GM Returns to the Stock Market: A Long Way to Reconstruction

While undergoing corporate reconstruction, American motor enterprise General Motors (GM) returned to the New York Stock Exchange and took its first step toward breaking away from the bailout.

It has merely been a year and a half since GM unlisted its stock due to bankruptcy in June 2009. However, GM will be facing many obstacles ahead. It is now the critical moment which determines whether GM can completely recover and become independent from government aid.

After GM’s bankruptcy, it has technically become “government owned” as the U.S. government holds 60 percent of its stock, and the Canadian government holds 10 percent.

This time, the GM stocks on the market are those bought by the governments during the bailout. The price started out at $33 per stock, and it rose to $35 as the trading began. Investors’ hype was the main cause of the increase in price.

GM was able to return to the stock market in such a short amount of time because it almost completely cleaned up its huge debt, and recovered its fiscal performance after carrying out big reconstruction, such as laying off its employees.

In the months between July and September, the company recorded profits in the fourth quarter as sales in emerging countries such as China are exploding, and sales in America have also recovered.

The United States government sold part of its shares and recovered around $11.8 billion. However, even though the portion of government-owned share decreased by 37 percent, the government remains the main shareholder.

The U.S. government has spent over $50 billion in order to rescue GM, and so far, it has recovered $10 billion. The government was able to retrieve a portion of the remaining $40 billion from selling its shares.

Although the government has thought of selling the remaining share to get the remaining $30 billion, it would not be feasible as it would hurt GM’s progress with reconstruction.

Still, the future is not optimistic for GM. GM still fails at lessening its dependence on sales from large vehicles such as SUVs and catching up on developing small eco-friendly vehicles. One of GM’s competitors, Nissan, is going to release LEAF, a new electric vehicle next month in Japan and America; on top of its huge selection of hybrid cars, Toyota is planning on launching the electric car it developed with America’s Tesla Motors in 2010. As the competition on eco-friendly cars is heating up, GM is soon launching its plug-in hybrid, the Chevy Volt. Since the success of this car [would] represent the rebirth of the company, people are paying close attention to its sales.

The Chinese market will become a main battlefield among all the motor makers, which will probably affect GM’s growing profits in China. How can it advance its technology and keep offering profitable vehicles to the market? GM’s real test of reconstruction has just begun.