Strong Demand for GM Pushes Stock Price Up
GM unveiled its new Camaro at the Los Angeles auto show Wednesday. On Thursday, it will unveil its new stock on Wall Street, reports CBS News senior business correspondent Anthony Mason.
GM will be selling more than half a billion shares at an initial price of $33. That's expected to bring in as much as $23 billion - a record for an initial public offering.
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"GM is absolutely a healthy company," said Steve Rattner, the former head of the Obama administration's auto task force and the author of "Overhaul."
"GM is doing exceptionally well. The entire auto sector is doing exceptionally well," Rattner said.
It has been a stunning turnaround for a company that just 20 months ago was saved by a controversial government takeover.
"Just last week Car and Driver named me auto executive of the year," President Obama had joked.
The government forced GM into bankruptcy and a restructuring that cut half of GM's brands and its workforce by nearly a quarter. The stock sale will cut the government's stake in GM by more than half, from more than 60 percent to less than 30 percent. The rest of its shares will be sold off over time. The government will need to sell at an average price of about $44 to break even - which Rattner thinks is a possibility.
Auto sales have begun to rebound. Ford CEO Alan Mulally is leading his company to record profits.
"We have tremendous pent-up demand," Mulally said. The average age of a vehicle in the United States is over 10 years now because people have been delaying this decision for all of the obvious reasons."
"Historically, America's spent about 4 percent of GDP on automobile purchases. Right now that number is about 2.3 percent," said industry analyst John Casesa. "These companies will make a tremendous amount of money as sales rebound. Their costs are low."
In all, taxpayers have invested $82 billion to save the auto industry.
"I now believe - and this is a more optimistic view than I've had before - I believe the government will get back all but $5 or $6 or $7 billion of that, which is an extraordinary success for the government in fixing this critical industry," Rattner said.
GM, which has already earned more than $4 billion this year is on course for its profitable year since 2004.
