2 years after IPO, GM is piling up cash

Associated Press Modified: November 16, 2012 at 5:15 pm •  Published: November 16, 2012
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STRUGGLES:

STOCK PRICE: Shares of GM sold for $33 when the company re-entered the stock market on November 18, 2010. For a few months, everything looked good. The stock peaked in January of 2011 at almost $39. But then the bottom dropped out and the shares tumbled. In July of 2012, they hit a low of $18.72, weighed down by a slowing U.S. economy and troubles in Europe. They've recovered some since, but are still almost 30 percent below the IPO price. That means the U.S. government can't sell its 500 million shares in the company without losing billions. The government got its stake in exchange for a $49.5 billion bailout almost four years ago. But the taxpayers are still $27 billion in the hole on the investment, and GM shares would have to sell for $53 each for the government to break even.

U.S. MARKET SHARE: GM's share of the critical U.S. market has dropped to 18 percent from 22 percent since the end of 2008. That means rivals like Toyota are taking away buyers who used to drive a Chevy, Buick, Cadillac or GMC. There are more troubling signs ahead. GM's U.S. sales are up only 3.6 percent this year, far behind the 13.8 percent growth of the overall market. GM blames the slow growth on having the oldest model lineup in the market. That will soon change to the newest lineup, the company says. By the end of next year, GM will roll out 21 new or refurbished models, including a key Chevy Silverado pickup. GM, which relies on U.S. sales to turn big profits, could run into trouble if the new models don't sell.

EUROPE: GM has lost $16 billion in Europe in the past 12 years, but it's trying to resuscitate the business with cost cuts and new products. CEO Dan Akerson said this week that European operations are making progress toward profitability and he expects them to break even before taxes by the middle of this decade. Reaching that goal will be tough, though. The company expects to lose $1.5 billion to $1.8 billion in Europe before taxes this year, and analysts say it has 20- to 30-percent more factory capacity in the region than it needs. Closing more plants will require drawn-out negotiations and expensive buyouts of union workers.

QUESTIONS AHEAD:

LEADERSHIP: Akerson became CEO in September of 2010, GM's fourth leader in two years. He took the reins as the company's recovery from bankruptcy was hitting its stride. The board hoped his background in private equity would give him a fresh perspective and allow him to shake up the slow-moving company. Despite streamlining decision-making, many in the company view him unwilling to listen. He recently removed the heads of sales, marketing, and Europe, which some critics viewed as too much change too fast. Akerson has pushed to bring products to market faster, but has hit resistance from engineers who fear that quality could suffer. Finally, he has bred resentment among employees by complaining that GM's culture is risk-averse and slow. "If I'm told the culture I've been brought up in is bad, then it's almost like a personal insult," said Michel Anteby, a Harvard Business School professor who studies organizational behavior. Anteby says it takes longer than two years to change a company the size of GM.

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