GM prepares for IPO sometime next year

/ Source: The Associated Press

The new General Motors Co. said Friday it was worried about regaining consumer confidence following its exit from bankruptcy protection, and that its sales won't improve in 2009 as U.S. economic troubles continue.

In a sweeping review of its business filed late Friday with the U.S. Securities and Exchange Commission, GM also said it plans to register 3.5 billion shares of stock to prepare for a public offering sometime next year.

Proceeds from the sale would be used to repay at least part of what it owes the U.S. government and other stakeholders.

GM says in the filing that the $50 billion it received from the U.S. government is adequate for the short term, but its medium- and long-term financial health depends on its plan to continue cutting expenses as well as how many cars and trucks it sells and how much money it can get for them.

The company's sales have dropped 38 percent for the first seven months of the year compared with the same period in 2008, but the government's "cash for clunkers" program helped to slow the decline to 19 percent in July. Industry analysts are predicting further sales boosts since the program has been extended.

"The deteriorating economic and market conditions that have driven the drop in vehicle sales, including declines in real estate and equity values, rising unemployment, tightened credit markets, depressed consumer confidence and weak housing markets, are not likely to improve significantly during 2009," the company said.

It warned those problems may continue past 2009 and could deteriorate further. The company has predicted a gradual recovery after the first quarter of next year.

All companies are required to report risks like these in quarterly filings with the SEC.

GM has several improved, more efficient vehicle models heading into showrooms later this year, and it already is getting higher prices for the new version of the midsize Chevrolet Malibu and other new models.

The Detroit automaker also said it is worried about regaining consumer confidence after its recent bankruptcy filing. The company said in its SEC filing that it must convince people that it can make money again to restore confidence.

Some consumers lost confidence in GM's long-term ability to provide parts, warranties and service for its vehicles and preserve adequate car and truck resale values.

"Long-term profitability depends on our ability to convince consumers of our long-term strength," GM said.

Financial distress among parts supply companies could disrupt parts flow and hurt GM's business, and it said it must have adequate capital to keep developing new products in a competitive market.

The company said it would register 2.5 billion common and 1 billion preferred shares in preparation for the public sale. Its executives and the government have said they expect the sale sometime in 2010, but no date has been disclosed.

Spokeswoman Julie Gibson said the company is merely authorizing 3.5 billion shares but likely would not sell that high of a number in an initial public offering. It is common practice, she said, for companies to register more shares than they issue.

Current GM stakeholders include the U.S. government, which now owns 61 percent of the Detroit company.

GM also disclosed that it already has issued 500 million shares of common stock and 360 million shares of preferred stock. There also are warrants for another 106 million common shares. It is unclear what would happen to all those shares if the company goes public.

GM said in the filing that the U.S. government owns 61 percent of the original 500 million common shares and the Canadian and Ontario governments hold 12 percent.

The rest would be owned by the United Auto Workers retiree health care trust and old GM, now called Motors Liquidation Corp.

GM emerged from bankruptcy court on July 10 after a lightning-quick 40-day stay, cleansed of much of its debt and burdensome contracts.

Just before it filed for bankruptcy protection, GM had about 611 million shares outstanding, but those shares stayed with the old GM, which now is mainly a collection of debt as well as closed plants and bad assets waiting to be liquidated.

The company also disclosed Friday that it would not report second-quarter earnings this year, but it will disclose its performance for the three- and nine-month periods before Sept. 30. Those reports will come after the third quarter closes, and the company said they will not comply with general U.S. accounting principles. GM, however, will file reports that meet the accounting standards in 2010.

Spokeswoman Renee Rashid-Merem said GM won't file the second-quarter earnings because of the extensive work still needed to set up the books for the new company. The new company also needs to finish accounting changes made necessary by selling its good assets to the new company.