General Motors (GM) is gearing up for one of the biggest stock market flotations in US corporate history barely a year after emerging from bankruptcy. It hopes to raise US$10 billon to US$15 billion and start to pay back government bailout money, giving a political boost to US President Barack Obama in time for November’s mid-term congressional elections.
The initial public offering (IPO) will mark an extraordinary turnaround for the US’ biggest carmaker which, at one point, appeared to be in terminal decline. GM, which owns Chevrolet, Cadillac, Vauxhall and Opel, required US$50 billion in government aid to stay afloat as it spent 40 days in Chapter 11 bankruptcy last summer. The Obama administration is believed to be keen to recoup at least part of the outlay in time for elections in November.
“It’s a bit early for an IPO but the Democratic Party might need it for this fall’s election,” said John Wolkonowicz, an analyst at IHS Global Insight. “The bailout of the auto companies was not favorably received by most Americans and the administration wants to show it’s starting to get paid back.”
GM returned to the black with a profit of US$1.2 billion in the first quarter. And to satisfy demand, the carmaker announced that nine of its 11 US assembly plants would forgo the usual two-week summer shutdown to produce an extra 56,000 vehicles.
Analysts believe that GM could be valued at as much as US$80 billion. The company is being advised by JPMorgan Chase and Morgan Stanley, who are charging lower fees, while the US Department of the Treasury has signed up Lazard Ltd to advise on the sale of part of its 60.8 percent stake. The offering is set to be the biggest on Wall Street since Visa’s flotation in 2008, which raised US$19.7 billion.
Meanwhile, GM and its South Korean subsidiary will recall more than 2,000 vehicles sold in South Korea because of a manufacturing defect, the South Korean transportation ministry said yesterday.
A faulty windshield wiper fluid system, which could cause wipers to catch fire, led to their recall from today, the ministry said.
Subject to the recall are 840 GM vehicles sold in its Cadillac CTS, DTS and Escalade models after being produced between October 2005 and September 2008 in the US, it said.
Also to be recalled are 1,314 large-size Veritas sedans produced by GM’s South Korean unit, GM Daewoo Auto and Technology, from August to October 2008.
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