GM was not exactly boastful yesterday as it disclosed its third quarter financial results. But it was quite keen that everyone should know that it is back in profit as a group…though not in Europe.
The relaunch of GM on the equity markets occurs next week. GM is going to release new shares – possibly as much as US$13bn-worth, which will allow the US Treasury to redeem some of its US$50bn holding.
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Buyers will be largely the same institutions who held them before the shares shrivelled to negative value.
Boasting and exaggeration was off the agenda for yesterday’s modest webcast results announcement. It was all scripted and no questions were permitted. In the period immediately before a share issue, every dot and comma of every public pronouncement has to be compared, contrasted and approved to ensure that no one prospective share purchaser gets an unfair information advantage over another.
GM’s rebirth is being described as an IPO – an Initial Public Offering (the term more usually deployed for a company listing for the first time in its life). It really needs a descriptor of its own which should be something like a SAIPO – a Second Attempt Initial Public Offering.
Scripted announcements seem to suit Dan Akerson, the chief executive, who was borrowed from the telecoms industry to ring the changes at GM. Flamboyance does not have a place in the man’s nature.
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By GlobalDataThe only moment at which he appeared to be getting excited was when he disclosed that GM’s objective was to… “design, build and sell the world’s best vehicles.” That’s actually a tad harder to do than say. And if a man in a black mac were to offer me a sheaf of brand new GM share certificates on a street corner any time soon, he would get a very dusty answer.
Never mind the improved financials; they have been quite easy to achieve with much lower debt repayments, much lower wage costs, net favourable foreign exchange and red hot demand for (two million) GM cars in China. But in contrast to Ford, GM still has no convincing product strategy. Ford has side-stepped the innately unsatisfactory US manufacturing costs by creating ‘One Ford’ and making sure that the same models will be built and sold all over the world.
GM is congratulating itself on having dropped four brands of the eight it had a year ago. How long had that meaningless vanity been allowed to continue? And how long has everyone but GM known that cosmetic variety was a doomed approach?
GM is market leader in the US. It should be the most profitable player there. GM was the first to build an empire in China (now a 14% market share) and should be converting first mover advantage into supernormal profit.
But the real failure is the Opel-Vauxhall business in Europe, by far the most sophisticated and competitive car market in the world. GM lost money at the rate of GM$1.3bn in the first three quarters on sales of US$17bn. That’s what needs fixing. But if a solution is visible to Mr Akerson he is not telling us what it might be.
Prospective shareholders really ought to know.
The new shares are due to be priced next Wednesday and trade the following day.
Rob Golding
See also: US: GM books US$2bn Q3 profit, forecasts positive year-end result
