The New General Motors Raises Billions In Stock Offering

VOA Breaking News (Voice of America)
November 18, 2010 at 3:05 pm

The new General Motors got a strong vote of confidence from investors Thursday when its stock was traded on the New York Stock Exchange for the first time.

The price of GM’s shares rose strongly in its first day of trading from the $33 level that the company first offered its shares.

It is a huge turnaround from bankruptcy 16 months ago when Washington had to rescue the firm with emergency loans.

The world’s second largest automaker could raise about $23 billion from the stock sale, which would make it the largest initial stock offering ever.

The carmaker was kept afloat last year with a nearly $50 billion bailout from the U.S. government. Depending on the final size of the stock sale, the federal stake in GM could be reduced from 61 percent to under 30 percent.

U.S. President Barack Obama lauded the General Motors stock sale as a major milestone not only for the company, but for the entire American auto industry.

Once an American corporate icon, GM’s fortunes plummeted as the car-buying public increasingly bought Asian- and European-made cars they considered to be of higher quality. The company was also saddled by union contracts that called for higher wages and benefits for its workers than those paid by foreign competitors.

The revamped company has shed four of its lines of vehicles and now only produces Chevrolet, Buick, GMC and Cadillac models. It also pays many of workers substantially reduced salaries.

GM turned a $2 billion profit in its last financial reporting period, from July to September, making it attractive to investors who quickly sought to buy seven times the number of shares the auto maker initially offered to sell.

The White House has said it expects to eventually be repaid the full loan to the company. But the government’s overall sale of its GM stock will have to average nearly $44 a share for it to break even. The size of Thursday’s stock sale could reach 550 million shares of common stock, plus another 80 million shares of preferred stock.

If the total sale does raise $22.7 billion, it would easily top the $19.7 billion first-day U.S. stock sale in the credit-card processor Visa Inc. in March 2008, as well as two overseas stock offerings earlier this year.

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