GM IPO a fast start, but paying back bailout cash will be a marathon
The GM IPO raised $20 billion of the $49 billion that the federal government spent to bailout GM. But the finish line is still years away.
General Motors and the Obama administration had good reason to cheer Thursday: The initial public offering that day raised more than $20 billion, recouping a significant chunk of the $49 billion that the Bush and Obama administrations spent to save the automaker.Skip to next paragraph
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GM shares finished up a further $0.07 Friday.
President Obama said the IPO helped GM take “another big step towards becoming a success story.”
GM North America President Mark Reuss was more measured, telling Reuters that the company has “to celebrate on the run.… It’s a big day to become a public company again, but we have got to just hit the ball out of the park here every day on product.”
Analysts agree that GM has put itself in a good position to do that. It has:
- Made dramatic cuts in labor.
- Cut manufacturing and dealership costs.
- Committed to expand in foreign markets including China and Brazil.
- Focused on vehicles that the market wants, such as Chevrolet's Cruze, Volt, Malibu, and Equinox.
The company predicts that it will have its first profitable year since 2004 and is in a good position to maintain its lead as the nation’s top automaker despite advances from Ford, its primary competitor.
'A marathon without end'
But the test of whether GM can continue its early success will come in years ahead, says auto industry analyst Paul Eisenstein, echoing GM North America President Reuss's words.
“This IPO is only the first step,” says Mr. Eisenstein, editor of TheDetroitBureau.com, a media site that tracks the automotive industry. “The big question is can they maintain the momentum they’ve had, because if they don’t, they’re going to be in trouble. This is not about hitting a goal post and scoring, it’s about beginning a process that is a constant marathon. It’s a marathon without end.”