Is The New General Motors Really New?

By Eric Fox | August 19, 2010 AAA

General Motors has filed its long awaited public offering, and will sell common and preferred stock to the public, as the company attempts a second chance at life. Although the company is in much better financial condition, the bigger question is the company's product lineup for consumers for the next few years.
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The Shareholders
General Motors filed for bankruptcy in 2009, and was bailed out by the government, which ended up owning a major part of the company. The four largest shareholders of General Motors prior to the offerings are:

  • U.S Treasury - 60.8%
  • United Auto Workers Retiree Medical Trust - 19.9%
  • Canadian Government - 11.7%
  • Motors Liquidation Company - 23.9%

Motors Liquidation Company is the name for the old General Motors entity. Also, the numbers don't round to 100% because the total assumes the full exercise of warrants by several of the shareholders on the list.

General Motors is issuing common and preferred stock in a concurrent offering. The company will receive no proceeds of either offering because selling shareholders, including the U.S. Treasury, are offering its shares to the public.

The Company
The new General Motors is but a shadow of its old self. In 2009, the company sold 7.5 million vehicles worldwide, giving the company an 11.6% share of total global sales.

General Motors has reduced its cost structure through the painful bankruptcy process, and estimates that 43% of its vehicles are manufactured in areas with labor costs that average $15 per hour.

Balance Sheet
The new General Motors has $31.5 billion in cash, cash equivalents and marketable securities on its balance sheet as of 6/30/2010.

This compares favorably to Ford Motor (NYSE:F), the company's main domestic competitor. Ford Motor reported cash, cash equivalents and marketable securities of close to $40 billion as of 6/30/2010.

This cash balance even rivals some high growth technology companies like Microsoft (NYES:MSFT) and Apple Computer (NYSE:AAPL), which ended the second quarter of 2010 with cash, cash equivalents and short term marketable securities of $36.7 billion and $24.2 billion, respectively.

Total balance sheet debt for General Motors stands at $8.2 billion, which is a large reduction from what the company owed prior to bankruptcy. The company boasts in its prospectus that the company's debt levels fell by $92.7 billion relative to the old General Motors.

The Bottom Line
The new General Motors appears to be much different than its predecessor with a lower cost structure and free of most of the huge debt load carried prior to bankruptcy. The company must now produce the type of vehicles that buyers want at a price that they can afford. (For related reading, take a look at The Murky Waters Of The IPO Market.)

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