GM’s IPO earnings before interest and taxes may rise to as much as $19 billion

Article by Christian Andrei, on November 6, 2010

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, 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]

Topics: gm, ipo, united states

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