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GM unveils IPO pricing as automakers post U.S. sales gains

The company expects to sell $13 billion in stock this month. In October, it saw sales rise 12.8% as Americans bought about 1 million vehicles industrywide.

November 04, 2010|By Jerry Hirsch, Los Angeles Times

Amid more signs of recovery in the U.S. auto industry, General Motors Co. detailed plans to sell shares on the stock market that would sharply reduce the U.S. government's stake in the nation's largest automaker.

GM said in a filing with federal regulators Wednesday that it would float a $13-billion public offering this month. It said the price of the shares would be $26 to $29, depending on investor demand for the stock.

The offering will reduce the government's ownership to minority status, taking it to about 43% of the company from the current 61%. Taxpayers became the main owners of the automaker during its bankruptcy reorganization and federal bailout last year. The offering will also trim the stakes of two other large shareholders, the United Auto Workers union and the Canadian government.

The filing with the Securities and Exchange Commission places GM's total value at well over $41 billion. The company's value would have to appreciate to about $70 billion for taxpayers to recoup their investment, according to analysts.

The filing came as the U.S. auto industry posted large sales gains in October, the strongest showing in more than two years, according to auto data released Wednesday.

In all, Americans purchased about 1 million vehicles in October, up 13.4% from the same month last year, according to Autodata Corp.

The October annualized sales pace of 12 million vehicles was the best in two years with the exception of August 2009, when the market was spurred by the federal "cash for clunkers" rebate program.

"There are some good signals," said Jeff Schuster, an analyst at J.D. Power & Associates. "Credit is easing and some buyers who have been shut out are getting back into the market."

GM said it expected next week to report a profit of about $2 billion in the third quarter on sales of about $34 billion.

"We are extremely pleased with the level of progress the company is making," said Chris Liddell, GM's chief financial officer. "We will deliver a solid and profitable first year, post-bankruptcy, and we are continuing to improve our balance sheet."

In October, GM said sales rose 12.8% from a year earlier to 183,392 vehicles after factoring out the Pontiac, Hummer, Saturn and Saab brands it closed or sold as part of its bankruptcy reorganization last year.

"The story we see is a little brighter this month, tempered by slow employment growth, but the signs are there that the recovery continues and that it will be sustained," said Don Johnson, GM's vice president for U.S. sales. "Consumers believe that we have already weathered the worst."

Brett Hoselton, automotive analyst at KeyBanc Capital Markets, said overall industry sales beat expectations and noted, "We are continuing to see a gradual improvement in auto sales."

Getting past the national election should also help consumer sentiment and pave the way for future sales growth by businesses, said Paul Taylor, chief economist at the National Automobile Dealers Assn.

"There is hope that this can be sustained," Taylor said.

The only major automaker to post a decline was Toyota Motor Corp., which has suffered a series of embarrassing recalls over the last year for problems with sticky gas pedals, brakes and electronics. Toyota said sales fell 4.4% to 145,474 vehicles. It saw big decreases in two of its flagship cars, the Camry and the Corolla.

Toyota had an unusually strong October last year, so it "had a pretty difficult comparison to work with, and obviously they have had a tough year this year and they have not had a lot of new product to counteract what's happened to them," said Jessica Caldwell, an analyst at auto information company Edmunds.com.

Bob Carter, the group vice president for the Toyota division, blamed part of Toyota's monthly drop on a shift in the market to trucks and sport utility vehicles, which accounted for almost 53% of industry sales last month, Autodata said. Toyota sells more cars than trucks.

But other manufacturers dependent on car sales did well in October. Nissan Motor Co., for example, posted a 16.1% gain.

Ford Motor Co. sales rose 19% in October after factoring out Volvo, which Ford sold earlier this year. Ford said it was on track to gain market share for the second year in a row — the first time that's happened since 1993.

Chrysler Group's October sales rose 37% year over year, Autodata reported.

"Our monthly sales continue to improve over last year," said Fred Diaz, the automaker's chief executive.

Hyundai Motor Co. had its best October ever, posting a 38% rise in sales compared with a year earlier.

"We were very encouraged by what appeared to be a general strengthening of the overall sales environment in October," said Dave Zuchowski, executive vice president of sales for the South Korean automaker's U.S. division.

Kia, Hyundai's sister company, also had a record October, seeing sales rise nearly 39%.

Dealers said they also were seeing improvement.

"Sales are picking up. We are making a profit, and things are looking up," said Mike Sage, general manager of Universal City Nissan.

jerry.hirsch@latimes.com

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