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 GM the U.S. Treasury, Canada's federal government and the United Auto Workers (UAW) are keenly interested in getting GM stock back into circulation. "There is a lot of interest from the future stakeholders ... 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. (See pictures of the remains of Detroit.)
Meanwhile, UAW 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 would be up to outside advisers, and there would be at least three one for the U.S., one for Canada and one for the UAW who would 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, says 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 to Fiat in a private deal anytime, 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 its long journey back to public life? Says 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 revaluing 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." (Watch a video about an optimistic Dodge dealer.)
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 GM.
"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 Hills, Mich. "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."