Ready or Not, General Motors Prepares for Potential IPO

DETROIT — General Motors Co. President and CEO Fritz Henderson says the recently bankrupt and now privately held auto maker could go public in second-half 2010, although much depends on getting its financial house in order and accelerating its business performance.

“Business performance, without a doubt, is the most important determinant of whether we go public in the second half of the year,” Henderson tells Ward's during an interview at GM world headquarters here.

Since exiting bankruptcy four months ago, GM has announced plans to wind down its Pontiac and Saturn divisions and agreements to sell Saab and Hummer are awaiting final regulatory approval.

A smaller GM, with the four core brands of Chevrolet, Cadillac, Buick and GMC, presumably gives the auto maker a better shot at turning around a business previously crippled by too many divisions eating up precious few resources.

Yet industry experts question whether GM can hold market share with four fewer brands.

The auto maker's bankruptcy also deleveraged its balance sheet, wiping out billions of dollars of debt, and a new union contract brings its labor costs more closely in line with key competitors such as Toyota Motor Corp.

With fewer executives, salaried and hourly employees, as well as a manufacturing footprint that will shrink from 47 facilities in 2008 to 34 in 2010, it is assumed the auto maker will react more quickly to consumer wants and needs — a key element of getting in front of its competitors.

But a sickly new-vehicle sales market shows only moderate signs of life.

In October, GM posted its first monthly year-over-year gain in the U.S. since January 2008. But the uptick is measured against year-ago when industry sales took a sudden nosedive due to a crash in the economy.

For its part, GM is forecasting 2010 U.S. sales of 11.5 million vehicles, including medium- and heavy-duty trucks. Henderson considers that at the low-range of most estimates.

Ward's forecasts 2010 light-vehicle sales of 11.3 million units.

GM says its business is designed for profitability in a market of 10.5 million units.

GM has not produced a quarterly financial report since the year's first quarter but will provide a snapshot of its financial health in mid-November, company executives say.

Potential investors will want to see a solid track record before an initial public offering from a company that in its former existence had not posted an annual profit since 2004.

Paul Bard, vice president-research at Connecticut-based Renaissance Capital LLC, a leading IPO researcher, says an offering from GM next year is not unexpected.

“But to be successful, they will have to show that they have appropriately restructured the business and can be a self-sustaining enterprise going forward,” he tells Ward's.