GM CEO promises profit on Federal Investment

[Mr. Wyndham]

DETROIT (CNNMoney.com) -- General Motors Chairman and CEO Ed Whitacre promised Monday that taxpayers will make a profit on the $50 billion that Treasury has sunk into the company over the past 13 months.

"I think the government's investment is well placed and I think they'll make a lot of money," Whitacre told reporters after an event at the annual auto show here Monday morning. "It won't be too long."

The promise of profits on the investment, which was echoed by GM Vice Chairman Bob Lutz in an interview with CNNMoney.com Monday, is quite a bit more bullish than any previous forecast made by a GM executive.

GM has previously said it would repay a $6.7 billion loan that it received from Treasury by June of this year. It has already made the first payment of $1 billion.

In order for the rest of the money to be returned to taxpayers though, GM will need to file for an initial public offering of its stock so that Treasury can sell its 61% stake in GM.

Even if GM goes public again, the value of its stock would have to greatly exceed levels it had traded at before the company's bankruptcy in order for the stock to be worth enough for taxpayers to make a profit.

In fact, the company's overall market value would have to hit at least $67 billion for Treasury to recoup its investment. But Rod Lache, an analyst with Deutsche Bank, estimated in November that based on the trading in GM's bonds, investors were putting the future value of the company at only $42 billion.

So it remains uncertain if Whitacre will be able to back up his bold claim.


http://money.cnn.com/2010/01/11/news...ion=2010011114

Continued Good news on this topic.

[DGthe3]

Funny how this doesn't get the attention that the gas tax thread got ...

[The_Blur]

Originally Posted by DGthe3

Funny how this doesn't get the attention that the gas tax thread got ...

This is great news! Everyone should be celebrating GM's newfound confidence.

[meanmike]

Maybe I'm missing something but this does'nt sound like good new's.

Even if GM goes public again, the value of its stock would have to greatly exceed levels it had traded at before the company's bankruptcy in order for the stock to be worth enough for taxpayers to make a profit.

In fact, the company's overall market value would have to hit at least $67 billion for Treasury to recoup its investment. But Rod Lache, an analyst with Deutsche Bank, estimated in November that based on the trading in GM's bonds, investors were putting the future value of the company at only $42 billion.

So it remains uncertain if Whitacre will be able to back up his bold claim.

[rudack]

Originally Posted by meanmike

Maybe I'm missing something but this does'nt sound like good new's.

You must have read it how I read it. There is a giant “if” in there.

[coolman]

Question: What's to keep the government from selling it's 61% to China or someone like that when this thing does go public ?

[DGthe3]

As I understand, that is based on the current value of bonds ... which is 50% of what they were a year ago (I think). Also, the act of selling stock should actually raise the value of their stock, since it is a positive sign of recovery for the company. If it gets timed with the release of a quarterly profit announcement.

[The_Blur]

Originally Posted by coolman

Question: What's to keep the government from selling it's 61% to China or someone like that when this thing does go public ?

Do you think a democratic country wants to sell ownership to a communist country? It won't happen like that.

[1bad65]

Originally Posted by DGthe3

As I understand, that is based on the current value of bonds ... which is 50% of what they were a year ago (I think). Also, the act of selling stock should actually raise the value of their stock, since it is a positive sign of recovery for the company. If it gets timed with the release of a quarterly profit announcement.

When is the last time GM had a profitable quarter?

Originally Posted by The_Blur

Do you think a democratic country wants to sell ownership to a communist country? It won't happen like that.

GM sold Hummer to China.

[DGthe3]

Originally Posted by 1bad65

When is the last time GM had a profitable quarter?

Before the renegotiated wages and benefits with the UAW, when the new car market wasn't garbage, and they had billions more in debt.

Originally Posted by 1bad65

GM sold Hummer to China.

When did GM become a democratic country?

[Kyle2k]

Originally Posted by coolman

Question: What's to keep the government from selling it's 61% to China or someone like that when this thing does go public ?

If you think that the US government went through all the trouble to bail them out just to sell it to China then you are...weird.

[coolman]

Originally Posted by The_Blur

Do you think a democratic country wants to sell ownership to a communist country? It won't happen like that.

Well you need to start paying attention because it's happening everyday as we speak.

[NoUCantDriveIt]

Interesting thread.. thanks for posting

[Russo]

this thread is full of humor...