Happy GM Day.

Wall Street and the Administration are hailing the GM IPO and claiming victory.

General Motors Co GM.UL pulled off the biggest initial public offering in U.S. history on Wednesday, raising $20.1 billion after pricing shares at the top of the proposed range in response to huge investor demand.

GM sold 478 million common shares at $33 each, raising $15.77 billion, as well as $4.35 billion in preferred shares, more than the initially planned $4 billion.

Including an option that would allow underwriters to sell more shares, expected to be exercised in coming days, GM looks set to raise $23.1 billion, making it the biggest initial public offering ever.

The strong response to the stock sale reflects a groundswell of investor confidence that GM is moving beyond its unpopular, taxpayer-funded bankruptcy in June 2009 with sharply lower costs and higher profit potential.

Now, don’t get me wrong. I will always remain grateful that Obama bailed out the auto industry, and I am a direct beneficiary of that policy. And I do think many of the decisions and actions Team Auto took last year–most notably the fast track bankruptcy–were the right decisions, incredibly well executed. And I think the cars currently in GM showrooms are good cars.

But this IPO is no great reflection, one way or another, on the success of the bailout.

Indeed, it may be something far worse. It may be a propaganda stunt that will allow the banksters–the ones in charge of the bailout, as well as the current private equity CEO, as well as the firm which consulted on the IPO whose Chairman is auditioning to take on a top advisory role in the Administration, as well as the big banks involved in the IPO whose TBTF status the Administration has fiercely protected–to claim victory. And of course, every single one of those banksters has a huge incentive to create a stunt that will allow the Administration to claim victory. But that won’t say much about or do much to ensure GM’s long-term value.

Mind you, I hope that’s not true. I hope the universe of possible car buyers believe that GM’s cars reflect a value of $33/share or more (the banksters think they’ll be able to drive up the share price in the coming days). More importantly, I hope GM sustains recent improvements in their product line even as the new top executives–particularly the ones who had nothing to do with the currently improved products who have changed the process and people that produced those cars–remain in charge.

But we won’t know the answer to that question for another 2 years or so. And we won’t know whether GM will improve its brand image enough to make cars more profitable for some time yet, either.

And, too, I hope those banksters driving up the price of GM’s stock keep that stock for the long term. I hope this doesn’t resemble a 90s style, pump and dump, IPO. But we won’t know that for a little while either.

What we know is that the bankster-CEO pointed to lower costs (which the bailout did make possible) and GM’s strong position in China (which the purportedly failed Rick Wagoner implemented long before the bailout but which didn’t, by itself, do much for GM’s value before the bailout) in his pitch for the IPO.

In a road show for investors spearheaded by GM Chief Executive Dan Akerson and Chief Financial Officer Chris Liddell, the automaker has emphasized both its sharply lower costs and its exposure to key growth markets like China.

But it’s not clear he said much about the cars. The cars that, one way or another, will ultimately determine the success or failure of the bailout.

In other words, what this IPO seems to reflect is the successful sale of a new balance sheet tied to a market mix that, before the bailout, Wall Street was none too impressed by. It seems to reflect the enduring belief on the part of the banksters that the only value worth measuring is that determined by Wall Street, and not that value measured by the ultimate consumers of a product.

The GM products shepherded through by Rick Wagoner and Bob Lutz are selling well at stores. The GM balance sheet shepherded through by Steven Rattner is selling well on Wall Street.

But what remains to be seen is whether the cars produced in two years by the development process implemented by Ed Whitacre and Dan Akerson will sustain and increase the value of cars in showrooms to match the $33/share value pitched by the banksters.

Good luck and happy GM day.

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  1. BoxTurtle says:

    I am very happy for the bankers and executives. I do worry about the people and creditors who lost big in the drive for ‘lower costs’, their retirement and medical benefits gone, and their small businesses gone.

    This was not free.

    Boxturtle (But what the heck, if they were REAL americans, they’d have already died for deficit reduction)

  2. donbacon says:

    The US government is doing its part to help GM, keeping Chinese electric cars out, for one thing.

    One manufacturer, Flybo Electric Cars from Jinan, China reports strict problems with U.S. customs preventing import into the U.S. market. The company was previously importing their Smart car knockoff electric car which had a top speed of 42mph and sold for a reasonable $9,950 or less.

    “…due to the crisis,the US government is much more strict with the products from China, our import have problem to clear the customs at present, so we don’t export to US now.” reports a representative from Flybo. “The main problem is your government’s policy regarding protectionism,also the customs now is much strict with products from China,please note it.”

    http://www.thecarelectric.com/content/us-protectionism-stays-electric-car-imports-from-china.php

    • emptywheel says:

      More likely, this reflects this Administration’s willingness–unlike the BUsh Administration’s–to enforce international trade agreements, as it has on tires.

      And for anyone to claim that the US is protectionist against Chinese products is just laughable.

      • donbacon says:

        And for anyone to claim that the US is protectionist against Chinese products is just laughable.

        The laugh’s on you.

        “General Motors Corp. agreed not to import Chinese-made subcompact cars to the U.S. as part of its concession deal with the United Auto Workers, union President Ron Gettelfinger said Thursday. Instead, the company will build up to 160,000 of the cars per year at an existing U.S. factory and sell them in the U.S.”

        http://usnews.rankingsandreviews.com/cars-trucks/daily-news/090529-Union-GM-Won-Import-Cars-from-China/

        I haven’t noticed any China-built cars on US highways recently, have you?

        • emptywheel says:

          Um. Now you’re making yourself an idiot.

          GM still won’t publicly say where it is importing Spark from (though it is assumed it will be imported from Korea). When I asked GM earlier this year whether they were importing from China, they pointedly wouldn’t rule it out.

          What actually happened (after the article you cited) is that GM agreed to source Aveo in the US–at a plant where most workers will be at Tier 2 wages, so $15/hour. But there IS no agreement pertaining to Spark.

    • papau says:

      I would love for the US to have an industrial policy that worried about US jobs, and thought of tariffs and non-tariff barriers as ways to protect our jobs, but I’m afraid that will not happen in my lifetime as dumping on our unions the popular attitude these days.

      Now what do we have by way of election cars from outside the US these days ??

      Well the BMW Megacity arrives 2012. The BYD E6 (Subaru 1RE) is not able to pass a crash test, and its parts are suspect – but it is coming because Warren B wants it. Southern California automaker Coda Automotive has a China import based on the Hafei Saibao 3 this year. Ford is using Focus platform with technology developed by auto supplier Magna to do a 100 mile range EV in 2011. Mitsubishi began delivering the all-electric iMiev to Japanese customers in 2009 but with production numbers only a few thousand per year and 75 mile range, they are not exporting it. The Nissan Leaf is under 30000 and it is called an affordable, zero-emission car as it competes head to head with the coming Focus EV. Nissan/Renault Fluence will launch in 2011. Nicrocars have not taken American roads by storm, so this may be the real reason current Chinese production is not making it to America – and of course there is that crash test and quality of sub-components problem. But China does sell the Wheego Whip LiFe for $32,995. And the Flybo or XFD-6000ZK – The electric Chinese Smart Car knock-off, measuring just 102.3 inches long on a 71-inch wheelbase, has a reported top speed of 45 mph and a range of 70 miles but the few in North America fail for Winter use. The Indian Reva / G-Whiz may be coming next year! And finally you can get the ZAP Xebra at $12000 if you like Chinese quality – not luxurious, smooth, or extremely well built—but you do get 3 wheels.

      I do not see the Government protecting the UAW – Ford, or GM, or auto jobs. The complaints about protection are bogus but made to hide the currency war by China that is draining America of jobs.,

  3. PhilPerspective says:

    To reply to your Tweet:
    Dems should know better than to crow that an IPO = successful bailout. Does it reflect longterm job guarantees? Longterm VEBA value? No.

    Did you expect anything different? Remember “Recovery Summer”? They don’t know how to sell anything. They either oversell it(the aforementioned) or don’t sell it at all(HCR/HIR).

  4. lefttown says:

    I’m sure the workers are sharing in the wealth? Oh, right. They’re the ones who had to make concessions in ordered to get the wonderful bailout.

    • emptywheel says:

      Well, that’s one of my concerns. If this $33/share is sustainable, great. But if it’s pump and dump, it’s going to hurt VEBA’s ability to provide retiree healthcare long term.

    • boston33 says:

      Imka… you are so misinformed. The bailout screwed over the bondholders that owned the bankrupt company. The same bondholders that Barry illegaly cut their ownership stake to benefit his Union buddies.

      • papau says:

        The bond holders were screwed only if selling abandoned buildings would have gotten them more money – and it would not have done so.

        That is why they voted for the restructuring.

        • boston33 says:

          papau… The government gave “The Union” four times the amount of ownership in GM then they deserved. Barry & Timmy!!! took over the company and decided to spread the wealth.

          The bondholders were forced to comply to Barry. The company should have gone Chapter 11.

          • papau says:

            Hard to say who deserved what. Bankruptcy pays wages and benefits ahead of all others, and the PBGC claim on Pensions would have been next. Now the situation is that the pension liability gets paid off over 10 years – giving the bond holders a bit of room. The VEBA claim was for more than the company was worth – the bond holders may actually have gotten a bit more than I would have calculated – and that was because of the union being flexible on VEBA and getting stock in return.

            The GM balance sheet was so negative under a bankruptcy view that it is hard to say that the bondholders got screwed – although it is popular to blame our few remaining unions of being more greedy than CEO’s – hard to believe that some folks do that – but true.

            I wonder when FORD will get back an un-encumbered right to the Ford name – the loan they took against the name was one of the high points of finance! Hell, if I could get a loan against my name I’d take it out because I could use the money. What GM showed was all those loans secured by buildings are based on someone using the buildings – not a sure thing under Bush/Obama.

            The good news is 80,000 folks in the US still have jobs with GM, and 200,000 suppliers also still have jobs (by the way – those 200,000 also supplied Ford, so if GM fell that would have caused the suppliers to fail, but that also would have killed the ability of Ford to produce cars. No wonder FORD does not say the bailout of one company – GM – was NOT unfair to the other company – FORD – that did not take a bailout.

  5. 4cdave says:

    I hope those banksters driving up the price of GM’s stock keep that stock for the long term.

    From here:

    Wall Street’s underwriters are about to make $2 billion. … Some very appropriate commentary from a desk: “20% OF ISSUE SIZE TRADED IN 10 MINUTES. THIS IS THE MOST AMAZING CHURN I HAVE SEEN IN MY LIFE.”

    The people who buy the IPO rarely hold it. You convince your fraternity brothers at various hedge funds, investment banks, and pension funds to subscribe to the IPO, which is placed below fair market value, then they flip it for an immediate profit. The price seems to be holding at around $35+. I would have been upset if it shot up to $45 (short-changing the government), but two-fifty or so isn’t bad.

    This represents a bit less than half of the government’s equity. Maybe they can dump the rest at a bit better price. Every little bit helps.

  6. BoxTurtle says:

    273M traded, price up to 35. Looks like GM’s getting the best of this IPO, considering they sold at 33. A rise to 35 isn’t unreasonable.

    [email protected]: I wouldn’t regocnize a Chinese built car if I was surrrounded with them. But remember, the deal you mention does not involve the government. It’s between GM and the UAW and the UAW has always been strongly protectionist in the auto area.

    I ain’t buying any of the new GM. I don’t like what they did to “old” GM, and I don’t think the stock will hold it’s value. I’d be willing to bet on a share price of around $20 this time next year.

    Boxturtle (Might buy some puts)

  7. BayStateLibrul says:

    I like to look at the numbers:

    GM got a total of $52 billion from the U.S. government and $9.5 billion from the Canadian and Ontario governments as it went through bankruptcy protection last year. The U.S. considered as a loan $6.7 billion of the aid, while the Canadian governments held $1.4 billion in loans.

    Prior to the IPO, GM payed off a loan of 6.7B that came five years ahead of schedule. GM still owes $45.3 billion to the U.S. and $8.1 billion to Canada.

    A good chunk of this IPO will pay down that debt.

    This is a good development since it will shrink the debt, and the deal

    worked.

    I listened to the GM prez and he said he wants to reduce the retirement

    obligations and return to a healthy balance sheet.

    I saw the IPO as a new opportunity for GM.

    • BoxTurtle says:

      I listened to the GM prez and he said he wants to reduce the retirement obligations and return to a healthy balance sheet

      Translation: We’re going to cut the pensions and 401k match’s of everybody outside the executive suite.

      Boxturtle (I thought they dealt with ‘retirement’ in the bankruptcy)

      • BayStateLibrul says:

        I think he was talking about the unfunded retirement benefits to GM

        workers who have retired. They will continue their current payments but

        use the funds for future payments.

        He seemed to be in step with the Union folks. He said that had already

        given up a lot in concessions.

        He seemed conciliatory, no mention of screwing anybody that I could detect.

    • emptywheel says:

      That’s all true if GM continues to trade at $33-35. As I noted above, if GM can sustain this stock value, great.

      But that all assumes the banksters are engaging in good faith, and I can’t help but note that they’ve got every incentive to pump up the stock.

      • BayStateLibrul says:

        Indeed.

        It needs to maintain its value.

        The Prez seemed to have a grasp of what the next 1-2 years will bring.

        One factor in their favor is if the economy does turnaround, people who

        have shelved the idea of buying a new car will dip their toes back in the market. The emerging markets will grow, and he is hopeful that the North American market holds its own…

        • emptywheel says:

          Well, too bad he’s doing next to nothing to fix the chronic crud in our finance system because he’s afraid of being mean to the very same banksters who have managed such a “successful” IPO today.

          See what I mean by problematic incentives?

          • BayStateLibrul says:

            Yup.

            When the investment bankers are bad, they are very bad.

            When they are good, they are very good.

            I have very mixed emotions.

            I finally concluded that they hold the upper hand cuz we are a capitalistic

            society and central banking is integral…

            Like Texas hold ’em poker, they go “all in”

            I especially dislike that fucker from AIG

  8. oldtree says:

    Were I stupid enough to invest in the market, I would short this one. Peak oil is behind us, GM is totally subject to oil.
    do you have to be brilliant to short such an idiotic proposition?

    • 4cdave says:

      The issue is the time frame.

      The Depression results in lower oil demand, which is masking declining productive capacity for a while. There is some pent-up demand for automobiles among those who are still working.

      Among the universe of industries to rescue, I would have placed the auto industry near the bottom, but what’s done is done. Maybe the government can recover most of the money it spent.

      Shorting autos in another five years or so will probably be a great opportunity.

  9. dude says:

    ” It seems to reflect the enduring belief on the part of the banksters that the only value worth measuring is that determined by Wall Street, and not that value measured by the ultimate consumers of a product “—

    I think that is a perfect description, one that ought to be widely broadcast.

  10. BoxTurtle says:

    I think he was talking about the unfunded retirement benefits to GM workers who have retired.

    See, I thought that was dealt with by the bankruptcy, basically relegating the retiree’s to the status of unsecured creditors in the ‘old’ GM and I assumed that he was talking about current employees retirement.

    Boxturtle (Warning: “Thought”, “assume”)

  11. papau says:

    They needed a price of 43 to break even, they sold half at 33, so the gov needs a p[rice of 53 on the remaining half to break even – and that is not unreasonable but will take 10 years.

  12. Tominator says:

    I have a dumb question: How is this an IPO? I thought GM had a stock on the exchanges for a long time. Was it eliminated or gone private with the BK?

    • BoxTurtle says:

      This GM is a brand new company. They took the wreakage that was GM and split it into “old” GM and “new” GM. Basically, “OLD” gm got all the liabilities and “new” GM got all the assets. This is a stock offering for “new” GM. “Old” GM stock is worthless, unless you have an actual stock certificate. There is some collector demand for those.

      Boxturtle (Stock certificates from GM’s first issue can bring around $4K, depending on condition and signatures)

  13. joanneleon says:

    Is anyone else wondering why they didn’t do this IPO a few weeks ago, or a couple months ago, before the election?

    Wouldn’t it have given Democrats something to push back with as they were reamed for use of TARP money, stimulus, etc?

  14. alank says:

    This is pathetic. What short-term memory doth plague this particular blog. The bailout was for the banking side of the company. Not production of things. Jeepers!