Will the General Motors IPO Be a Success?

During the week of August 16th, General Motors (GM) plans to file a nearly $20 billion initial public offering (IPO). This would be the largest IPO in the United States since Visa’s $19.7 billion IPO in 2008. With a $50 billion investment in GM, the U.S. Treasury currently owns over 60% of the automaker, and hopes to sell roughly 20% of its stake in the company. What can be expected from the IPO? Will investors have faith in a company that lost over $80 billion from 2004 until early 2009?

GM needs to convince potential investors they can make money at a time when demand for cars and trucks remains low in the United States. J.D. Power forecasts vehicle sales in 2010 to be 11.7 million. That is 1.3 million more sales than 2009, but far less than 2008. Although GM’s sales are up 14% through the first half of the year, sales have slipped in May in June. May sales were down 8% over April, and June sales were down another 10% versus May.

Given their struggles in the U.S. and Europe, maintaining their success in emerging markets will be key component of future profitability. Sales in China in the first half of 2010 were up 50% over the same period in 2009. GM actually sold more vehicles in China (1.21 million) than they did in the U.S. (1.07 million) from January to June. They currently have 13% of the Chinese market.

Thanks to their bankruptcy filing, they are healthier than Ford, a company whose stock has doubled in the past year. GM owes creditors a little over $15 billion and has $30 billion in cash while Ford has $27 billion in debt and $20 billion in cash. One financial issue not in their favor is their pension liability. GM has an unfunded pension liability of almost $27 billion. They will not need to make payments into the pension fund for three years, but paying into the fund will greatly decrease their cash flow. In addition, will potential investors be wary of a company that during bankruptcy proceedings gave the United Auto Workers union disproportionately more of the newly issued stock than some secured bondholders? Traditional bankruptcy rules would not have allowed that, but if GM finds itself needing bankruptcy protection again in the future can investors expect the rules to be followed?

GM has made a couple shrewd moves that will help their bottom line, and make their IPO more attractive:

1. The fee that banks charge to manage the IPO has been negotiated down from the normal rate of 3% to 0.75%. If the IPO does reach $20 billion the banks would still receive $150,000,000 from GM, but that is far less than the $600,000,000 they would have received if the fee was 3%.

2. GM purchased AmeriCredit, an automotive financing firm specializing in sub-prime lending, to help expand the financing options they can offer potential buyers. AmeriCredit makes loans to people with credit scores in the 300 to 600 range; a segment of the population that comprises as much as 25% of the car-buying market. Some analysts say that this will allow GM to sell up to 20% more vehicles in North America.

Predictions for the success of the GM IPO are mixed. Many analysts share the opinion of Edmunds.com CEO Jeremy Anwyl who stated recently, “This certainly is not the climate in which I’d want to have an IPO since it’s likely to reduce the initial value of the stock”. GM is in a tough position as they want to shake their Government Motors label as quickly as possible, but they also want to maximize potential cash flow. Having the IPO in August will move them towards achieving the former, but potentially have a negative effect on the latter.

Classic Car Storage

My car, my car, my car… Time spent taking apart the car, rebuilding the car and restoring the car to a brilliant piece of art is time never returned. So when the car of your dreams is glistening in the sun and the engine is purring to a perfect pitch, keep it that way forever, by putting it into the storage barn for the cold winter months. Take your car for an end of the season drive, feel the vibration of the motor racing to a top level roar, cruise along the roads and streets, enjoy the waves from people who appreciate the skill of workmanship put into the restoration of your classic car and remember the power of your car beneath your body for the long winter months ahead.

Where to begin? Location, location, location… Find the right place, where your classic car, your muscle car, your dream vehicle will spend the cold, dark months in solitude. The special place could be your garage at home or it could be a private or commercial garage specializing in car storage. A perfect storage garage will have a climate controlled air system, not too cold, not too hot and not too humid. Keeping the air at a controlled temperature will assure good ventilation throughout and around your car and decrease the possibility of rust and corrosion build up on any part of the car. If a climate controlled garage is not an option, keep the garage where you will store your car, clean, limit traffic in and out, keep windows and doors closed, no storage of items around your car, and COVER your car with a superior car cover. Superior grade car covers allows the air to breath around your car and stop the dusk from landing on the car and then scratching small tiny lines into the car’s brilliant paint job.

No guts – no glory for the spring… Want the engine to power up and roar the first time out after spending the winter locked up in a garage? Look at the guts of the car, essential to the life of the engine in your classic car is the maintenance of the engine and fuel tank for the winter months during the storage period. Batteries need to be secured with a low amp 6-12 volt battery tender. This battery tender will keep the battery fully charged all winter long without ever turning the motor on to charge the battery. The gas tank is the next step in keeping your car maintained during storage all winter long, pour stabilizer into the fuel tank to preserve the fuel in the car’s system, this will eliminate the possibility of the gas separating or turning rancid.

Check your baby from time to time… Simple checks can ensure your vehicle’s safety for the cold weather storage time. Check around the car, make sure there are no creatures living inside of the storage unit, look at the integrity of the classic vehicle cover, look for leaks underneath the carriage and remove any new items stored alongside your car. Plan for the storage of your American classic and eliminate any worries about t’s safety through smart planning and these simple storage tips.