Which GM Will Investors See?
It's a compelling argument. The question is who will buy it and who will dismiss it as inflated confidence.
Today two teams of GM executives will kick off their IPO road show with presentations about why big firms should invest in the new GM. It makes two compelling arguments:
- GM is restructured to be profitable at a much lower sales volume in North America.
- GM is the only global auto maker that is strong in North America, China, and the rapidly growing BRIC (Brazil, Russia, India, China) markets.
Whether you want to agree with them or not, GM is absolutely right on both counts. It's made roughly $4 Billion this year, thanks in large part to the fact that bankruptcy allowed it to clean up its balance sheet. And yes, GM is very strong around the globe. Especially in China which has blown by the U.S. to become the world's largest market.
So why do I hear from so many people that they won't touch shares of the new GM?
Some dismiss GM because they don't like that Uncle Sam bailed out the automaker. Some of it is because people are skeptical the new GM leadership has changed the stodgy, money losing culture at GM. And some of it is because people doubt GM can be a nimble, profitable global company. I can't change opinions, nor will I try.
I will say that when you watch GM's investment pitch (www.iporoadshow.com) you'll see an investment case that is not only credible, but built to deliver as promised—at least initially.
I'm not endorsing or suggesting people buy GM stock once it starts trading. I am saying that when I talk with auto analysts, consultants, and those who have looked at the new GM, all say roughly the same thing: these guys will make money. Will it be the $11-13 Billion pre-tax that GM CFO Chris Liddell is projecting in his IPO pitch? Who knows.
Now the challenge for General Motors is to win the perception battle with investors. The large mutual funds and pension plans will buy it. But will the little guy? It depends on whether they see the numbers or a company still saddled with a legacy of mistakes.
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