The president of General Motors famously said in 1953, “What’s good for the country is good for General Motors and vice versa.” It may also be true in 2010.
The automaker sold $15.8 billion of common stock in an initial public offering on the New York Stock Exchange, by far the largest IPO of the year and one of the biggest in history. Priced at $33 a share, already higher than the company thought possible a week ago, the stock quickly jumped to $35.99 by mid-morning Thursday, its first day of trading. It closed at $34.19, a gain of 3.6 percent.
“It’s a new day for GM,” CEO Dan Akerson said in a video on the company’s website. “We will never forget what General Motors and the country went through. We will always be grateful for those who stood with us.”
Proceeds of the offering will help repay the U.S. government for the $49.5 billion it spent rescuing the company, which led to the nickname Government Motors. By selling stock, the government reduced its stake in the company from 61 percent to 37 percent, which could go as low as 26 percent if options for additional shares and warrants are exercised. The United Auto Workers union also will benefit from the sale of stock; its health care trust fund had a 17.5 percent stake in the company. Buyers included big pension funds and hedge funds, as well as GM workers and retirees.
The company also raised $4.35 billion in a sale of preferred stock. Those proceeds will go to the company. GM helped drive the overall market higher. The Standard & Poor’s 500-stock index ended the day up 1.5 percent.
From Bankruptcy to Beating the Street
The stock offering came just 17 months after the company filed for bankruptcy protection amid questions about whether it could survive. At the New York Stock Exchange Thursday, the CEO, surrounded by a group of employees, rang the opening bell, followed by the revving of a car’s engine. GM cars were also in display outside the exchange on Wall Street. The shares will trade under the iconic symbol GM, a symbol it gave up when the company filed for bankruptcy.
GM has staged a remarkable turnaround in the last year. It has had had three consecutive profitable quarters, earning more than $4 billion in the first nine months of 2010. It sold 6.6 percent more cars and trucks in the first ten months of 2010 than the year before. Sales of the Chevrolet Malibu were up 34 percent. The company launched an ad campaign last spring in which it said “Reinvention is the only way we can fix this, and fix it we will.” The 2011 Chevy Volt, its electric car, was named Motor Trend’s car of the year, and Consumer Reports announced “GM made big strides” in reliability.
President Obama on Wednesday said GM's IPO marks a major milestone not only in the turnaround of the company, but of the U.S. auto industry as a whole. Sales at auto dealerships rose 5 percent in October, contributing to the largest gain in retail sales in seven months.
A report Wednesday from the non-profit Center for Automotive Research said the bailout of the auto industry saved more than 1.4 million jobs and saved the government a $28.6 billion loss from lower tax receipts and higher public welfare costs. Since July 2009, when GM emerged from its short bankruptcy, the industry has added 52,900 workers, the report said.