The news out of Government/General Motors during the past couple of days hasn't been particularly good.
First, August sales results were disappointing. Second, it become known today that GM will attempt to go public on November 18, a later than originally hoped post-election date chosen to hopefully allow for another reported quarterly profit to boost investors' appetite for its shares.
As so often has been the case during Democratic administrations when unfavorable developments arise, the UK press has seen potential problems with the IPO, while the Associated Press has been acting as if all is well.
In two separate items, AP reporters couldn't even bring themselves to tell readers what the company's real August sales decline was.
In a report yesterday on the industry's awful August, reporters Dee-Ann Durbin and Tom Krisher were appropriately gloomy overall, but they massaged GM's reported result (bolds are mine throughout this post):
Americans nervous about the drumbeat of bad economic news stayed away from auto showrooms. Automakers nervous about their bottom lines didn't offer deals to lure them in.
As a result, it was the worst August for U.S. auto sales since 1983, when the country was at the end of a double-dip recession. General Motors, Toyota, Honda and Ford all reported declines from the month before and from a year earlier.
The bleak results were a reminder that, for all the good news about the turnaround of the Detroit automakers, the market for cars and trucks in the United States remains frail. Initial data showed sales came in at about 997,000, down 5 percent from July, according to AutoData Corp.
"Coming in below a million units is eye-opening for August," said Paul Ballew, a former chief economist for GM. "I never thought I'd see that. That's a tepid month for August, which is supposed to be one of the top months of the year."
... "We know it's going to be a modest recovery. It's going to be bumpy," said Don Johnson, GM's vice president of U.S. sales. "What we don't want to do is get back to putting incentives in the marketplace to keep the plants running."
... Overall, sales at Ford were down 5 percent from July and 11 percent from last August. At GM, sales of its four remaining brands were down 7 percent from a month ago and 11 percent from a year ago.
For the year so far, sales are up 5 percent at GM, which is preparing for an initial public offering of its stock that could come as early as next month.
We learned today that the "next month" part concerning the IPO isn't going to happen. In her report today, Durbin's massage was more thorough:
Analyst: GM plans to sell shares on Nov. 18
General Motors plans to start trading shares again on Nov. 18, timing that allows the company one more quarter of earnings to build its case to investors, a firm that researches initial public offerings said Thursday.
Scott Sweet, the managing partner of IPO Boutique, said GM plans to price the shares on Nov. 17 and begin selling them the next day. He said the automaker wants to start a two-week a road show to drum up investor interest on Nov. 3, the day after the midterm congressional elections.
It's unclear if the IPO dates have been finalized. Two people with knowledge of the process say the automaker's board hasn't approved a date for the IPO but is expected to meet next week to discuss the issue. GM is in a "quiet period" before an IPO, so no one is authorized to discuss the process publicly.
... Sweet said his information comes from multiple people on Wall Street but declined to name them. He says the company hasn't yet established a price for the shares, but hopes to raise $15 to $20 billion with the initial public offering.
The timing could disappoint some Democrats who supported the government's $50 billion bailout of GM last year and wanted to point to a successful IPO before the elections.
... But one more quarter of earnings could help the automaker establish that it is healthy and capable of making sustained profits. GM earned $2.2 billion in the first half of 2010 despite depressed U.S. auto sales, but it lost $3.4 billion in the fourth quarter of last year.
GM also hopes the U.S. auto market sees some modest improvement this fall. On Wednesday it said its U.S. sales fell 5 percent from July and 11 percent from last August, when they were boosted by the Cash for Clunkers program.
The fact is, as seen in this Wall Street Journal compilation, that GM's August 2010 sales were 24.5% lower than August 2009. For Dee-Ann Durbin's and Tom Krisher's benefit, that's the result you get when you go to the WSJ link and compare the 185,105 vehicles sold in August 2010 to the 245,066 sold in 2009, and divide the difference (59,961) by 245,066. Yes, according to the company, sales of the company's four remaining brands were down "only" 11% from a year ago. But it's your job to report the full story, not merely to parrot the company's press release.
The folks at the Financial Times understand that, and also see how a company reporting declining sales in its largest market might encounter a bit of difficulty foisting its shares on the investing public. Reporter Bernard Simon also managed to find space for the actual year-over-year sales decline in yesterday's coverage (link requires free registration):
GM Sales Dip Casts Shadow Over IPO
General Motors’ sales in its core US market sagged in August, potentially complicating its bid to drum up investor support for its forthcoming public share issue.
Sales were a quarter lower than in August 2009, when demand was bolstered by the Obama administration’s cash-for-clunkers scrappage incentives. GM has also eliminated four brands since then.
More worrying, however, was a 7.2 per cent decline from July. Low-margin sales to car rental operators and other fleet owners climbed to 28 per cent of the total, from 25 per cent in July. “August was definitely what we call ‘one of those months’,” said Don Johnson, GM’s head of US sales operations.
Mr Johnson said that consumers remained cautious amid an unexpectedly slow revival in employment. In the longer term, however, he forecast that there was “pent-up demand building” that would “eventually be released when the economy gets a firmer footing”.
... GM filed a bulky draft prospectus for an initial public offering with US and Canadian regulators last month. The US and Canadian governments hold 72 per cent of GM’s equity.
The document warns that in spite of a pick-up in demand since late last year, “many of the economic and market conditions that drove the [earlier] drop in vehicle sales, including declines in real estate and equity values, increases in unemployment, tightened credit markets, depressed consumer confidence and weak housing markets, continue to impact sales”.
If the recent revival falters, the prospectus warns, “our results of operations and financial condition will be materially adversely affected”.
It's hard to fault Mr. Johnson for his optimism, but if he thinks the revival in employment has been "unexpectedly slow," he's been reading too many happy-talk missives from Team Obama.
Durbin at the AP and an unbylined Reuters article both report that GM will conduct its IPO "road show" during the two weeks after the November elections. Reuters says that "The final value of the IPO has not been set but one source said early plans for the IPO envisioned selling $12 billion to $16 billion in common stock and $3 billion to $4 billion in preferred stock that would convert to common stock under a mandatory provision." That's $15-$20 billion of the $50 billion (really more) the government "invested" in return for a 61% stake during the company's emergence from bankruptcy. Even if the IPO flies, it will still be Government Motors.
Both Reuters and the New York Times correctly noted GMs 25% year-over-year August sale decline. Since AP couldn't bring itself to do so, the graphic at the top right of this post, which may have seemed a bit over-the-top when it appeared a few weeks ago, is more appropriate than ever.
Cross-posted at BizzyBlog.com.
