GM IPO Today - Sell the News

I hope Turbo Timmy sold at the opening pop... The market maker for the IPO today is Getco, a Chicago-based high-frequency trading giant.

The lead underwriters for the IPO, who are set to collect millions of dollars, are J.P.Morgan Chase, Morgan Stanley, Bank of America Merrill Lynch, and Citigroup. There are 35 underwriters for this IPO, after UBS got dropped.

Their work is done now, having managed a pop above the IPO price. Nothing new here, move along...




And the supposed architect of this amazing turnaround 'narrative', Steven Rattner, is being charged with bribery by NY Attorney General Andrew Cuomo, who also wants to ban Rattner from the securities industry for life. But no one gets punished as long as they are the ruling elite or well connected to the ruling elite. Rattner will probably proclaim that he will fight this unjust allegations, and quietly settle with a few million dollars.

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China's SAIC Motor to Be GM IPO Investor

After the US taxpayers were made to pay to "save" GM and "save US auto jobs" (which by the way Prez Obama admitted would be gone forever), US Government Motors is likely to sell equity to its Chinese-government-owned partner, SAIC Motor Corp, in the upcoming IPO.

Reuters reports:

Nov 10 (Reuters) - General Motors Co [GM.UL] is in the final stage of talks to sell equity to long-time Chinese partner SAIC Motor Corp (600104.SS) in conjunction with its landmark initial public offering, two people familiar with the matter said.

The two government-funded automakers are currently finalizing how much of a stake SAIC would buy in the top U.S. automaker after discussions involving technology sharing and SAIC's ambitions to move beyond the China market, the sources said.

On the side note, guess who's been suddenly popping up in the financial news media: ex-Car Czar and Wall Street hedge fund manager Steven Rattner. Mr. Rat is back, to shine the light upon his fine leadership in turning around GM on the eve of the IPO, no doubt.

Chutzpah. These people cannot help themselves.

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Cash for Clunkers: Taxpayers Cost Was $24,000 Per Car

according to Edmunds.com. The administration ridicules.

Well, my vote is for Edmunds.com.

Clunkers: Taxpayers paid $24,000 per car
( Peter Valdes-Dapena, 10/29/09 CNN)

"NEW YORK (CNNMoney.com) -- A total of 690,000 new vehicles were sold under the Cash for Clunkers program last summer, but only 125,000 of those were vehicles that would not have been sold anyway, according to an analysis released Wednesday by the automotive Web site Edmunds.com.

"Still, auto sales contributed heavily to the economy's expansion in the third quarter, adding 1.7 percentage points to the nation's gross domestic product growth.

"The Cash for Clunkers program gave car buyers rebates of up to $4,500 if they traded in less fuel-efficient vehicles for new vehicles that met certain fuel economy requirements. A total of $3 billion was allotted for those rebates.

"The average rebate was $4,000. But the overwhelming majority of sales would have taken place anyway at some time in the last half of 2009, according to Edmunds.com. That means the government ended up spending about $24,000 each for those 125,000 additional vehicle sales."

The administration tries to paint it as if Edmunds.com is a "naysayer" (a new dirty word these days for this administration):

""It is unfortunate that Edmunds.com has had nothing but negative things to say about a wildly successful program that sold nearly 250,000 cars in its first four days alone," said Bill Adams, spokesman for the Department of Transportation. "There can be no doubt that CARS drummed up more business for car dealers at a time when they needed help the most."" [emphasis is mine]

I thought the cash for clunkers program was all about "fuel efficiency" and "environment". (At least it was sold as such.) So now they are openly saying it was to prop up car dealers. And remember this cash for clunkers program was announced right after a boatload of GM and Chrysler dealers got axed under allegations that the dealers who donated to Republican party were targeted.

(That actually reminded me of Bear Stearns under severe liquidity crisis being forced to sell itself to J.P. Morgan Chase for $2, only to have the Federal Reserve open the discount window to investment banks after the fire sale was official. Nice job, Tim [Geithner].)

Anecdotal evidence suggests that the dealers marked up the cars eligible for the rebate, sometimes even higher than MSRP, then they gave a token discount if at all.

So who got the short end? Taxpayers who had the honor to fund the program to the tune of $24000 per car. But if you take a look at this chart from St. Louis Fed, you'll see it's Edmunds.com who is right. The vehicle purchase collapsed back after the program. All it did was to bring forward the demand that existed anyway without the program.




Auto sales heavily aided by the cash for clunkers program contributed 1.66% to the total GDP growth of 3.5% for the 3rd Quarter. If you subtract this 1.66% and other government spending from the 3rd Quarter GDP, it would have been flat at best.

I personally would have liked to see the GDP flat to ever so slightly positive without the government intervention that distorted the picture so much to render it worthless.

The CNN link above also contains a video interview of ex-Car Czar Steve Rattner, of Quadrangle fame. (What an insult it must have been for Rick Wagoner to be fired by a person like this.)

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Rattner Leaves Auto Task Force

So, after bankrupting the two of the three U.S. auto makers, bankrupting part of their dealerships and subcontractors and suppliers, and selling off the best assets of the companies to foreign entities on the cheap, the investment banker leaves the post of the Car Czar. His boss, the President, now says "some" of the auto jobs will never return. (What was the point of using the taxpayers' money on these companies? The last I remember is the babble about "saving jobs". Ha!)

Rattner Departs as Head of U.S. Panel Overseeing GM, Chrysler (7/14/09 Bloomberg)

"Steven Rattner stepped down as head of the U.S. panel that forced General Motors Co. and Chrysler Group LLC into bankruptcy, signaling the government was easing into a new role as a passive investor in the automakers.

"His departure leaves Ron Bloom, a former union adviser and Lazard Ltd. vice president, to oversee remaining Obama administration carmaker decisions, including when to sell stakes in the two companies it bailed out with more than $75 billion in taxpayer money.

"“The administration definitely wants the perception to be out there that they’re not going to have their fingerprints in every decision,” said Clint Currie, an analyst with Concept Capital’s Washington Research Group."

Now, do you see the key word in this statement? It is "perception"; as long as the administration is "perceived" as not making every decision. It's more like some ad campaign for branded goods. Perception to make you feel good.

"“Job one for Ron Bloom is to get the government out of these equity positions in GM and Chrysler, preferably before the next election,” said auto analyst Michael Robinet of CSM Worldwide, a Northville, Michigan, consulting firm that did research for the task force. “The American public does not want to be long term owners of car companies.”"

I hope Mr. Robinet is talking about the mid-term election. The American public didn't want to be short-term owners of car companies either, but did they have a choice?

The article says Mr. Rattner has no plans to go back to his firm Quadrangle, which has been investigated by New York Attorney General for New York public pension bribery scandal.

One banker leaves (Rattner, Quadrangle), another banker steps in, albeit with a labor slant (Bloom, Lazard). Change we can believe in. (As if all we need to do is close our eyes and believe - oh look, I do see some green shoots...)

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GM Out Of Bankruptcy in 40 Days

It took only 40 days, 2 days less than it took for Chrysler. Now the government-owned (61%) General Motors can "compete" with the likes of Toyota and Honda on alternative energy cars - Toyota's Prius sells for just above $20,000, new GM's Volt will probably sell above $40,000. (Who in the rational mind would pick the latter, unless at a gun point - Oh I see, that's why the U.S. keeps military bases all around the world.)

GM Out Of Bankruptcy (7/10/09 Business Insider)

By the way, the rumor that GM will change the color of its logo from blue to green is probably false. For now at least. (Remember it was impossible for GM or Chrysler to go into bankruptcy, until they did. Fannie Mae and Freddie Mac were sound, until suddenly they weren't.)

I still want to know what happened to the GM's secured bond holders, and what happened to the holders of CDS on GM's debt (here's a notable one).

Now that both Chrysler and GM are "successfully" out of bankruptcy, will the Presidential Auto Task Force disband? Or will it transformed into a politburo-like governmental committee to manage the companies? Will Mr. Steve Rattner the Car Czar descend on GM as CEO, as the reward for his "hard" work?

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Mr. Steve Rattner and Chrysler

Mr. Steve Rattner of Quadrangle Group, a private investment firm which is currently investigated by New York Attorney General for the public pension scandal, heads the government auto task force, advising Geithner and Summers. He recently made news when his forceful words to the hedge fund who refused to accept the government's offer on the Chrysler debt they owned was reported in the press.

What I find more amusing though, is that Mr. Rattner, whose investment firm defaulted on its debt to Cerberus, soon-to-be-wiped-out owner of Chrysler, is advising the top government officials on Chrysler restructuring. Not that Cerberus is an angel, but it must be raising blood pressure there, having to deal with Mr. Rattner.

Mr. Rattner was also the one who told GM's Wagoner to take a walk.

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