Showpiece for Obama govt: $20.1-bn GM IPO | business | Hindustan Times
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Showpiece for Obama govt: $20.1-bn GM IPO

business Updated: Nov 18, 2010 22:25 IST
Yashwant Raj

Troubled but iconic US automaker General Motors on Wednesday pulled off the biggest IPO in the country's history, handing President Barack Obama his first piece of good news after the congressional shellacking.

GM, which sells the Chevrolet Spark, Aveo, Magnum and Cruze cars in India, raised $20.1 billion at $33 a share riding strong investor demand. This could well become US economic recovery's showpiece.

The scrip will be listed on the exchanges for trading on Thursday.

And that would mark a long journey over a very short period for the auto giant, from the time it nearly went under because of the credit crisis brought on by the recession - but for government funding.

General Motors became one of 938 US companies to receive bailout money from the government to survive, totalling close to $700 billion yet. It got $ 7 billion as direct loans, returned by April 2010, and $ 43 billion as equity investment.

With Wednesday's IPO, the government's stake in General Motors shrinks from 60.8% to 36.9%, and even less if the underwriters exercise their over-allotment option to the maximum.

"Supporting the American auto industry required tough decisions and shared sacrifices," said Obama, adding, "but it helped save jobs, rescue an industry at the heart of America's manufacturing sector."

The sacrifices might have included some by Obama himself. The bailouts became a major sore point with the ultra-conservative Tea Party movement, which helped mother ship Republican Party crush the Democrats in the recent congressional elections.

"GM's initial public offering is an important step in the turnaround of the company and for our work to recover taxpayer dollars and exit this investment as soon as practicable," treasury secretary Tim Geithner said.

The bailout saved the company from liquidation. The first tranche of $19 billion came during the Bush administration and the remaining in Obama's watch.

GM's IPO was one of the most eagerly awaited event of recent days, with general speculation of a good showing. But what has happened has surpassed all expectations.

Time for Thanksgiving?