Saturday, March 19, 2011

GM: Watching a Success Story Unfold

The once stellar Blue Chip company, which had all but fallen off a cliff, was rescued days before it threatened to shut its doors for good. Against all odds, and with the involuntary support of the taxpayers (bailout Funds) GM went into structured bankruptcy like a battered lamb, and emerged like a lion. Eighteen months ago, there were more than enough economists, auto industry analysts and political figures arguing against bailing out the big three auto makers. The American people had also had their fill of Bailouts, especially as increasing numbers feared being laid off.
Keeping hope alive, GM pressed on.
The IPO issued November of last year, brought in over $20.1 billion, with an additional $2 billion raised in the days following the historic offering. GM’s offering goes down as the biggest Initial Public offering Ever. There were several objectives at play here; to capitalize the new firm to get back on its feet, pay off creditors, pay back most (if not all) of the Government bailout funds, and revitalize their brand. The company’s market valuation was estimated to settle somewhere in the range of $50-70 billion after the much anticipated IPO. However, in reality analysts estimated that the company needed to yield a total valuation closer to $70 billion if the government was going to break-even on the bailout funds.
Although GM’s marketing campaign was well received in the weeks leading up to the sale, the IPO did not stand up to the hype and expectations. Ultimately, the valuation landed on the bottom range of the estimate at $50 billion, with a share price of $33 per share. Still, considering the size of the IPO, it was a huge success.

As the sales numbers continue to climb a success story begins to take shape. Reuters reported that last month marked a 49% jump in auto sales for GM, as a clear affirmation that their business strategy is working. Further, the 102-year old corporation posted four consecutive profitable quarters, which yielded a net income of 4.7 billion for the calendar year, with gross revenues of $135.6 billion in its first full-year of operations. Well done GM, well Done.

So far, it would appear that GM has taken lemons and set up a lemonade stand. It is exciting to watch the GM comeback success story unfold.

Interesting Article concerning GM's Move to Cut unnecessary spending amid Japan Disaster, Click Here

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