GM pays debt and gears up factories before IPO

Article by Christian Andrei, on November 1, 2010

As General Motors Co.’s initial public offering nears, it is showing how good a company it is now by investing in small cars, planning to add more workers and fulfilling its obligations early. Last Thursday, GM said that it will invest in the production of a small Cadillac at a Michigan factory, which will employ 600 workers.

On the same day, GM announced that it paid $2.8 billion to its union retiree health-care trust and had access to $5 billion in credit that it may not require. After the IPO, GM intends to buy back preferred shares from the US and put $6 billion in its pension plans.

GM’s latest moves are indicative of the operations of GM under the leadership of new CEO Dan Akerson after the carmaker eliminated a big portion of its debt and reduced its fixed costs by restructuring in bankruptcy.

Maryann Keller, an auto industry consultant with a self-named firm in Stamford, Conn., said that the courts had ordered whatever GM had to do in the last 12 months. She believes that how good a company GM is will be apparent in how it handles the business starting now.

She said that GM would have to take care of its balance sheet and invest in the business. Keller added that factors that will help as GM goes public is setting up the credit line, planning to pay debt and managing pension obligations – which are all either expected or are considered prudent financial management. [via autonews - sub. required]

Topics: gm, ipo, united states

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