General Motors has revamped the way it operates, with sharply lower costs, stronger brands and gains in key emerging markets like China, Chief Executive Ed Whitacre said in a pitch for the company's planned IPO.
Speaking to Wall Street analysts and potential investors for the first time after GM's emergence from bankruptcy in 2009 and ahead of a planned stock offering later this year, Whitacre on Tuesday tried to draw a distinction between the new GM and the automaker that was restructured in a U.S. government-funded bankruptcy.
We're not reintroducing GM today. We're introducing a new GM, because we are a new and much different company than we were 12 months ago, Whitacre said at an event GM hosted at its product development and engineering center in Warren, Michigan. About 200 members of the financial community and other stakeholders attended the GM presentation.
The first-of-its kind update on GM's financial progress by its leadership team comes as the largest U.S. automaker prepares for an initial public offering, one that is expected to be among the largest U.S. IPOs ever.
The event marked the de facto start of a roadshow for a stock sale that would allow the U.S. Treasury to step aside as the majority shareholder in the top U.S. automaker and that bankers said could raise up to $20 billion.
Chief Financial Officer Chris Liddell said bankruptcy restructuring has allowed GM to break even at the bottom of the industry's downturn, while producing in a lowered cost structure that would present massive opportunity' when the market recovers.
When you add break even at the bottom and a huge global opportunity for growth, you have this massive economic opportunity that we believe is incredibly exciting, Liddell said.
GM executives also cautioned that while they saw higher U.S. auto sales on the horizon, a recovery of sales would be very delicate. How soon and how fast the market would recover remained to be seen, they said.
U.S. auto sales have stabilized in the first half of the year above 11 million units on an annualized basis, from 10.4 million last year, but have failed to show signs of the rebound that automakers, including GM, had expected to see.
We need to be prepared for volatility going forward, Vice Chairman Stephen Girsky said.
During the daylong event, GM also offered attendees a chance to ride in, and drive, a new fleet of GM cars and trucks, including the heavily touted Chevrolet Volt electric car and the Cruze small car, both slated for U.S. showrooms this year.
Ask any employee of GM and they will tell you our vision is to design, build and sell the world's best vehicle, Whitacre said.
If we once did things that didn't support the vision, and believe me, we did plenty of those, it's dead now or it's on its way out. It's breathing its last breath, he said.
EMERGING MARKETS, NEW CARS
With the balance sheet clean thanks to the $50 billion bailout and bankruptcy financing provided by the Obama administration, Whitacre and other executives tried to sell the message that GM has reformed its product lineup and has a plan to expand further in fast-growing markets.
GM said its combined market share in four key growth markets -- China, India, Brazil and Russia -- stood at 13 percent in the first quarter, ahead of its overall market share of 11.2 percent globally.
The company plans to introduce 70 new products in developing countries through 2014, it said.
All in all, we're the best positioned U.S. automaker in the world's critical emerging markets. Nobody can top our position in the world, Whitacre said.
GM, which ranks No. 1 in China auto sales with more than a 13 percent share, said industry sales in the country -- now the world's largest auto market -- would rise about 20 percent to 16.5 million vehicles this year. In comparison, analysts have projected 2010 U.S. industry sales of 11.5 million to 12 million units.
GM expects a marginal increase in its share of the Chinese market this year, said Tim Lee, who heads GM international operations in Shanghai.
A successful GM IPO would represent an important political win for the Obama administration, which engineered bailouts for both GM and its smaller rival Chrysler in 2009. The restructuring gave the U.S. Treasury a 60.8 percent stake in GM, which it expects to start selling when GM goes public.
The financial benefits from GM's cost-cutting in bankruptcy were reflected in the first quarter when GM surprised analysts with a $865 million profit, its first quarterly profit in three years.
North America President Mark Reuss said average transaction prices rose by $3,000 per vehicle in the region from a year ago, incentive spending was down by about $1,200 per vehicle and capacity utilization up sharply to about 85 percent.
Liddell said that GM would need to use cash to address a $27 billion shortfall in pension funding at some point, the one liability on its balance sheet that the government-funded restructuring failed to resolve.
Addressing another of the remaining wrinkles in its turnaround -- its Opel European unit -- GM said its restructuring would allow the company to break even in Europe next year and return to profitability after that.
(Reporting by Soyoung Kim, Kevin Krolicki and Bernie Woodall; Editing by Phil Berlowitz and Steve Orlofsky)