Posted By thestatedtruth.com on August 12, 2010

GM having a profit has much more to do with GM’s debt being reduced and restructured then about GM’s rising sales.   It’s much like a homeowners budget, to much debt, and there is nothing left for other things.  Once the debt becomes more manageable, there will be more money left over at the end, even if the paycheck is smaller.

General Motors Co., the automaker 61 percent owned by the U.S., is seeking to raise $12 billion to $16 billion in an initial public offering, said a person familiar with the plan.

GM’s $50 billion taxpayer bailout in the wake of its bankruptcy in June 2009 is what has set up this IPO.  Once the debt of the company was restructured or eliminated, then sales are meaningful in ways more then just paying the unions enormous benifits for not working or early retirements. 

Now that the debt level of GM is under control, GM can show more money to the bottom line.  Sales don’t  have to increase at a high growth rate for this to happen,  in fact car sales vloume wise are still down substancialy from just 3 or 4 years ago. It’s much like a homeowners budget, to much debt, and there is nothing left for other things.  Once the debt becomes more managable, there will be more money left over at the end.

The company reported $1.07 billion in first-quarter profit in May, compared with a $5.98 billion loss a year earlier.

Most of the shares offered would come from the U.S. Treasury, the person said. The aim is to sell a fifth of the government’s 304 million shares, two people familiar with the plan said in June. That would reduce the Treasury’s holdings to less than 50 percent.

“GM needs to be very careful about when to conduct the IPO,” said Yuuki Sakurai, chief executive officer of Fukoku Capital Management in Tokyo. “Can they convince investors to buy shares when spending is dropping in the U.S. and they don’t have leading-edge environmental technology?”

Categories: Commentary, Economy, National News, Wall Street
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