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General Motors' public offering may net $20 billion
She also warned that if the company began to make large profits, the United Auto Workers union would seek to "claw back" some concessions it has made.
Said Marina Whitman, formerly GM's chief economist and now a professor at the University of Michigan: "It really is kind of like taking a chance on a start-up, because in some ways GM is a start-up." She added: "It has totally new management, a largely new board of directors, and, if you leave aside the very top people, it's a new generation."
Whether those factors will produce better cars that people want to buy is another question. The company's ballyhooed Chevrolet Volt may be too expensive to woo many customers. The bigger-selling brands are still fighting to overcome the carmaker's tarnished reputation.
"GM was able to coast on its reputation for a long time, then it plunged back to the cellar," Whitman said. "And it's going to take time to build it back up. Reputation lags reality on the way down and the way up."
Even without a dramatic change in its products, supporters argue, the new GM is a better investment because of its improved financial structure. "Having a better balance sheet is an important part of being a better company," Rattner said.
When the Obama administration orchestrated GM's bankruptcy restructuring, it said its goal was to streamline the company so that it could make money if U.S. car sales settled to about 10 million to 11 million annually, about two-thirds of peak levels.
A lightened debt load, lower wages and cheaper benefits helped GM make money this year, when cars were selling at a rate of about 12 million vehicles annually.
Many investors think the car market will grow further. Rattner said that to replace aging vehicles and accommodate the growing number of drivers, the industry will have to sell 15 million cars a year.
Said Yardeni: "I think we can get up over 15 million in a year or two." He added: "There is a lot of pent-up demand because people did hunker down and drive their cars a bit longer. But consumers still have the will to drive a new car."
For the administration, the offering provides a way to recover another chunk of the money that was spent to rescue GM. Money used for emergency funding plus reorganization totaled $49.5 billion (part of that provided by the George W. Bush administration).
Including money for preferred shares, GM had already repaid the Treasury $9.5 billion. At the offering price, the entire Treasury stake in GM would be worth $30 billion.
The administration's top economic officials, White House aide Lawrence H. Summers and Treasury Secretary Timothy F. Geithner, insisted at the time of the rescue that the government should sell its shares as soon as possible.
In the end, the Treasury's losses probably will amount to less than $10 billion.
Some critics say that money could have been better spent. Philip Levy, an economist at the American Enterprise Institute, said that although the bailout helped GM workers and suppliers, the money could have gone toward job retraining. He noted that if the company had gone under, Chrysler and Ford might have benefited. Moreover, he added, private capital might have come in to buy up GM scraps.
Other critics say that the GM reorganization gave unions too much money.
But others say it was a reasonable deal. The administration noted Wednesday that the U.S. auto industry has added 77,300 jobs since GM and Chrysler emerged from bankruptcy, that vehicle exports are up more than 40 percent from 2009, and that the nation's Big Three car companies posted operating profits for the first three quarters of this year.
"Certainly this is a very attractive valuation compared to what most of us expected a year and a half ago," Rattner said. "When the dust settles, Treasury will be modestly out of pocket on GM, but in terms of the disaster averted, I think it was a very cheap form of stimulus. It helped the economy when the economy appeared to be in total free fall."
Staff writer Jia Lynn Yang contributed to this report.