GM pulls off landmark IPO

General Motors stock began trading on Wall Street again Thursday, signalling the rebirth of an American corporate icon that collapsed into bankruptcy and was rescued with a US$50-billion infusion from taxpayers.

The stock rose sharply in its first minutes of buying and selling, going for nearly US$36 per share - nearly US$3 more than the price GM set for the initial public offering.

The stock traded for less than a dollar when the company filed for bankruptcy last year.

Chief executive officer Dan Akerson rang the opening bell as raucous cheers went up and the sound of a Chevrolet Camaro's revving engine echoed through the room.

In the initial offering, the government reduces its ownership stake from 61 per cent to 33 per cent. The federal Treasury is unloading more than 400 million shares of the resurrected GM, which is smaller - but cleansed of most of its debt. The company is making money.

"There's a lot of work to do, but today is the beginning of the new company," said Mark Reuss, GM's North American president.

The IPO could wind up as the largest in history. GM raised the initial price to US$33 and increased the number of shares it was offering because investor demand was so high.

Counting preferred stock issued by the company, the deal's value could top US$23 billion.

The stock offering is the latest in a series of head-spinning developments over the past two years for an American corporate icon.

In September 2008, to mark its 100th birthday, the automaker celebrated in the grand three-storey atrium on the ground floor of its Detroit headquarters.

Two months later, then-CEO Rick Wagoner found himself in front of members of Congress, begging for money to keep GM alive. Four months after that, he was replaced by President Barack Obama.

By June 2009, GM had filed for bankruptcy. It emerged relieved of most of its debt but mostly owned by the government, and saddled with a damaging nickname: "Government Motors".

The value of its old stock was wiped out, along with US$27 billion in bond value.

Now GM is a publicly traded company again with the familiar stock symbol 'GM'.

Obama, on Wednesday, said GM's IPO marks a major milestone not only in the turnaround of the company, but of the US auto industry as a whole.

Most of the new stock will go to institutional investors, not to everyday investors, following a Wall Street system that rewards investment banks' big customers.

GM will set aside five per cent of its new stock for employees, retirees and car dealers to buy at the offering price.

The deadline to sign up was October 22, but the company has not revealed how many people took the offer.

Early Thursday, GM's main joint-venture partner in China, SAIC Motor Corp, said it has bought a nearly one per cent stake in GM, buying shares being offered in the IPO at a total cost of nearly US$500 million. The Shanghai-based, state-run SAIC said the share purchase is meant to enhance its cooperation with GM in China, the world's biggest auto market.

Senior Obama administration officials said Wednesday that the US Treasury Department sought to strike a balance between getting a return for taxpayers and exiting government ownership as soon as practical.

The government has agreed that it will not sell shares outside the IPO for six months after the sale. The officials, who spoke on condition of anonymity, said they would assess their options for selling the government's stake further.

In the stock offering, the US government made US$11.8 billion by selling 358 million shares at US$33 apiece.

It stands to make US$13.6 billion if bankers exercise options for up to 412 million shares, as planned. The government would still have about 500 million shares, a one-third stake.

It would have to sell those shares over the next two to three years at about US$53 a share for taxpayers to come out even.

The government's strategy in retaining shares is to wait for GM's finances to improve, pushing the stock price up even further during the next couple of years. If that happens, the government stands a chance of getting most of its money back.

GM has already paid or agreed to pay back US$9.5 billion of the bailout funds. That comes from cash and payments related to preferred stock held by the government.

Whether bankruptcy actually fixed the company remains an open question, but it is far healthier in its new form.

The company closed 14 of its 47 plants, shuttered or sold off its Hummer, Saturn, Saab and Pontiac brands, and slashed its debt from about US$46 billion to about US$8 billion.

Union retiree health-care costs are now the United Auto Workers' responsibility, and the controversial jobs programme that paid idled workers almost a full salary has been scaled back dramatically.

GM employs 209,000 people in the United States today, down from 324,000 in 2004.

Before bankruptcy, GM lost about US$4,000 per car. Now it makes about US$2,000 each.

- AP