That doesn’t mean such buybacks aren’t market-pleasing, by the way. Much like Buffett’s recent slightly-above-market buyback, GM’s above-market buyback seems to have boosted the stock. Delightfully part of the boost is accounting-related. From the Journal: Read more »
I’m pretty sure that there’s one or two or thirty investment bankers currently handholding at the U.S. Treasury and General Motors in their debate over when and at what price Treasury should get rid of its remaining GM shares. I’m also pretty sure that those bankers are fed up with their principals’ childishness. Thus, I guess, this Wall Street Journal article. On the one hand, you’ve got Treasury and its unfamiliarity with the concept of sunk costs:1
Earlier this summer, GM floated a plan with Treasury officials to repurchase 200 million of the roughly 500 million shares the U.S. holds in the auto maker, according to people familiar with the discussions. Under the plan, Treasury would sell the remaining shares through a public stock offering.
But Treasury officials aren’t interested in GM’s offer at the current price and aren’t in a rush to offload shares, according to people familiar with the matter. The biggest reason: A sale now would leave the government with a hefty loss on its investment.
At GM’s Friday share price of $24.14, the U.S. would lose about $15 billion on the GM bailout if it sold its entire stake. While GM stock would need to reach $53 a share for the U.S. to break even, Treasury officials would consider selling at a price in the $30s, people familiar with the government’s thinking have said.
Kingdom Holding Co. said the investment firm and its chairman, Saudi Arabian billionaire Prince Alwaleed Bin Talal, invested $500 million in General Motors Co.’s recent initial public offering. The transaction represents 1% of the value of GM’s subscriptions, Kingdom Holding said Tuesday in a statement emailed to Zawya Dow Jones. The firm cited “the global strength of the General Motors brand, the relatively attractive offering price, and the company’s growth prospects in Brazil and China.” [WSJ]
Why does General Motors take it up the tailpipe? You could probably come up with at least handful of reasons, but at a breakfast hosted by Fortune this morning, Steve Rattner wanted to highlight one in particular. Over bagels and lox, the retired Car Czar, who last month was finally able to get it off his chest that automaker’s PowerPoint presentations were for shit, said that the higher-ups took no responsibility for their action and spent most of their time smack talking the “competition.”
On Rattner’s conversation with former GM CEO Rick Wagoner when he told him he was fired: “The most curious part of it was that after three to four minutes of chit chat he asked ‘Well are you going to fire Ron Gettelfinger too?’…And I said, ‘Look I’m not in charge of firing Ron Gettelfinger’… One of the problems with GM is that they blame everyone but themselves for their problems…But the fact is, Ford is doing OK and there is no reason why GM had to be in this position.”
As Dealbreaker readers will already been keenly aware, American automotive firms have been beset by difficult market conditions including too many customers, too few customers, high material prices, low material prices, insufficient resale value, excessive resale value.
You will be happy to know that the management team has been working overtime and come up with this solution. GM, eBay to Test Online Car Sales [The Wall Street Journal]
In addition to spending$950 million to wind down the old GM, the new GM may have unintentionally found a way to send a tough message to the UAW workers looking to milk the system and retire in their 40s. In 2007, the UAW and GM struck a deal which allowed GM to cut its work force and avoid severance packages by offering early retirement to tens of thousands of workers. While that sounds predictably foolish by auto industry standards, the real hiccup comes in the form of GM not having to make contributions to the fund until 2013. Consequently the pension fund may only have 20 years left before it runs out of cash, leaving newly retired 40-somethings faced with a daunting choice- roll the dice with fund or, perish the thought, find a job. Retired From G.M. at 54. Pensionless at 74? [NYT]
Among the bills that GM may need to pay with their additional $30 billion infusion are massive fees due to two of the only big winners in the GM debacle, Evercore Partners and turnaround consultants AlixPartners. For their impressive work overseeing the automaker’s complete collapse, Evercore and AlixPartners are seeking fees totalling a cool $130 million, which includes a combined $30.9 million in success fees. But the US Trustee overseeing the bankruptcy thinks the “staggering” and “excessive” fees aren’t well deserved and is worried about one of AlixPartners’ fees in particular. As a token of its appreciation, GM agreed to pay the firm a “discretionary fee” that has “no boundaries in amount and scope” and no clear method of calculation. Trustee Objects to Fees for G.M. Advisers [Dealbook]