General Motors' sale of stock on Thursday is poised to be one of the largest initial public offerings in U.S. history.
For most companies that would be cause for celebration. But when the shares start trading on the New York and Toronto stock exchanges, it will be a bittersweet occasion for those with the closest ties to the company.
GM's nearly 700,000 retirees, active workers and dealers will get the first chance to buy the new stock. But many in those groups are showing the least enthusiasm for the new GM.
So far this year, GM is profitable. Part of the reason is that GM shed its most burdensome debt and obligations in bankruptcy.
Improvements Over The Short Term
Sean McAlinden of the Center for Automotive Research says the restructured GM has shown it's a much better company during the past nine months. "In terms of improving vehicle price, reducing labor cost [and] running their plants efficiently -- that's remarkable progress, and of course that's the progress they want to show before they sell their common stock," he says.
McAlinden says despite the good news, there's a question any investor has to ask of the new GM: "By the way, the last set of shareholders and bondholders you had, you totally screwed them. So, why should I trust you now on nine months' worth of results?"
Those results come after wage concessions and benefits cuts for employees and retirees. Those employees and retirees, along with dealers, have the right to buy up to 800 shares of the new company at the initial price. But for many it's a tough sell.
Skeptical Retirees
Doug Hanscom is one of many retirees who are afraid of taking any more risk with GM. He got his start 32 years ago at a GM ball-bearing plant in Connecticut. Hanscom calls himself a "GM gypsy" because he worked in four states in four plants. He saw each one close. Hanscom says he doesn't believe GM is a truly restructured company.
"They hold my pension," he says. "And I would like them to be viable and make a profit. But I just don't trust the leadership. ... I'm keeping my fingers crossed that everything works out, but I'm not gonna buy their stock."
Retirees Looking To Invest
Many other retirees are definitely leaning toward buying, including John Christie, the president of the GM Retirees Association. He spent 36 years on the job and says he and other retirees are willing to invest in the new GM in the hope they can get back some money they've lost on the nearly worthless old GM stock.
Other car stocks have rallied in recent weeks. And potential investments in GM from China and sovereign wealth funds could help drive up GM's stock price.
David Kotok, the chief investment officer for Cumberland Advisors, says big Wall Street firms and foreign governments can afford to bet on GM stock.
"There are those who think it may be an opportunity and they would speculate," he says. "And there are those who wonder whether or not the auto recovery can have enough robust activity to make the auto industry a long-term successful venture."
But he warns GM retirees, current workers and average investors to remain cautious.
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