According to an administration official, the White House is pushing for an initial public stock offering to reduce the government’s majority stake in the General Motors Company.
Ron Bloom, the head of the president’s autos task force, said that the IPO may come as early as the fourth quarter of next year assuming the financial markets are receptive and GM has met the benchmarks set out in its restructuring plan.
Referring to the government’s current 61% stake in the company, Bloom told Reuters that the administration would rather "err on the side of getting out a little faster."
He said, "Private markets would like to see us exit this investment, and I think they will be more comfortable if we’re on a sustained path out the door than if they think we’re going to try to market time it to maximize return."
GM is currently revaluing its assets and liabilities in order to provide a “fresh start” accounting since its emergence from bankruptcy last summer. The valuation is required in order to move forward with the IPO, and GM expects to have the process completed by next March.
Bloom said, "I would anticipate that if the fresh start is complete, if you put numbers on the board, if things are going well and the capital markets are open, that in some point in the fourth quarter the markets will be open enough to do a successful IPO."
GM’s CEO, Fritz Henderson has indicated that the company could initiate an IPO by midway through next year.
Bloom said that the question of when to launch the IPO may be taken up next June when government officials are scheduled to make a decision on whether or not to allow GM access to the $13 billion escrow account remaining from the company’s bankruptcy.
Bloom said, "Clearly we’re going to be smarter in June than we are today. Whether we feel we have enough visibility on the IPO or not, I don’t know."
He echoed the opinion expressed by GM chairman Ed Whitacre that, “the company ought to be focused on making money and paying us back and not particularly on the IPO. The IPO is a consequence, not a cause."
Bloom also cited a recent forecast by a Deutsche Bank analyst that estimated the potential equity value for GM at $43 billion based on the conversion of existing GM bonds into stock in the new company. Assuming the company reaches a valuation near that amount, the federal government could potentially recover the entire $30 billion it invested in GM in the form of bankruptcy financing.
He then went on to say, "Nobody believes that’s the truth because it’s not there until you can sell it and we’re a long way from selling it. But if you want to just observe it, that’s the observed truth by a smart Wall Street analyst."
Bloom also said that the administration also aims to liquidate its current 8% stake in Chrysler Group along with its stock in GM over time. "Our benchmark of success is zero.” he said. “We don’t think it’s proper over the long term for the government to own an industrial company."
Bloom declined to comment on statements made by former autos task force head, Steve Rattner, that the administration was shocked by the automaker’s mismanagement of financial matters.
GM is reportedly looking for a replacement for its current COO, Ray Young.
When asked about those reports and other concerns surrounding GM’s management Bloom responded, "We had a number of concerns about GM that we shared with the board. We said what we think. But we’re done. We’re not saying what we think anymore. We’re trusting Ed and the board and Fritz and his team to carry out what’s best for the shareholders."
When asked whether he thought government-imposed caps on executive compensation might have a detrimental effect on GM’s ability to attract qualified managers, Bloom said, "So far we haven’t seen any evidence that they can’t find people. It’s an evolving process, but at this point it’s not something we’re worried about."