Autos Weekly: GM's New Anxiety

Every Friday, we present a Foolish roundup of auto stories you may have missed -- small stories of interest as well as updates to larger ongoing stories we've been following at the Fool. This week, I check out the latest on General Motors' IPO, look at sales trends in China, and join Tesla Motors (Nasdaq: TSLA  ) in poking a bit of fun at GM's latest "anxiety."

GM's IPO comes into focus
The details of General Motors' plan for getting back into public hands are starting to emerge. According to a report in Automotive News, the Detroit automaker plans to begin its IPO "road show" -- a series of in-depth presentations to institutional investors -- immediately after the elections on Nov. 2, with an eye toward going public later that month. The timing will allow GM to present its third-quarter results as part of the pitch -- a reasonable move given that its second-quarter profit was the company's largest in more than five years.

Meanwhile, The Wall Street Journal reported on Friday that the U.S. Treasury is worrying about foreign money -- specifically, how many foreign investors should be allowed to buy big stakes in the General. Apparently, the Feds' worry is that a GM largely owned by investors from, say, Dubai or China might not play well in Peoria.

There is of course a larger tension between GM's management, who would like to be rid of the Feds (and the "Government Motors" moniker) as quickly as possible, and the Treasury, who hope to be able to break even -- or better yet, show a profit -- on their "investment" in the company. Many expect that the two will strike a balance, with the Treasury selling a portion of its stake in November -- enough to relinquish its majority-shareholder status -- and the remainder over time as market conditions warrant. Nonetheless, GM's offering, led by investment banks JPMorgan  (NYSE: JPM  )  and Morgan Stanley  (NYSE: MS  ) , is expected to be the United States' largest since Visa's (NYSE: V  ) in 2008 -- and one of the largest ever.

Speaking of GM management: Dan Akerson formally took over as GM's CEO on Wednesday, its fourth chief executive in less than two years. According to The Wall Street Journal, Akerson has promised GM's board that he would hold the job "from two to five years, or possibly longer." Whether that's good news or not, of course, remains to be seen.

Is China slowing down or not?
Why does China cause so many headaches for investors? I don't know, but here's another example: On Wednesday, the China Automotive Technology and Research Center, a government-run research and policy institute, reported that August auto sales rose a whopping 56% over August 2009 -- a month in which sales were up an even-more-whopping 95% over year-prior results.

Quite a few of us raised an eyebrow when that figure was released -- August is just as slow a month in China as it is elsewhere, and there were good reasons to believe that growth was moderating significantly -- and we raised another eyebrow yesterday when major international automakers announced their Chinese-market results. Market-heavyweight General Motors? Up 19% year over year. Toyota (NYSE: TM  ) ? Up 16%. And Ford (NYSE: F  ) , as I mentioned yesterday, was up 24%.

Those aren't bad results, but they aren't a 56% year-over-year increase, either. So what's the deal? The Wall Street Journal tried to find out, but apparently the officials at CATARC "couldn't be reached for comment." Funny about that.

GM's "anxiety" problem
No, it's not sweaty palms before the road show: As first reported by the Jalopnik blog, GM has filed to register the term "range anxiety" as a trademark. We can assume that this is part of GM's plan for marketing the upcoming Chevy Volt, as the Volt's gasoline-powered "range extender" motor has been touted as an advantage over purely electric cars like Nissan's upcoming Leaf.

Naturally, a Tesla Motors spokesperson found it hard to resist a snarky quip, saying in a statement that to Tesla owners, the "range anxiety" term "is as irrelevant as 'gas stop' or 'smog check.'" Tesla claims a range of 245 miles for the current iteration of its $101,500 Roadster.

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True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.

Fool contributor John Rosevear owns shares of Ford, which is a Motley Fool Stock Advisor pick. You can try Stock Advisor or any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


Read/Post Comments (7) | Recommend This Article (6)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 04, 2010, at 12:13 AM, BobMichigan wrote:

    Whatever you call it, having to stop for an extended period of time for any all electric car to charge is a deal breaker for most people.

  • Report this Comment On September 04, 2010, at 6:36 AM, TMFMarlowe wrote:

    @BobMichigan: The idea is that there will eventually be high-power "charging stations" that can do a full recharge in 10-15 min... longer than a gas fill-up, but not a lot longer. Meanwhile, I think people are assuming they can do their daily commute and then plug it in to recharge overnight.

    Nissan seems to think they can sell a lot of EVs in the US. We'll start to find out whether they're right in a few months.

    Thanks for reading.

    John Rosevear

  • Report this Comment On September 05, 2010, at 11:15 PM, nonqual wrote:

    There are ideas, then there is reality.

  • Report this Comment On September 06, 2010, at 10:46 PM, baldheadeddork wrote:

    Another nice rundown, John.

    I've written in the past that I thought it was a huge mistake for the government to rush GM into an IPO, if that was the real driving force. I still have huge doubts about that, but in any case if GM is just hitting it's groove it's a huge mistake to push out the IPO at a time when GM is relatively weak - especially since GM will get very little money from the IPO.

    It just didn't make any sense.

    But I've changed my mind, thanks to a review of GM's upcoming new models. The problem is, they don't have very many when you get into 2011 and beyond. GM is going to live or die on the strength of Chevrolet, and Chevy is going to be starved for new product for the next three years. The only firm models through 2013 are (and I am not making this up) two versions of the Volt, an Australian-sourced Caprice for police departments, and another rebadged Daewoo to torment rental car customers. That's it. No new Malibu, no new Impala, and most important - no new Silverado until 2014 when the GMT900 will seven years old.

    It's not any better at GMC (nada) or Buick (zip). Cadillac gets the XTS to replace the STS and DTS, and maybe a new ATS 3-series competitor. It's not better around the world, either. GM is now a minority partner on its China operations and the damage Opel has suffered in the last two years will take decades to repair. It is now a corpse of a brand.

    This is the inevitable result of GM being starved for cash from 2007 through the beginning of this year. Any new car for 2012 needed to be approved two years ago and there just wasn't the money to do it. You can't make that up now.

    The picture I have for GM's near future isn't hopeful. They're going to continue buying market share with incentives twice as high as the industry average, and a third higher than Ford. This is going to make them less profitable, which is going to reduce the funding they have for essentially replacing their entire lineup by 2015-2016. To get past that, the new GM is either going to have to take on billions in debt or dilute itself through partnerships to develop new platforms.

    All this means the next six months might be the best environment for GM to make its IPO for the next five years. If it's the best time to invest in GM is going to be another question.

  • Report this Comment On September 07, 2010, at 11:11 AM, TMFMarlowe wrote:

    @baldheadeddork: I have a theory that Opel is toast no matter what. Note that they're putting some serious effort into establishing the Chevy and Buick brands in Europe. I suspect they plan/hope to both rid themselves of the Opel problem and emulate the "One Ford" strategy with their 4 core brands over the next few years.

    Buick has fresh product and should be okay for a couple of years. Cadillac really has nothing that's fresh and hot except the SRX and arguably the CTS, but in addition to the XTS and ATS they may get their own Lambda before too long. (Whether that's a good or bad move is another discussion, but if the SRX's success is any indication, it'll sell well.)

    But yeah, they do have a big gap in product spending to overcome -- and I still think that a desire to aggressively ramp up that spending is part of what's motivating them to push the government out the door.

    John

  • Report this Comment On September 07, 2010, at 11:34 PM, rd80 wrote:

    "I still think that a desire to aggressively ramp up that spending.."

    Where is the money to aggressively ramp up spending at GM going to come from? Everything raised in the IPO goes to Treasury, the UAW or Canada - the selling shareholders - not the company.

    Maybe GM could float a secondary once .gov is out of the picture, but any plans for that would have to be held until after the IPO since fear of more dilution would trash the pricing.

    A bond issue would be a tough sell. Market memory has to be long enough to remember how bondholders were screwed last go 'round and would, at a minimum, tack a risk premium onto any offering.

  • Report this Comment On September 08, 2010, at 9:53 AM, TMFMarlowe wrote:

    @rd80: GM's selling two things in the IPO: common stock (held by others) and preferred shares (to raise money for its own operations while punting the issue of dilution down the road for several years). See my article here for more details:

    http://www.fool.com/investing/general/2010/08/20/is-general-...

    I suspect that much of that, plus most of their profits for the next couple of years, will be plowed into product development as they try to play catch-up.

    Thanks for reading.

    John Rosevear

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