Tag Archives: John Neff

Look, We’ve Got A Heartbeat!

Heather Horn at The Atlantic with the round-up. Horn:

GM has had a fantastic second quarter, reporting a $1.3 billion profit. That “set[s] the stage,” reports Bill Vlasic for The New York Times, “for the automaker to file for an initial public offering, possibly as soon as Friday.” How well GM stock does, he explains, “will determine how much money American taxpayers will recoup from the $50 billion government bailout of G.M.”

Steve Schaefer at Forbes:

A year ago, General Motors was fresh off a spin in bankruptcy court and an IPO was the light at the end of a very long tunnel. By January the automaker’s executives were laying out the key checkpoints on a journey back to the public markets and now, just over 14 months since filing for Chapter 11 GM is on its way to a public offering that is widely anticipated for the fourth quarter.

Everybody’s got a view on the GM story and on Thursday the IPO specialists at Renaissance Capital offered their own take on how the automaker should go about returning to the public market, offering up a four-point plan for how GM can get out from under the government’s thumb and ensure it is offering a valuable opportunity for IPO investors.

Here are a few highlights from the four-point plan outlined in the Renaissance Capital commentary, which I encourage you to read in its entirety:

Transparency means full and fair disclosure. The Treasury has the duty to ensure that all material fundamental and governance issues are fully disclosed to potential public investors. Thus far, GM has largely avoided specifics on its strategy, but the company now must clearly lay out a chronology for regaining market share, realigning costs and transitioning from government control.   Assuming that GM does a $20 billion raise in this upcoming IPO, what’s the plan for the other $30 billion held by the government?

Assure IPO allocation transparency.  Prior IPO bad practices included spinning shares to favored executives or giving hot IPOs as “free money” to institutional investors as a quid pro quo for other business.

Decision-making roles must be clarified. GM and the government have been silent on how the competing interests of shareholders, the administration and the United Autoworkers will be resolved.

Value the stock for success. In thinking about valuation, the government and management need to understand that the GM IPO is in a similar position as a debt-laden private equity company with backers eager to monetize an investment. Recent sales of shares by such highly motivated selling shareholders have been accomplished only with deep discounts.  Over the last two years, between 50% and 70% of private equity IPOs have been forced to price below the originally proposed ranges.  GM needs to adjust its expectations accordingly.

Among the other issues that need addressing according to Renaissance Capital’s roadmap: the post-IPO succession plan for CEO Ed Whitacre; how GM’s product mix will be driven by the administration’s environmental policy and will the Treasury take a backseat to management as it offloads its stake in the automaker over time.

John Ogg at 24/7 Wall Street:

We are expecting somewhere around $15 billion per discussions we have had with others.  Here is the big question… Will the GM IPO become a busted IPO right out of the chute like so many others have?

The company recently secured a new $5 billion credit line and when the IPO will actually come, that may be as long as 45 to 60 days after the filing and will be somewhat dependent upon market conditions.

Richard Read at The Car Connection:

The line of credit has been pieced together from ten banks, including big-hitters like Bank of America and Morgan Stanley — two corporations that have shared GM’s pain of bankruptcy and bailout. More may join the ranks, since the line of credit is a potential cash cow for lenders.

But today’s news isn’t just important for GM, it’s also a major development for politicians. GM and the Obama administration both took a lot of heat for last year’s controversial bailout, and the nickname “Government Motors” still hangs around GM’s neck. Filing for an IPO now means that GM’s return to the stock exchange could happen before November’s mid-term elections. That would be a boon for Democrats, who could point to the IPO as evidence that the bailout was successful and that taxpayers will eventually recoup their loan from GM.

But even if the IPO runs on schedule, Republicans will probably still be able to point to government ownership of GM, which currently hovers at 61%. GM wants the Treasury Department to sell off about $10 billion of its $43 billion stake in the company as soon as the IPO launches, which would bring the government’s position below the 50% mark. However, the Treasury isn’t completely onboard with that plan; they’re afraid — as they should be — that selling off that much equity at once would dilute the value of the company and the government’s remaining shares. And right now, “diluting” is the last thing that probably needs to happen for GM.

That said, demand could be high for GM stock when it does relaunch — not least because of the company’s earnings, which are rumored to ring in above the $1 billion mark for the second quarter. We’ll have more about that later, but in the meantime, check John Voelcker’s post about Ed Whitacre’s sudden retirement.

John Neff at Autoblog:

The announcement today that General Motors will soon be welcoming its fourth CEO in just 14 months was startling news, but the real unanswered question is just who is Dan Akerson? We’ve already told you what his business chops are and it’s clear the man can run a lemonade stand, but there’s virtually no other information available out there besides his resume. And as for pics, the entirety of the internet has but one to offer, which is Akerson’s glamor shot as a member of GM’s board of directors. Flattering? No. Looks like a high school principal’s year book picture.

Well, we dug a little and found some interesting info on one Mr. Daniel F. Akerson. For one, he lives in McLean, Virginia and is reportedly an avid golfer. Ok, not too surprising, as most corporate executives can swing a club. How about this: He’s said to be worth an estimated $190 million. Yeah, CEOing is a good gig if you can get it. Also, he currently drives a Cadillac CTS.

Finally, we’re told that Mr. Akerson’s first car was an MGB roadster, which he quickly traded in for a 1970 Oldsmobile Cutlass. Now, we don’t have confirmation on which Cutlass he had, and it makes a difference. The 1970 Cutlass was nothing special, unless you’re talking about the 442, which was a legitimate muscle car. The fact that Akerson first had an MGB makes us hopeful that he is a car guy after all and that the Olds in question was the 442… or at least was powered by a Rocket V8 of some sort.

Derek Thompson at The Atlantic:

The good news is coming from good places. Although the company cut 20,000 jobs and a dozen U.S. plants, the profits aren’t coming all from cost cuts. Revenue grew from $32 billion to $33 billion in the second three months of the year. What’s more, the company is seeing a strong North American market for its goods. While it’s certainly not bad to have a strong overseas market, any indication that the American consumer is actually breathing out there is nice to hear.

There’s lots of silver lining, but the dark cloud for tax payers is that an IPO won’t end the government’s significant stake in the company. As the Michigan Messenger reports, the federal government will reduce its stake in the company from about 60 percent to below 50 percent in the initial IPO, and sell off the rest of the taxpayers’ stake in the company bit by bit.

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The Tale Of The Sticky Accelerator

John Neff at Autoblog:

Toyota has quite the PR nightmare on its hands. The boiling cauldron of complaints surrounding unintended acceleration issues bubbled over this month with two separate but giant recalls. The latest involves eight Toyota models that contain defective accelerator pedal mechanisms that could stick over time due to wear.

There is no fix available for the pedal mechanisms yet and dealers have continued to sell new models affected by the recall, so Toyota announced yesterday that it’s suspending the sale and production of these eight models for the week of February 1. It was a bold move that made headlines, as Toyota stands to lose a lot of money. On the other hand, the Japanese automaker got some pats on the back for doing the right thing.

Turns out, the decision to stop producing these vehicles wasn’t made by Toyota alone. The Detroit News reports that Toyota is required by law to stop selling the vehicles since there is no fix available yet. David Strickland, the new administrator of the National Highway Traffic Safety Administration, said that Toyota consulted with his agency, which informed the automaker of its obligations and it complied. That still doesn’t answer why these recalled vehicles were being sold five days after the recall was announced.

Nevertheless, Toyota spokesman Mike Michels is reported saying that the company’s decision to stop selling the recalled vehicles was voluntary, but that they also had a legal requirement to do so. How do you voluntary do something that you’re obligated to do?

James Treece at Automotive News:

There’s only one level of telling the truth. If you almost tell the truth, it’s not the truth.

Toyota Motor Sales USA sent a notice to its dealers, suggesting a script of answers if customers call with questions about the accelerator-pedal problem. Here’s one of the Q&As from that script.

Q. Have there been any accidents reported?

A. The number of accidents are still under investigation.

That’s the truth, but it’s not the whole truth. The accurate answer would be, “Yes.”

Or, if Toyota wants to spin the news — and most automakers in Toyota’s position would be desperate to put some spin on the situation — the answer could be, “Yes, sadly there have been accidents. But we’re determined to prevent any future ones, so please come in and let us check out your vehicle.”

At 7:19 p.m. Wednesday, Toyota announced that the supplier of the faulty accelerator pedals , which are involved in the recall of 2.3 million vehicles, has revised its design for future vehicles. Vehicles built at Toyota assembly plants in the future will presumably not have the same issue with accelerator pedals getting stuck. A time frame for when these new vehicles will be on dealer lots was not announced.

Toyota also says it’s working with the supplier on a fix to address the recalled cars currently in owners’ hands.

Reilly Brennan:

Because the Pontiac Vibe is built on the same line as the Toyota Matrix in Fremont, California at the joint GM/Toyota NUMMI plant, GM is getting pulled into fray for problems with Toyota’s accelerator pedal system.

GM confirmed to AOL Autos this morning that they would halt sales of the Pontiac Vibe immediately. However, since GM announced the wind-down of the Pontiac brand last year, the company doesn’t have many on sale. In fact, the number is less than a dozen.

Tiernan Ray at Barron’s:

They’re deriding Toyota’s (TM) decision to halt sales of its most important U.S. autos as a “total recall” today; the event pushing down the company’s American Depository Receipts by $5.94, or 7%, to $80.84 this morning.

Toyota late yesterday said it told dealers to halt sales of eight models in the U.S., including the Corolla and Camry, over a sticking pedal. Quite an ungainly follow-up to the news earlier in the day that the company expects a 6% rise in volume of sales worldwide this year, at about 8.27 million cars — still below its 9.37 million peak in 2007, the Financial Times’s Jonathan Soble notes.

Those eight car models were 57% of Toyota’s sales in the U.S. in 2009, note The Wall Street Journal’s Norihiko Shirouzu, Mariko Sanchanta and Yhshio Takahashi. The authors quote a car analyst at CLSA Asia-Pacific Markets as saying it’s conceivable the drive to overtake General Motors in volume, which Toyota did last year, has hurt quality control at the firm. Toyota engineers are “scratching their heads” over whether the current problems reflect engineering snafus identified three years ago.

The story quotes a U.S. rep who says the recall will be ” as short as possible.”

UPDATE: James B. Meigs in Popular Mechanics

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