White House: GM IPO Likely for 2010, But Not Chrysler.by
TRAVERSE CITY, Mich.—The White House’s senior advisor to the Task Force on the Auto Industry said Wednesday that he believed it was likely that General Motors would have an initial public offering sometime in 2010, but that he thought it would take longer for Chrysler to tap the capital markets.
Ron Bloom, speaking at an auto industry conference here put on by the Center for Automotive Research, said the U.S. government would unwind its stakes in the automakers “as soon as is practicable,” echoing a comment made by President Obama.
“The definition of practicable is a bit like pornography, though, we’ll know it when we see it,” said Bloom.
Public offerings in the automakers will allow the government to sell its shares in the companies to institutional and individual investors. It would be counter-productive, said Bloom, to start selling off the investment prematurely.
“GM has lowered its costs and break-even to the lowest levels in decades,” said Bloom. Indeed, GM could break even this year, or come close to it, senior executives have said if the industry manages to sell 10 million vehicles or more. “Chrysler is undertaking a remarkable transformation, but it will take time for new vehicles to come out,” he said. Bloom also said that he thought the $8 billion the government pumped into Chrysler was enough to see it through. “They are fast and nimble and doing the right things,” he said.
The U.S. government currently owns 60% of General Motors, and 10% of Chrysler. Bloom said that if the government had not stepped in to provide financing to the automakers to make it through Chapter 11 bankruptcy proceedings, “the alternative was horrific.”
Bloom—talking a group of print, radio and TV reporters—said he rejects charges that the task force is dictating management selection of policy to the automakers. As an example, he said, the task force is playing no role in GM’s deliberations with suitors for its German-based Opel business.
“Long term government ownership is not conducive to long term success of these companies,” said Bloom.
Now that GM and Chrysler have re-emerged from Chapter 11 the task force is downsizing, from a high of 15 people to fewer than six. The function of the task force going forward, said Bloom, will be in monitoring GM and Chrysler to make sure the companies are meeting their commitments. Both automakers, while now privately held, will be making quarterly financial reports to the government and voluntary filings with the Securities and Exchange Commission. “Transparency is important,” said Bloom.
Though Bloom and other members of the task force were aggressive in recommending tax-payer aid to the automakers, he said the panel’s position on helping auto suppliers is different. The only way, said Bloom, he could forsee recommending direct aid to auto suppliers would be if large key suppliers were to face failure and thus jeopardize the flow of product at the automakers. “So far, we haven’t seen that.” Bloom said, “II’ll never say never,” but he added that the supplier industry is going through a “rationalization.”
Other analysts have speculated that hundreds of supplier companies will either go out of business or be absorbed in the next 12 to 24 months.