In late 2010, a General Motors (GM) Initial Public Offering (IPO) is intended to transfer the majority ownership of the former number one global auto manufacturer from the hands of the U.S. Government, to non-governmental entities including the public. Public ownership of General Motors will allow the company to reenter the auto industry as a rehabilitated corporation. Among the conditions of the offering is that the company’s leadership embrace new market dynamics and challenges rather than an antiquated business model that contributed to the company’s failure.
General Motors is among the largest employers in the United States with over 200,000 employees. By returning GM to the public, the Government can help recoup some, and potentially all, of the billions of tax payers’ money spent bailing out the company and its many employees. Estimates for the IPO vary, with some saying no more than $20 billion will be raised in the first offering. Financial headwinds prevail however, as what’s left of the U.S. auto industry struggles to regain its footing amid low consumer demand and greater international competition.
In addition to reclaiming a fraction of tax payers’ money, a GM IPO means the company can strive for excellence in current and future market conditions under new leadership. It is hoped, the new General Motors will promote and participate in leading growth for itself and a revived auto industry. However, GM is still facing a sluggish economy. In such case, the only thing the General Motors Initial Public Offering might mean for America is assurance of the government’s willingness to step away from a sustainably non-competitive business.
According to Maxine Waters, Congresswoman for the House of Representatives’ 35th District in California, the underwriting of the GM IPO is to contradict recently enacted financial reform by excluding minority owned businesses from the process. In this sense, the General Motors Initial Public Offering echoes a tradition of investment banking elitism that does little to inspire confidence in the shedding of old school business practices that led to a decay of GM in the first place.
Even with selective underwriting of the GM IPO however, America is still lucky to have a second chance at General Motors because it can help revive the United States’ position as a leading global auto manufacture. In other words, General Motors is more than its equity structure, it is a large economic sector component that once brought economic prosperity, and could do so again. Had General Motors been allowed to fail, it might have become an economically digested entity that’s remains were left for the highest bidder on the former company’s dissolved assets. In such case, what may have been thrown out with a complete corporate disintegration are the long-term potential of a revived auto manufacturer and the economic cost of losing such a large employer.
In order for the General Motors IPO to be a complete success for America, the company has to contribute to the revitalization of the U.S. auto industry, and maintain profitability in addition to returning direct and indirect investment value made by taxpayers via the government bailout of GM. Even without a break even capitalization, a redistributed net gain of company worth and economic output is possible. This would constitute a win for the auto industry and perhaps a well guided economic sacrifice on behalf of U.S. taxpayers.
Sources: (Date of record October 12, 2010)
1. http://bit.ly/aGrFda (Nasdaq)
2. http://politi.co/1rc83 (Politico)
3. http://huff.to/dC4E3L (Huffington Post)
4. http://bit.ly/dnH5vF (Congresswoman Waters)
5. http://reut.rs/bA7ned (Reuters)