Global Biz
GM roars back to profit, but can it repay?
(Agencies)
Updated: 2010-05-19 11:51
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 An unidentified autoworker holds a sign as the last Toyota Corolla sedan rolls off the line at the NUMMI plant in Fremont, California, in this publicity photo taken and released to Reuters April 1, 2010. [Agencies] |
To pay off all its shareholders, including the government, a United Auto Workers union health care trust, and its old bondholders, the stock market would have to value GM at more than $70 billion. That's almost double Ford Motor Co.'s market value of roughly $40 billion, but far less than the total value of Toyota's shares, about $120 billion.
One analyst, Eric Selle of JPMorgan Chase & Co., predicted last month that a GM stock sale could reach around $70 billion, selling at $113 to $137 a share.
Rattner, who is now writing a book about the auto industry's near-death, said GM could be worth more than Ford when investors compare their enterprise values, or the values of their stock shares, debt and cash. Ford now has $34 billion in debt on its books and $25 billion in cash, compared with GM's $8.4 billion in debt and $36 billion in cash.
But others are not so confident in GM. Schrager thinks the market will view GM as worth less than Ford because Ford is ahead in management reform and has more and better new vehicles coming in the next year.
Rattner, though, said the government put up money to save thousands of jobs at Chrysler and GM when the economy was nearing a depression. It never expected to get back the whole $50 billion it loaned to GM, he said.
He said under Whitacre, GM has good new products in the pipeline and is a far leaner and faster company.
"I'd be careful about the perfect being the enemy of the good here," he said.
From any perspective, GM was a sick company before its bankruptcy, racking up more than $86 billion in losses since 2005. It had $53 billion in debt, burdensome labor contracts and a weak lineup of cars at a time when global markets were shifting to smaller vehicles.
Since then, the company has rolled out new vehicles that have sold well, including the Chevrolet Equinox crossover and Buick LaCrosse midsize luxury sedan.
 An unidentified autoworker raises his arms as the last Toyota Corolla sedan rolls off the line at the NUMMI plant in Fremont, California, in this publicity photo taken and released to Reuters April 1, 2010. [Agencies] |
In addition, GM is now using 85 percent of its North American factories to make vehicles. That figure was only 38 percent in the first quarter of last year, when the company had shut down most of its factories to control inventory.
