The Obama administration wants a fast-track initial public offering of General Motors Co shares to reduce its majority stake in the automaker, a senior official said.
An IPO for GM could come as soon as the fourth quarter of 2010 if the automaker is meeting its recovery targets and the financial markets are receptive, Ron Bloom, the head of the U.S. government's autos task force told Reuters.
Bloom said the U.S. government, which now holds a nearly 61-percent stake in GM, wanted to err on the side of getting out a little faster from the investment it took as part of a policy to restructure the automaker in bankruptcy.
Private markets would like to see us exit this investment, and I think they will be more comfortable if we're on a sustained path out the door than if they think we're going to try to market time it to maximize return, Bloom said in the Tuesday interview.
GM is in the process of revaluing its balance sheet to provide what is known as a fresh start accounting of the company's assets and liabilities since emerging from bankruptcy in July. That process, which is expected to be finished by March, is a necessary step toward an IPO.
I would anticipate that if the fresh start (accounting) is complete, if you put numbers on the board, if things are going well and the capital markets are open, that in some point in the fourth quarter the markets will be open enough to do a successful IPO, Bloom said.
Chief Executive Fritz Henderson has said GM could launch an IPO as soon as the second half of 2010.
Bloom said U.S. officials could revisit the question of the timing of a share sale in June when they consider whether to allow the automaker to have continued access to an escrow account with $13 billion left over from its bankruptcy.
Fritz has talked about back half of 2010 as a potential timing. Whether or not we feel we have enough visibility by June to have that conversation, I don't know, Bloom said.
Clearly we're going to be smarter in June than we are today. Whether we feel we have enough visibility on the IPO or not, I don't know, he said.
Bloom, a former adviser to the United Steelworkers union who has headed the U.S. government's autos task force since July, said he endorsed the position on an IPO taken recently by GM Chairman Ed Whitacre, who heads a new GM board installed by the task force.
Ed said that he thought the company ought to be focused on making money and paying us back and not particularly on the IPO. The IPO is a consequence, not a cause, Bloom said.
U.S. GOVERNMENT GOAL: SELL IT ALL
Bloom said he believed there would be a market for GM shares after it used bankruptcy to slash debt and other obligations.
He cited a forecast by Deutsche Bank analyst Rod Lache that estimated a $42 billion equity value for GM based in part on the price of GM bonds, which will be converted into stock in the new company.
A GM valuation in that range would allow the Obama administration to recover potentially all of the $30 billion in bankruptcy financing it extended to the automaker.
Nobody believes that's the truth because it's not there until you can sell it and we're a long way from selling it. But if you want to just observe it, that's the observed truth by a smart Wall Street analyst, Bloom said.
Bloom said it would be impractical for the government to sell its stake in GM all at once. He said it would have to be determined if the IPO would reduce its holdings to a minority stake.
Over time, he said, the administration wants to sell all of its stock in GM and an 8-percent stake it acquired in Chrysler as part of that automaker's restructuring.
Our benchmark of success is zero. We don't think it's proper over the long term for the government to own an industrial company, he said. If you want to be out, you should be out.
Bloom declined to comment on GM management. Steve Rattner, who headed the autos task force until GM emerged from bankruptcy, has said U.S. officials were shocked by problems in the automaker's financial management.
GM has been looking for a new chief financial officer to succeed Ray Young, people briefed on that process have said. Young is expected to stay on with GM, the sources have said.
We are going to leave that to the board of directors, Bloom said when asked for his assessment of GM's management.
Fritz is the CEO. He will be the CEO until the board doesn't want him to be the CEO and that will be their decision. He may stay forever. He may stay until yesterday, Bloom said.
I am confident the board is in full command of that situation. We had a number of concerns about GM that we shared with the board, he said. We said what we think. But we're done. We're not saying what we think anymore. We're trusting Ed and the board and Fritz and his team to carry out what's best for the shareholders.
Bloom said he believed GM would be able to bring in the executive talent it needs from outside the company despite government-imposed pay caps that now set a limit near $500,000 for cash compensation.
So far we haven't seen any evidence that they can't find people, he said. It's an evolving process, but at this point it's not something we're worried about.
(Additional reporting by David Lawder; Editing by Neil Stempleman)