G.M. Is Said to Consider Filing Soon for Offering

G.M. Is Said to Consider Filing Soon for Offering
By MICHAEL J. de la MERCED and NICK BUNKLEY
Copyright by Bloomberg News
Published: July 2, 2010
http://www.nytimes.com/2010/07/03/business/03autos.html?th&emc=th


General Motors is aiming to file an initial public offering of stock in mid-August, taking its biggest step yet toward repaying the federal government, people briefed on the matter said on Friday.

The company, which emerged from bankruptcy last July, is also seeking a $5 billion credit line, these people said, cautioning that the specific terms and the amounts that various banks would contribute had yet to be determined.

A mid-August filing would put G.M. on track to go public by the end of the year, a timeline the company has already hinted is its goal. The carmaker has selected Morgan Stanley and JPMorgan Chase as the lead underwriters for the offering, people briefed on the matter said previously. The Treasury Department has hired the investment bank Lazard as an adviser.

“I can’t have a date, but I think this is a good year to do it if we can get everything done,” Edward E. Whitacre Jr., G.M.’s chief executive, told reporters in Texas on Thursday, according to Reuters. “I think it’s a great year.”

G.M. and the federal government have sought to stage an offering as soon as is practical, though both have said that the company will ultimately determine when to go public. Through its sponsorship of the automaker’s quick bankruptcy last summer — including more than $50 billion in loans — the Treasury Department holds an approximately 61 percent stake in the company.

The government would like to reduce its stake significantly to become a minority shareholder, and G.M. also wishes to raise money, possibly creating one of the biggest offerings in recent years. The company has declined to comment on the possible valuation.

The final details will depend in part on market conditions, and the recent whipsaws in the market have made a big offering somewhat risky.

“Our stakeholders obviously will want it to be successful, so we’ll do our best to project the best timing for that,” said Noreen Pratscher, a G.M. spokeswoman.

Rebecca Lindland, an automotive analyst with the research firm IHS Automotive, said access to additional credit was important to make sure G.M. could weather any bumps in the economic recovery or its own turnaround. She added that the Ford Motor Company’s decision to borrow $23 billion in 2006 allowed it to avoid bankruptcy.

“We’ve seen that cash is not always easy to get, and there’s a level of weakness that everyone’s sort of feeling in the economy,” Ms. Lindland said. “It’s a good idea just to have it in their back pocket if they need it. I see it as a little bit of an insurance policy for them.”

Ms. Pratscher declined to comment on any talks with lenders. “Securing a credit revolver is a prudent thing to do,” she said.

On Thursday, automakers reported that new-vehicle sales in the United States fell 10 percent from May, raising concerns about how well the market was recovering. G.M.’s sales were 12 percent higher than a year ago, but 13 percent lower than the previous month.

Still, G.M. officials say the company is making great progress. Its four active brands in the United States — Chevrolet, Buick, Cadillac and GMC — sold 12 percent more vehicles in the first half of 2010 than the company did with eight brands in the first half of 2009.

Mr. Whitacre told analysts at a gathering this week that the prebankruptcy G.M. was “overly complicated” and “hamstrung by a tendency to overanalyze and overthink even the smallest decisions.”

G.M.’s ability to perform today is in large part the result of changing that culture, he said.

At the same event, Christopher P. Liddell, G.M.’s chief financial officer, laid out goals of eliminating the company’s debt and returning to a “strong investment grade” credit rating. He said G.M. could make money — and did to the tune of $865 million in the first quarter, its first profit since 2007 — at lower volumes because its operations are so much more efficient now.

“It’s a fundamentally different company in terms of its break-even point,” Mr. Liddell said. “What’s new about the new G.M.? Really everything.”