The chairman actually works for the taxpayers, who need results to have their loans paid back.
General Motors Company plans to release its third quarter 2009 preliminary results on Monday morning, November 16, 2009.
The newly restructured company has not published financial results since it entered the bankruptcy process earlier this year in May. The results will cover the period from July 10, when it emerged from bankruptcy, through September 30 of this year.
In its bankruptcy filing, GM said it lost $88 billion between the end 2004 and the first quarter of this year. Analysts expect the company to again lose money but are uncertain as to the amount.
The company also will release figures starting in January 2009 and ending July 9 for the old General Motors Corporation, which remains in bankruptcy and is being liquidated.
The privately held company will not provide numbers that adhere to generally accepted accounting principles as required by the Securities and Exchange Commission for publicly held U.S. firms.
Results!
Still, revenue, cost and cash flow numbers would be indicators of its actual health. The results are needed to gauge the effectiveness of the reorganization imposed on it by the U.S. Treasury Department, and to assess the likelihood that U.S. and Canadian taxpayers will be paid back, some if not all of, the $50 billion in loans advanced via their ownership stake of 61% of the company.
GM’s business results and their trend, as well as the size of the global markets are all key to the pricing — and crucially, the acceptance — of an impending public stock offering of GM Company, which could come as soon as next year. It is through the eventual sale of the stock that will determine if or how much taxpayers will be paid back.
CEO Fritz Henderson maintains that the loans will be repaid in full. In a speech earlier this week at Texas Lutheran University, Ed Whitacre, GM’s new chairman, said that payments on the loans could begin “before the end of this year.”
Chrysler has already paid back almost $4 billion of the $14 billion received in Troubled Asset Relief Program (TARP) funding.
A report by the Congressional Oversight Panel released in September claims that taxpayers are not going to recover anywhere near the money they have invested in automakers and their subsidiaries.
The Panel, which was investigating the U.S. Treasury Department’s TARP, criticizes Treasury’s ongoing lack of transparency about what remain wildly unpopular auto bailouts.
The report analysizes how tens of billions of taxpayer dollars have been used to support Chrysler, General Motors, and GMAC and parts makers.
In protecting the interests of taxpayers, the Panel found that Treasury “negotiated aggressively with all the players,” and now holds a combination of debt and equity in the reorganized Chrysler Group, General Motors Company and GMAC.
In GM’s case, U.S. taxpayers have lent $50 billion of TARP funds in conjunction with its bankruptcy and the subsequent creation of General Motors Company.
Total TARP net support for the U.S. domestic automotive industry is slightly over $81 billion as of September 9, 2009.
The problem comes when trying to figure out how much of this will be paid back.
Earlier Congressional Budget Office estimates said that between 65% and 75% of the money was lost. Recovery of the loans to the automotive industry would be dependent upon the value of the stock that Treasury holds (or subsequently receives) in the two companies when they are able to go public.
Therefore, the prospects for recovery of the TARP investments depend on the forecast for Chrysler and GM stock appreciation, which is something that cannot be predicted.
However, in discussions with the Panel, Treasury agreed with the Panel’s assessment that the new companies’ stock prices will have to appreciate sharply for taxpayers to be fully repaid.
The value of General Motors Company used by the bankruptcy court estimated that the market capitalization (the price of all outstanding shares) of the new entity would be worth between $59 and $77 billion in 2012. Treasury has invested a combined $49.5 billion in the New and Old GM and hold on paper approximately 61% of equity in General Motors Company.
Assuming full repayment of an $8.8 billion note and preferred stock issued by the new GM Company to Treasury, the shares in General Motors Company will have to be worth $40.7 billion (the difference between $49.5 billion and $8.8 billion) for Treasury’s investment to be repaid when Treasury sells its shares
This means the market capitalization of the entire company needs to be worth $67.7 billion. In April 2008, when Old GM shares were at the height of their value (not adjusted for inflation), the company’s total value was only $57.2 billion.
Therefore, General Motors Company will have to achieve a market capitalization that is higher than was ever achieved by Old GM – if taxpayers are to break even.