GM CEO says taxpayers won’t be repaid by initial stock sale; payment could take couple years

Thursday, September 16, 2010

GM CEO: Repayment of bailout could take years

DETROIT — It will take a couple of years for taxpayers to get back the billions they spent bailing out General Motors, but the company has a goal of returning the money, GM’s new CEO said Thursday.

CEO Daniel Akerson told reporters that the government won’t be repaid with the company’s initial public stock offering, which could happen later this year, but couldn’t answer more specific questions about the sale.

Akerson, a former telecommunications industry executive and GM board member since July 2009, said the $50 billion government bailout of GM saved a lot of jobs and helped to preserve the country’s manufacturing base.

The bailout has bred resentment with some car buyers and hurt GM’s sales. The automaker hopes the stock sale will end its government ownership and raise money for investment and to reduce debt.

GM has repaid $6.7 billion of the money the government put up to save the company and get it through bankruptcy protection last year, and the remaining $43 billion was converted to a 61 percent ownership stake. GM has filed paperwork starting the process to sell stock to the public, and a sale could come as early as mid-November.

Akerson, GM’s fourth CEO in less than two years, also indicated that management will be stable in the future, saying he doesn’t expect to make any changes.

The man he replaced on Sept. 1, former CEO Ed Whitacre, said in August that he expected the stock to be sold all at once, but Akerson said that was unrealistic. Although he said no investor has “infinite patience,” he indicated that it would take consistent earnings from GM and several stock sales before the money is returned.

“I don’t think that’s going to be in one fell swoop,” he said. “So we have to post those numbers and provide some consistent results. Over the next couple of years that will happen,” he said.

President Obama also has said all taxpayer money will be returned, but spokesmen later said he meant the money his administration pumped into GM.

GM made $2.2 billion in the first half of the year, a strong sign to investors that it is much leaner and healthier than it was before bankruptcy.

The company will not sell any shares of common stock, leaving that to the government and its three other shareholders. But it plans to sell preferred stock, which pays a dividend and will be converted to common shares in 2013.

Also Thursday, Chrysler and Fiat CEO Sergio Marchionne said he expects Chrysler’s IPO to take place in the second half of next year. Chrysler got $12.5 billion in bailout money from the government in exchange for $7.1 billion in loans and a 9.9 percent ownership stake.

Akerson, who replaces Whitacre as board chairman at the end of the year, also said he hopes GM will be able to create more jobs in the future, but he gave no specifics.

“I think it’s clear that we have good demand, strong demand in certain models,” he said. “It’s my sincere hope that that demand will drive production, and obviously associated with production will be jobs.”

GM will announce on Friday that it’s recalling 400 laid-off workers, less than 1 percent of its global work force, to make four-cylinder engines at a plant in Spring Hill, Tenn. Earlier this year the company said it had restored 6,900 jobs since leaving bankruptcy protection last year, including 1,200 at a plant that makes small cars in Lordstown, Ohio, near Cleveland.

Also at the hourlong meeting with reporters, Akerson said:

— He would not put a time frame on how long he’ll stay as CEO, but said his wife is looking for a house in Detroit. “I’m not here for the short term. I don’t view myself as transition,” he said. Akerson is 61.

— Despite criticism, he would not change the decision to charge $41,000 for the Chevrolet Volt rechargeable electric car when it comes out in December. Nissan Motor Co. priced its Leaf electric car substantially less at $32,780, but GM said the Volt is a better value because it has a small gas engine on board to power the car if the batteries run down.

Akerson said the price should drop with subsequent versions of the Volt, which he said is equipped with unique technology. “I think that gives us a leg up, and I’d rather have my position than anyone else’s in the industry,” he said.

— The company will be patient in turning around its money-losing European operation, saying it’s an important part of a global company. “We’re willing to be patient and invest, and I’m confident that we’ll see progress over the longer term,” he said.

— GM has to move faster as an organization in developing products and responding to competitive challenges. He said Whitacre righted the ship, and it’s his job to get it moving forward to play offense rather than defense.

— Unlike Whitacre, he won’t appear in any television commercials. But he’d like to see more humor in the ads, which in the future will emphasize brands and not the parent company.

— He is pleased with the company’s sales in September, although he wouldn’t give details. GM’s August sales fell 25 percent compared with last year’s levels that got a lift from the Cash for Clunkers program.

— He updates the government, GM’s largest shareholder, every two weeks or so by talking personally with auto czar Ron Bloom.

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