In the pitch that General Motors Co. is giving investors about its initial public offering, it is claiming that its earnings before interest and taxes could rise up to $19 billion in what is dubbed as a “high cycle” for the global automobile industry.
Chief Financial Officer Chris Liddell said that GM has cut its hourly labor costs and will be able to generate up to $16 billion in free cash flow with profit margins as wide as 10%.
GM aims to raise as much as $10.6 billion in an IPO. The restructuring done on the old GM had allowed the carmaker to earn up to $4.2 billion through three quarters this year.
Liddell said that GM seeks to pay off all debts and fully fund employee pensions. In a videotaped presentation on retailroadshow.com, Liddell said, “This will give us the type of fortress balance sheet that we believe is appropriate for a company in a high fixed-cost, cyclical industry.”
GM estimates that by next year, it would already have cut hourly labor costs by more than two-thirds, from $16 billion in 2005 to $5 billion. Liddell noted that health care-related costs for hourly retirees amounted to $4 billion in 2005.
Mary Ann Keller, the consultant and founder of the self-titled firm in Stamford, Conn., said that GM will have to keep its current cost base and observe an economic recovery to realize those profit projections. [via autonews - sub. required]