New General Motors Stock Price Soars

VOA Breaking News (Voice of America)
November 18, 2010 at 4:50 pm

The price of new shares in General Motors soared Thursday when the New York Stock Exchange reopened trading in the giant auto company’s stock.

The price jump is a huge turnaround for GM. The company was near collapse in 2008, but emerged from bankruptcy 16 months ago with the help of $50 billion in emergency loans. Most of that money came from the U.S. government, but there also was assistance from other nations.

Depending on the final size of the stock sale, the U.S. ownership stake in General Motors could be reduced from 61 percent to under 30 percent.

Chief executive officer Dan Akerson said the new GM has learned from its mistakes and is building new, smaller, more fuel-efficient cars that win awards and sell well.

President Barack Obama called the General Motors stock sale a major milestone for the company and the entire American auto industry.

CEO Akerson said GM will never forget those who stood by the firm, including the taxpayers of the United States and Canada. Another executive joked that the old GM had lost its way, becoming a huge pension fund and a finance company with a small car company attached.

Once the pinnacle of American industry, the 102-year-old car company’s fortunes plummeted as buyers switched to Asian- and European-made cars seen as higher quality models. GM also was saddled by union contracts that gave its workers higher wages and benefits than those paid by foreign competitors.

The revamped company has shed four of its vehicle product lines. GM now makes only Chevrolet, Buick, GMC and Cadillac models. It also has substantially reduced salaries for many workers.

GM turned a $2 billion profit in its last financial reporting period, from July to September, making it attractive to investors, and buyers welcomed the “initial public offering” of new shares with offers to buy seven times as many shares as the company planned to sell.

The Obama administrations says its loans to GM will eventually be repaid in full. That forecast is based on an average price of $44 per share of new GM stock. The stock sale that began Thursday could result in the purchase of 550 million shares of common stock plus another 80 million shares of preferred stock.

Some information in this story was provided by AP and AFP.