When is the GM IPO? After the Election (WSJ)

Official White House Briefing: "Fact Sheet on Obama Administration Restructuring of General Motors"

Treasury Provides Further Guidance on GM IPO

AUTOS SEPTEMBER 21, 2010

China's SAIC Expresses Interest in Buying GM Stake


By SHARON TERLEP
DETROIT—Interest by China's biggest auto maker in possibly buying a stake in General Motors Co. this fall raises the dicey issue for the U.S. government over foreign investment in the Detroit company.

SAIC Motor Corp., which has built cars with GM in China since the 1990s, hasn't decided whether to participate in GM's initial public offering but has expressed an interest in doing so, people familiar with the matter said.

GM declined to comment about SAIC. The Chinese auto maker said only that it is closely watching the GM offering. SAIC's interest was first reported by Reuters news service.

The issue of foreign investors buying GM shares in the company's IPO is a thorny one for the U.S. government, which is eager to unload its 61% stake in the auto maker.

The Treasury is likely to seek out large institutional investors to buy blocks of GM stock at a set price. Such "cornerstone" investors typically commit to holding their stock as a show of confidence, which can help draw other investors. In exchange, cornerstone investors sometimes get a favorable deal on the shares. Several U.S. investors have expressed an interest in buying a stake in GM, including potential cornerstone investors, according to a person familiar with the situation.

The larger the group of cornerstone investors, the easier it would be for the Treasury to sell a big chunk of its GM stake in the IPO. GM and the banks underwriting the deal are pushing for the biggest possible investor pool to increase the size of the offering. The IPO will likely involve shares held by the Treasury, a union-managed retiree trust fund and Canadian governments.

But the Treasury also is worried about the political reaction if non-U.S. investors, such as sovereign-wealth funds or a Chinese company, are allowed to acquire a significant stake in GM after U.S. taxpayers spent $50 billion to assist the company through bankruptcy reorganization.

"Critics will publicly blast the Obama administration for using taxpayer money to fund foreign ownership in an American icon," said Morningstar automotive equities analyst David Whiston. Yet restricting foreigners from buying stock in the IPO would be impractical since the shares would be available on the public market, he said.

Indeed, the Treasury, in an effort to maximize the share price and establish a solid shareholder base, said last week that all investors will have access to GM shares. The statement also said, however, that no single investor or group of investors would receive "a disproportionate share or unusual treatment."

GM plans to begin pitching the IPO to investors immediately after the Nov. 2 midterm elections, which could keep the IPO separate from campaign politics. The goal is to conduct the offering before the end of the month. GM Chief Executive Dan Akerson said last week that it will likely take years for the U.S. government to unload its entire stake.

Mr. Akerson, who took over as CEO Sept. 1, has been more pragmatic about the IPO than was his predecessor Edward E. Whitacre Jr., who pushed the Treasury to unload as many shares as possible as quickly as possible. In contrast, Mr. Akerson last week acknowledged the importance of Treasury getting the best possible share price, even if means the government continues to hold some shares for some time.

China's auto market, the world's biggest, is a key source of strength for GM.

The auto maker's sales in China rose 19% in August from a year earlier while the U.S. and European markets struggled. The auto maker's partnership with SAIC has been central to GM's success in China and is expected to continue to play a major role.

Such joint ventures also are an important platform to reaching other fast-growing, emerging markets. GM and SAIC are teaming to expand in India, for example.

Write to Sharon Terlep at sharon.terlep@wsj.com