Carmaker has much to tout, and overcome, before its IPO

By Tom Walsh; Detroit Free Press ~ Oct 31, 2010

A new and improved General Motors has much to tout -- $2.2 billion in first-half profits, strong reviews for the upcoming Chevrolet Volt, good sales in China -- as it prepares to launch a stock offering and shed some government ownership.

But GM executives also carry a ton of baggage as they set off on a road show this week to talk up the initial public offering to investor groups.

Here are key reasons why a successful IPO is no slam-dunk and what GM executives must do to convince skeptics:

•   Who's in charge, and for how long? GM is on its fourth CEO in 19 months. Rick Wagoner was ousted by the feds. Fritz Henderson was sent packing by the GM board last December. Chairman Ed Whitacre stepped aside in August as CEO and has made a couple of public gaffes talking prematurely about the IPO.

Answer: CEO Dan Akerson, 62, a relative newcomer to GM and the auto industry, must project himself as a take-charge leader, vow to stick around a while and convince skeptics that the company is grooming legitimate candidates who can be future CEOs.

•   Will the UAW behave, or will the union start agitating to recover past concessions once GM looks healthy?

Answer: GM now has a labor contract that's competitive with U.S. plants of foreign rivals. And it will use a lower-tier wage for new hires to bring more work in-country, such as a new small car planned for the Orion Township plant.

•   Can GM's numbers be trusted? The old GM had a history of overly rosy projections and had to revise its financial reports several times.

Answer: Chris Liddell, the ex-Microsoft guy GM picked as its new chief financial officer, must inspire confidence the automaker's projections are conservative and achievable. Otherwise, GM won't pass the smell test.

•   How strong is product development? Pluses include good buzz on the Volt; strong sales of Buick LaCrosse, Chevy Camaro and Equinox; and big improvement in Consumer Reports' latest reliability rankings. But former industry guru Bob Lutz is retired, current global product boss Tom Stephens is 62, and it's kind of fuzzy with non-car-guys Akerson and Liddell running GM who will provide the long-term vehicle vision.

Answer: Mark Reuss, president of GM North America, is a rising star with legitimate product chops, but he'll need help.

In summary, despite a remarkable turnaround since Chapter 11 bankruptcy, GM must sell this IPO in a skittish market to investors that have suffered through decades of disappointment by the auto industry in general, and GM stock in particular.

Patrick O'Keefe, head of O'Keefe & Associates turnaround consulting firm, frames GM's credibility challenge this way: "I think the cold reality is that Wall Street's had enough of the auto industry, and it's going to be tough for these guys to have a successful offering."

Akerson, a U.S. Naval Academy graduate and a big fan of former President Theodore Roosevelt, will need every bit of Teddy's supreme self-confidence to make this sale.

Contact Tom Walsh: 313-223-4430 or [email protected]