GM to Test Investors' Hunger for Risk With Stock Offering

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I'm Alex Villarreal with the VOA Special English Economics Report.

America's biggest carmaker accepted fifty billion dollars in federal aid from the Obama and Bush administrations. People joked that GM meant "Government Motors." Now, General Motors could be on the road to recovery. The company recorded over two and a half billion dollars in profit in the first half of the year. The government still owns sixty-one percent of GM as a result of the bailout. Canada is also a shareholder. But now GM plans to sell stock to the public again. GM spent just forty days in bankruptcy. It sought protection from its creditors in June of last year. GM restructured. It discontinued some vehicles and closed dealerships and factories.In April, GM repaid almost seven billion dollars in government loans. Many of its creditors are waiting to see how much they get. GM plans an IPO, an initial public offering of stock, later this year. The company could raise as much as fifteen billion dollars. Chief executive Edward Whitacre left the company September first. He wants the government to sell all of its shares in the company during the IPO. Many experts believe the Treasury will act slowly over time after the public offering is completed. If the stock price rises, the government could profit from the rescue. But the IPO is risky for the company. The offering will test the willingness of investors to take an equity share in the "new GM."Buying equity is not like buying bonds. Bonds represent a loan. Equity represents ownership. Investors willing to buy equity shares in a company expect one thing -- growth.GM believes it can make that happen, in part with a new electric-and-gas hybrid car. The Chevrolet Volt can go up to sixty-four kilometers before it uses any gas at all. The Volt is expected to start arriving in showrooms later this year. GM is also looking overseas. The world's fastest growing car markets are in developing nations. GM is now selling more cars in China than in the United States. GM still leads the American market, although Toyota is now the biggest car company in the world.There are signs that America's big three carmakers may have put the worst of their recent troubles behind them. Chrysler also went through bankruptcy and says its sales are up. Italy's Fiat holds a twenty percent share.Ford Motor Company avoided bankruptcy and refused government help. Ford reported close to five billion dollars in profit for the first six months of the year. For VOA Special English I'm Alex Villarreal.

(Adapted from a radio program broadcast 27Aug2010)

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