GM Retirees Weigh Buying Its Stock Again

John Christie, who worked for 36 years building Chevrolet and Cadillac cars, once thought owning General Motors stock was a safe bet.

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Mr. Christie of suburban Detroit now says he cannot afford to make the same mistake twice.

He is among the thousands of G.M. retirees who are wrestling this week with one of the toughest, and unexpectedly emotional, questions of their retirement: after seeing their G.M. stock wiped out in bankruptcy last year, do they dare put the reorganized company’s stock back in their nest eggs?

“I’m still on the fence,” said Mr. Christie, who retired in 2005 as a manufacturing engineer and is president of the nationwide G.M. Retirees Association. “I did lose money on the old G.M. stock, enough that I may not have to pay capital gains tax for about 73 years.”

It is a decision being talked about at retiree clubs, union halls, and G.M. plants and offices across the country as the nation’s biggest automaker prepares to become a public company again.

More than 500,000 retirees and surviving spouses, as well as about 90,000 active workers in the United States and Canada and 3,000 dealers, have been given a chance to buy shares in G.M.’s initial public stock offering.

G.M. has set aside 5 percent of the 365 million shares in the offering, which is expected as early as Wednesday, for current and former personnel. An average investor would not be able to buy in at the stock offering price.

Even if some retirees balk at buying shares, overall demand for the offering is expected to be strong among big institutional investors in the United States and overseas. G.M. has been courting sovereign wealth funds, or state-owned investment funds, from Asia and the Middle East to invest in the stock, and is negotiating to sell a 1 percent stake in the company to its Chinese partner, the SAIC Motor Corporation. The Treasury Department has said it is not opposed to the stock’s being sold internationally, but it wants it to be sold “with a focus on North American investors.”

It is hardly an easy call for many retirees who had banked on the benefits they earned while working at a company once called “Generous Motors,” only to see their medical plans, life insurance and retirement contributions slashed in recent years.

Then, when the government forced G.M. into bankruptcy in exchange for federal aid, many retirees saw the value of their stock basically evaporate. “I have a lot of friends that were planning to live on G.M. dividends,” said Neil Millar, who retired in 1998 as a salaried employee at the company’s assembly plant in Wilmington, Del., which has been closed. “They’re very disappointed.”

At a meeting of about 500 retired assembly plant workers last month in Lordstown, Ohio, the crowd was divided and very vocal about it, said Bill Bowers, head of the retiree group at United Auto Workers Local 1112.

“There were a lot of sour notes in the audience,” Mr. Bowers said. “A lot of them had put a lot of money into the old stock and ended up with nothing.”

Those who want to participate in the stock offering had to formally express interest last month, but will not really have to decide until G.M. executives conclude their roadshow to institutional investors and set a final price for the offering. The preliminary range is $26 to $29 a share, but that could change depending on the broader interest in the stock.

A G.M. spokesman, Peter Ternes, declined to comment on how many retirees and workers had shown interest, or how many shares each of them could be eligible to buy. The initial paperwork indicated the minimum investment would be $1,000.

Many of the retirees interviewed fell into two camps: those who see the stock as a chance to make up for losses in benefits, and those who want no part of the stock in a company that failed to deliver on its promises in the past.

“I can’t thank G.M. enough for the wages they provided me and my family,” said Jim Kane, a retiree who was a labor relations representative at the Wilmington plant before retiring in 2005. “But the way they dumped on us with the health care didn’t sit well with a lot of people.”

Another Wilmington retiree, Palmie Maccari, said that the company was in much better shape than before and that he hoped to buy 300 shares. “If it’s doing well, I’ll keep it,” he said. “If it’s not, I’ll sell it.”

The old G.M. is "gone"

It was the retirees association, which acts as a watchdog on G.M.’s pension investments and benefits policies, that suggested last summer to the company that it allow retirees and workers to participate in the stock sale.

In a letter to Edward E. Whitacre Jr., then G.M.’s chief executive, Mr. Christie, the association president, said the gesture could help “rebuild relationships” with retirees who had lost benefits.

“So many retirees have been hurt by the bankruptcy,” he said. “This was a chance for G.M. to show they weren’t totally throwing them under the bus.”

Mr. Christie has cautioned fellow retirees to set aside their emotions about G.M. — pro and con — in their deliberations about investing. “There are some people who say G.M. will take care of us again,” he said. “Well, those days of G.M. are gone.”

Ed Lynch, a financial adviser with the Edward Jones investment firm in the Detroit area, said his clients were understandably wary about the stock, particularly if they owned it before.

“They can’t afford to be wrong twice,” he said. “They’re rooting for them, but they’re not ready to put their money there just yet.”

Some retirees remain unconvinced that G.M. is a better-run company under the ownership of the federal government, which has a 61 percent stake. G.M.’s current chief executive, Daniel F. Akerson, is a former partner in the Carlyle Group private equity firm who was recruited to the board by the Treasury. On Jan. 1, Mr. Akerson will take over from Mr. Whitacre as chairman of the board as well.

“If it was a car guy running the business, I’d feel much better,” said Steve Quindlen, who retired in 2003 after 41 years at the Wilmington plant.

G.M.’s most famous car guy in recent years, Robert A. Lutz, is one retiree who is unabashedly bullish on the stock.

“I’m going to buy every share I can get my hands on,” said Mr. Lutz, who retired May 1 as G.M.’s vice chairman. “We are making more competitive products now than we ever did.”

Even though the new G.M. has a better shot at success than the old one, the retirees know well that its improvements came at a cost.

“I’m planning to buy some stock because the earnings are looking very good,” said David Daniels of Overland Park, Kan., who retired in 1998 after 39 years with G.M. “But I had to see an awful lot of people get put out of work to get it to this point.”