JEFFREY BROWN: General Motors returned to life as a publicly traded company today. And, though many questions remain, the move symbolized the rebirth of an American corporate icon that the government rescued from collapse last year.
GM’s chief executive, Dan Akerson, rang the opening bell at the New York Stock Exchange this morning, accompanied by the roar of a Chevy engine. He said he hoped it signaled a revitalized future.
DANIEL AKERSON, CEO, General Motors: I think it’s just a wonderful day for General Motors. I think it’s a wonderful day for the United States. And I’m particularly pleased for the employees of and retirees of General Motors. This is not the finish line for General Motors today. In fact, I would say this is the beginning, a new beginning, a new chapter, and a much better chapter than it has been in recent years.
JEFFREY BROWN: The old GM stock had traded for less than $1 before the company went bankrupt 16 months ago. Today’s initial public offering price for the new GM was set at $33 a share. By day’s end, it closed just over $34.
Shortly after the closing bell, President Obama welcomed the day’s developments.
U.S. PRESIDENT BARACK OBAMA: Today, one of the toughest tales of the recession took another big step towards becoming a success story.
General Motors re-launched itself as a public company, cutting the government’s stake in the company by nearly half. What’s more, American taxpayers are now positioned to recover more than my administration invested in GM.
And that’s a very good thing.
JEFFREY BROWN: Even so, the president of GM’s Retiree Association, John Christie, said his members aren’t getting excited just yet.
JOHN CHRISTIE, president, General Motors Retiree Association: Especially some of the older retirees have had a lot of GM stock, which became almost worthless. They took a pretty good financial hit on that. So, a lot of those folks are not real anxious to get back in, and maybe are not even financially in a position to get back in.
JEFFREY BROWN: GM itself was in critical condition not so long ago. It took a $50 billion federal bailout just to stay alive and underwent a radical reorganization.
The automaker closed 14 of its 47 plants as part of that process. And it shut down or sold its Hummer, Saturn, Saab, and Pontiac brands. The company also cut its debt from $46 billion down to $8 billion. The turnaround was managed by company and government officials, led by so-called auto czar Steven Rattner.
He was also in the news for another, unrelated reason today, after agreeing to pay more than $6 million to settle a securities case. Rattner had been accused of paying kickbacks to help his private equity firm win business from New York’s state pension fund.
As for GM, it emerged from bankruptcy a leaner company, but one with the unwanted nickname “Government Motors,” with Washington holding a 61 percent stake.
After today’s stock offering, the government’s role has been reduced from majority shareholder to a 36 percent stake. GM’s share price will still need to reach at least $53 within the next few years for taxpayers to break even.
And for a closer assessment of the new GM, we turn to Michael Robinet, director of global production forecasting for IHS Automotive, an industry research group, and Micki Maynard, senior editor of Changing Gears, a public radio project focused on the future of the Industrial Midwest. She previously covered the auto industry for The New York Times, and is author of several books, including “The End of Detroit: How the Big Three Lost Their Grip on the American Car Market.”
Michael Robinet, I will start with you. What does this IPO tell you about GM’s success at turning itself around?
MICHAEL ROBINET, IHS Automotive: Well, we have got 40 years of hubris and accumulated legacies that were essentially and, unfortunately in some respects, washed away about a year ago. But this is sort of — this is a rebirth.
This allows GM to — to go to customers and basically say, we are moving away from being government-owned, either the U.S. or Canadian government. And, also, it gives them more flexibility. GM is a global company now and has been, but will be even more global, and will have to make decisions as such.
JEFFREY BROWN: And a clear vote of confidence, you’re saying, from the markets, from investors?
MICHAEL ROBINET: I think there’s no doubt. It was clear from the beginning, over the last couple of weeks, that it was going to be successful. And I think all of us in the industry are actually fairly happy for GM. This is — gives them a lot more ability to do the things they need to do, and not really by encumbered upon by government ownership or some other issue.
JEFFREY BROWN: Well, Micki Maynard, how much and in what ways — you have watched this company for a long time as well — how much have they — have they changed and what questions are still out there?
MICHELINE MAYNARD, senior editor, Changing Gears: Well, they have changed in a couple of ways.
First of all, as your piece mentioned, four of their brands are gone. The top management of General Motors is pretty much now from outside General Motors. They’re representatives of private equity, Wall Street, from Microsoft. So, the people at the top running the company don’t have that old sort of baggage of the Detroit legacy era.
But the questions that remain are very simple. First of all, will people want to buy General Motors’ products? Will General Motors introduce products that meet where customers’ needs are going, not just where they were in the past?
And then I think third, and most important, will the national economy give sort of some weight, some lift to this turnaround at General Motors? Because we still have high unemployment. We have a very sad housing situation. And we have consumer confidence that could be a little bit better. And those are the things that you need to really lift the auto industry.
JEFFREY BROWN: Well, Michael Robinet, what do you see in terms of those kinds of questions going forward?
MICHAEL ROBINET: Well, we’re seeing — at least in the United States, we’re seeing the sales rate get better. But we get — we can’t forget that GM is a global company.
They are doing very, very well in China. They’re growing in India. They’re doing well with their partner in Thailand in the form of Isuzu. They still have some work to do in Europe. I think that, if there’s one box that didn’t get checked on the checklist, it’s Europe.
And they’re — they’re addressing that. It takes a little bit longer to clean up some of the capacity and really right-size the footprint. But that’s a work in progress.
I would also say that there’s a number — there’s a — it’s a very, very competitive marketplace. You know, the Toyotas of the world, the Hondas, the Hyundais, the Fords, they’re — nobody’s taking a break. And, certainly, GM has been given sort of this rebirth. But, certainly going forward, it’s not going to be a walk in the park.
JEFFREY BROWN: Now, Micki Maynard, a lot of celebrating today, but what about the fallout or the — the human toll, I guess? I mean, we heard in our piece from somebody representing the retirees association. Who’s lost? Who’s been left behind here? What do you see?
MICHELINE MAYNARD: Well, I see a few groups of people. First of all, retirees have really had a hard time.
A lot of the white-collar workers who worked for General Motors bought lots of stock. They thought that that would be one of the things that helped them through retirement. The stock is almost worthless. They also have seen their medical benefits cut. And so have blue-collar workers at General Motors.
Now, the UAW didn’t have to grant any wage cuts, but some benefits that have been long held at the company went away. And then, finally, we have seen hundreds of dealers closed as part of this. And you have to remember that every one of those dealerships that you see that’s now closed probably employed 100 people, maybe even 200 people.
And, so, there are a lot of jobs of people who didn’t work directly for General Motors, but who’ve lost their jobs because of what happened to General Motors.
JEFFREY BROWN: And so, where you are in the — you’re documenting the changes in the Midwest, we said. So there’s a lot bigger story out there than just what happens on a given day like today, you’re saying?
MICHELINE MAYNARD: It’s a significant story for us at the Changing Gears project. We’re looking at how the Midwest is trying to reinvent itself.
And, certainly, the state of Michigan has to reinvent itself, Ohio, Indiana, Illinois, Wisconsin. All of these are places that had big General Motors plants. So it’s definitely good for the Midwest that General Motors has gone through bankruptcy and survived. But there’s going to be years and years to make up for here, and a lot of hard choices for people to make as well.
JEFFREY BROWN: Now, Michael Robinet, a lot of people looking at this IPO as not only a verdict on GM, but perhaps on the broader economy. But speak to that, specifically about a verdict on the broader auto industry. What does this tell us, if anything, about that?
MICHAEL ROBINET: There’s a lot of optimism. Certainly, out of Detroit, there’s a tremendous amount of optimism.
I deal with the vehicle parts suppliers, and they — a number of them have had to go through a vetting process very similar to what we have seen GM has done. They closed capacity. They took out white-collar salary count. They became more efficient.
But they’re at a point where everybody’s break-even has been lowered. And we have got — the volumes are slowly rising. It’s actually a very good environment to earn income in this industry. It’s getting much better. It’s going to be slow.
And stable is key here. Stable is very key. The manufacturers and the parts suppliers, they don’t want volume moving up and down and gyrating a lot. They want a more stable environment that they can play into, and that’s exactly what we have right now.
JEFFREY BROWN: And, Micki Maynard, what do you see, in terms of the broader economy — broader industry?
MICHELINE MAYNARD: Well, I — well, obviously, the auto industry is more than General Motors, Ford, and Chrysler. More than half the cars sold in this country now are built by companies from outside the United States.
So, one of the things that people sort of forgot about in the whole debate over the bailout was, what about the plants in the South? What about the Hondas and Toyotas and Hyundais and Mercedes-Benz? Actually, they are foreign companies that are still coming to invest in the United States.
So, I think, over the next few years, we will continue to see, as Mike said, that very, very competitive auto market, and General Motors has to merge into sort of three lanes of traffic that are not going to slow down for it.
JEFFREY BROWN: And, Micki, finally, come back to GM and today. And where do things stand in terms of the government’s involvement in the company and, of course, the potential for taxpayers to be eventually, perhaps, repaid?
MICHELINE MAYNARD: Well, there’s a good comparison with the Ford Motor Company, because Ford is a public company, but the Ford family has control of about 40 percent of the company through a special class of stock.
If you look at General Motors, the government has control of General Motors through about 36 percent of its stock. So, it’s really the government on one side, the Ford family on the other. And both will say that they’re not intrusive in either company, and yet I think their influence will be felt.
All of the CEOs that have been named in the last couple of months — there are two people who ran General Motors — Ed Whitacre and now Mr. Akerson — they were directors chosen by the Treasury Department. And I think, if Treasury sees that General Motors is drifting in the wrong direction, they won’t hesitate to correct their course.
JEFFREY BROWN: And, briefly, Michael Robinet, what about the taxpayers’ potential for getting repaid eventually?
MICHAEL ROBINET: I think it looks fairly positive. It was interesting to see that the Canadian government didn’t increase their allocation, like the U.S. government did. I think that maybe they see that, going down the road two or three years, the stock’s going to be higher, and they will be able to repatriate and really pay back, and then some, the funds that they put in to save this company.
JEFFREY BROWN: All right. Michael Robinet, Micki Maynard, thank you both.
MICHELINE MAYNARD: Thank you so much.
MICHAEL ROBINET: Thank you.