News Column

GM Stock Is a Long-term Investment, CEO Tells Shareholders

June 8, 2011

Chrissie Thompson

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General Motors CEO Dan Akerson said stockholders should view the company as a longer-term investment, as its shares traded this week at its lowest levels since GM's return to the stock market last year.

"No one said this was going to be a layup. There's a lot of work to be done," Akerson told reporters ahead of the automaker's first stockholder meeting in Detroit since 1990. "I own stocks for a long period of time when I believe in their management. ... I don't think these get-rich schemes of buying an IPO company is the best way to invest."

This month marked the two-year anniversary of GM's entry into government-funded bankruptcy. The company emerged 40 days later and today held its first public shareholder meeting. About 60 shareholders gathered in the Fisher Building in Detroit.

Akerson told shareholders GM plans to leverage its Chevrolet and Cadillac brands globally and use the rest of its brands as regional offerings. The automaker wants to add international production of Cadillacs by some time next year, he said. (GM already builds one China-only Cadillac, the SLS sedan, in that country.)

GM also plans to exercise its option to regain a 50 percent share in its Chinese joint venture Shanghai-GM, Akerson said. The automaker sold 1 percent of its stake to China's SAIC one and a half years ago, leaving GM with 49 percent and SAIC with 51 percent. And the automaker wants to have a fully funded pension fund during Akerson's tenure, which he has said will last three to five years.

Akerson is leading a post-bankruptcy GM that is smaller, quicker and profitable. After $82 billion in losses in the four years before its bankruptcy, GM turned a $4.7 billion profit last year and made $3.2 billion in the first three months of 2011.

Akerson touted GM's ability to make money in North America in slow sales years and the first-place market share it and its joint ventures hold in fast-growing Brazil, Russia, India and China -- collectively called the BRIC countries.

But the company faces several challenges. National labor talks with the UAW are this year; the automaker just posted its second-straight monthly sales loss in China, its largest market; and GM's stock price stagnation has delayed the U.S. Treasury's sale of its shares.

The new GM's common stock debuted at $33 a share and rose until it routinely closed above $38 in January. But then the stock price started to slide, as investors worried about rising oil and commodity prices.

Subsequent quarterly profits were disappointing to analysts. Their complaints focused on North America and its high costs and incentives. GM has promised to keep incentives around or below industry average for the rest of the year. But neither that promise, nor a few one-time balance sheet cleanups, nor Akerson's purchase last month of 30,000 shares has boosted the shares higher.

The U.S. government cut its GM stake in half during the November initial public offering and now owns 26 percent of GM. To break even on its $49.5 billion investment in the automaker, the government must sell the rest of its shares at about $53 each. The U.S. Treasury is expected to wait until it can price its remaining stock at least above the initial offering. Akerson told reporters he thinks the government will review whether to sell its shares after GM releases its second-quarter results this summer.

The anticipation of those new shares on the market has held down GM's stock price. Still, analysts continue to say the stock is undervalued, along with other auto stocks. Of the 19 analysts reporting to Bloomberg in the past year, 14 list GM as a "buy."

Today's shareholder meeting marked the end of voting for three board-driven proposals: re-election of the current board members, approval of Deloitte & Touche as GM's independent accounting firm and recommendation of executive pay.

Preliminary voting indicated all three passed overwhelmingly.

Stockholders who voiced concerns at the meeting focused on competition from Chinese automakers and ways to get customers and employees to think differently about post-bankruptcy GM.

The Rev. Jesse Jackson suggested Akerson hold town meetings in the top 10 U.S. markets among people of color to ask what urbanites and minorities are looking for in a car. He said he doesn't think GM is effectively marketing to those buyers.

"There's more in the car than the ride, and I don't think that story is told very well," Jackson said.

Contact Chrissie Thompson: 313-222-8784 or cthompson@freepress.com



Source: Copyright (c) 2011, Detroit Free Press


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