GM launching IPO, ending government majority stake

DETROIT (AP) - General Motors is returning to life as a public company Thursday with a stock offering worth potentially $23 billion, ending the U.S. government's role as majority shareholder and closing a remarkable chapter in American corporate history.

The U.S. government should make about $13.6 billion as GM shares start trading on the New York Stock Exchange. The federal Treasury is unloading more than 400 million shares of GM, reducing its stake in the company from 61 percent to about 33 percent.

The IPO could wind up as the largest in history. GM set a price of $33 per common share on Wednesday, a day after it raised the number of shares it will offer to satisfy investor demand. When the U.S. government and other owners sell their shares, they'll raise $18.2 billion. GM will raise another $5 billion by selling 100 million preferred shares at $50 each.

Together, the sale of common and preferred stock will bring the deal's value to a record $23.2 billion.

Dan Akerson, GM's fourth CEO in less than two years, will ring the opening bell to start the day's trading, and they'll honk the horn of a new Chevrolet Camaro SS muscle car at the same time.

For Mark Reuss, GM's North American president, the first day of trading represents a rare second chance for the company, courtesy of a $50 billion bailout from U.S. taxpayers.

It's a chance that GM is ready to capitalize on as a new company with a focus on building cars and trucks that people want to buy, Reuss said in an interview Thursday from the floor of the exchange.

"We've all taken that as the No. 1 priority, to make everybody proud of us," he said. "There's a lot of work to do, but today is the beginning of the new company."

The stock offering is the latest in a series of head-spinning developments over the past two years for an American corporate icon.

Now GM will become a publicly traded company again and revive the stock symbol "GM." 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.

"Supporting the American auto industry required tough decisions and shared sacrifices, but it helped save jobs, rescue an industry at the heart of America's manufacturing sector, and make it more competitive for the future," Akerson said.

Most of the new stock will go to institutional investors, not to everyday investors, following a Wall Street system that rewards investment banks' big customers. GM will set aside 5 percent of its new stock for employees, retirees and car dealers to buy at the offering price.

The deadline to sign up was Oct. 22, but the company has not revealed how many people took the offer.

Early Thursday, GM's main joint venture partner in China, SAIC Motor Corp., said it has bought a nearly 1 percent stake in GM, buying shares being offered in the IPO at a total cost of nearly $500 million. The Shanghai-based, state-run SAIC said the share purchase is meant to enhance its cooperation with GM in China, the world's biggest auto market.

Senior Obama administration officials said Wednesday that the Treasury Department sought to strike a balance between getting a return for taxpayers and exiting government ownership as soon as practical.

The government has agreed that it will not sell shares outside the IPO for six months after the sale. The officials, who spoke on condition of anonymity, said they would assess their options for selling the government's stake further.

In the stock offering, the government stands to make $13.6 billion if it sells 412 million shares, as planned, for $33 apiece. It will still have about 500 million shares, a one-third stake. It would have to sell those shares over the next two to three years at about $53 a share for taxpayers to come out even.

The government's strategy in retaining shares is to wait for GM's finances to improve, pushing the stock price up even further during the next couple of years. If that happens, the government stands a chance of getting most of its money back.

The total bailout was $50 billion. GM has already paid or agreed to pay back $9.5 billion. That comes from cash and payments related to preferred stock held by the government.

In the interview, Reuss said he knows there's pressure to keep performing well and boost the stock price even further.

"I can't control share prices," he said. "I'll just go right back to designing and building and selling the world's best vehicles. That's what we can control."

The GM debut comes at a time when auto stocks are performing well generally. The stock of GM's crosstown rival, Ford, has risen steadily this year, from about $10 in January to about $16.50 as the GM IPO approached. The stock traded for a dollar in November 2008, and Ford never even took bailout money.

As for GM, whether bankruptcy actually fixed the company remains an open question. Before the crisis, it was saddled with debt and had a labor contract that called for paying workers even if they weren't working. Massive pension and health care costs kept GM's fixed costs high, and contracts with dealers meant it would be expensive to shut underperforming brands. Combined, those problems put the automaker in a topsy-turvy world where it made more sense to run plants at full bore, even if no one was buying cars.

Bankruptcy fixed much of that. The company closed 14 of its 47 plants, shuttered or sold off its Hummer, Saturn, Saab and Pontiac brands, and slashed its debt from about $46 billion to about $8 billion. Union retiree health care costs are now the United Auto Workers' responsibility, and the controversial jobs program that paid idled workers almost a full salary has been scaled back dramatically.

GM employs 209,000 people in the United States today, down from 324,000 in 2004. But it's making money. Before bankruptcy, GM lost about $4,000 per car. Now it makes about $2,000 each. GM says it is poised to earn about $19 billion a year if the U.S. car market rebounds to 17 million, a record level set last decade.

Still, questions remain. With this stock offering, GM doesn't rid itself of government intervention. The government remains a big shareholder.

Financial problems that plagued the automaker for the past decade still don't seem under control: Despite hiring Chris Liddell, a new CFO from Microsoft known for fixing problems, GM says it's still not sure all the financial problems were fixed.

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Tom Krisher in Detroit and Elaine Kurtenbach in Shanghai contributed to this report.