US stake sale of GM to revive image

PUBLISHED : Monday, 14 January, 2013, 11:25am
UPDATED : Monday, 14 January, 2013, 11:25am

The sale of the US Treasury’s stake in General Motors and a possible credit rating upgrade of the US automaker this year will help distance the company from the stigma of its 2009 bankruptcy restructuring.

“We lose the stigma of ’Government Motors’,” GM Treasurer James Davlin said on Sunday during a speech at a conference of automotive analysts. “People will be more focused on the things that they should, which is our underlying operations.”

The US Treasury outlined plans last month to sell its GM stake over the next 12 to 15 months. Last week, chief executive Dan Akerson said he expects GM to earn an investment-grade credit rating this year.

GM is already “trending toward investment grade,” Davlin said. He pointed to GM’s eleven-quarter streak of profits, its large financial cushion and its strong position in the world’s two largest automotive markets, the United States and China.

“We want to ensure we have the liquidity to make it through the cyclicality of the industry,” Davlin said, speaking to reporters and analysts ahead of the Detroit auto show.

Until recently, uncertainty over when and how the US Treasury would sell its 26-per cent stake hurt GM’s overall market value, Davlin said. But GM shares have risen nearly 20 per cent since the US government announced its exit strategy.

GM shares ended at US$30.36 per share on Friday.

Still GM has a number of challenges ahead, most prominently of which is Europe. GM is struggling to stem years of losses in the depressed and highly competitive European market where its core brands are Opel and UK-based Vauxhall.

It has made inroads in restructuring its European operations, including announcing plans to close its assembly plant in Bochum, Germany. But Akerson said he is not yet satisfied with GM’s current position.

“That’s probably my greatest concern -- how quickly can we turn that around,” Davlin said, of Europe.

He also predicted that the US dollar would rise against the Japanese yen and the euro this year. This would represent a “slight headwind” to GM, which must convert its earnings overseas into US dollars. GM is also expecting a stable US economy this year.

“We don’t see a big rebound in the economy or a return to financial doldrums,” Davlin said, of this year.