

No Easy Resolution For GM Brand Restructuring

Just weeks from now, General Motors will have to present its recovery plan to the U.S. government as part of keeping its side of the deal when the feds went ahead and loaned the automaker bailout money in December and in January. GM received billions of dollars of taxpayer money, but with one catch: they would have to present a recovery plan by March 31st, outlining the direction that the company plans to go.

Three Weak Brands

That direction for GM involves overhauling its bulky and costly brand structure, one that means shoring up several brands, shrinking at least one, and selling off two. As of now the shoring up side of things is progressing, but even that effort could be dragged down by the company’s inability to sell HUMMER and Saab.

Yesterday, Automotive News [subscription required] outlined the progress GM has been making with HUMMER, Saab and Saturn and the news isn’t pretty. GM has already committed to upholding Cadillac, Buick, GMC and Chevrolet while shrinking Pontiac down to a one or two model brand. Those plans are in place, but the automaker’s effort for the three remaining brands are not.

The Swedes Are Showing Little Interest

Reportedly, GM has been in talk with the Swedish government about finding a buyer or receiving aid, but neither a buyer nor aid have come forth. GM is attempting once again to make Saab an autonomous company by moving production, engineering and marketing to Sweden while pulling the brand out of GM’s vast global network.

HUMMER has been nothing but a headache for GM since last summer when the company announced that the niche sport/utility brand was for sale. High gas prices destroyed the brand’s appeal, which has kept potential buyers away. GM is asking $500 million for HUMMER, but would probably take significantly less for it if a buyer (Chinese manufactuer, perhaps?) stepped forward.

R.I.P. Saturn?

Saturn was at one time the most promising of all GM ventures, having got its start as a separate car company wholly owned by GM back in 1985. When its first model, the S Series, rolled off of a Tennessee assembly line in 1990, the brand was an immediate hit. Over time, GM neglected Saturn and eventually pulled the company into its brand network, supplying Saturn with a handful of unique vehicles or badge-engineered products from Opel and other U.S. brands.

Interest in Saturn has waned over the past few years, with GM considering blending Saturn into the Buick-GMC-Pontiac network, or finding a global partner, or even allowing dealers to purchase it. So far, none of these options has transpired, leaving Saturn hanging and vulnerable to closure.

Whatever direction GM chooses to take, a decision will have to be made soon. Shutting down all three brands is an option, a step which would invite debilitating lawsuits from dealers.

Clearly, the options for GM are quite limited when it comes to HUMMER, Saturn and Saab, three brands that no one wants and brands GM is unprepared to support. Taking taxpayer money has a price, something GM will have to pay in what could be a costly restructuring of the century old automaker.