Treasury Gets $1.8B from GM - Analyst Blog

The Treasury Department of U.S. announced that it has received $1.8 billion as bankers, handling the initial public offering (IPO) of General Motors (GM), have exercised options to purchase an additional 53.8 million shares of its stock.

Last week, the Treasury received $11.7 billion from the IPO. The payment was received against its $52 billion loan extended to GM last year. The treasury has sold 358.5 million shares in the IPO.

This along with the net proceeds from stock options pushed the total receipts of the Treasury to $13.5 billion. The bankers are allowed to exercise an option to sell up to 72 million shares.

The Treasury is yet to receive $2.1 billion from the sale of preferred shares by GM this month. The preferred shares will be converted to common stock in 2013.

The U.S. government expects to recover about half of its unpaid loans to GM. Of the total loans extended by the government in exchange of a 61% ownership in the company, $6.7 billion has been repaid in April this year, leaving $45.3 billion still to be repaid.

GM sold 478 million shares at the targeted price of $33, raising $15.8 billion in the IPO. Over and above the net proceeds from the IPO, stock options and sale of preferred shares, GM has stated that it would repay $9.5 billion to the government this year.

GM, in another attempt to improve its debt position, made a cash contribution of $4 billion to its pension plans recently. The payment included $2.7 billion contribution to a plan for its hourly workers and $1.3 billion for its salaried workers. At the 2009-end, GM's U.S. pension plans were underfunded by $17.1 billion.

In the third quarter of the year, GM has topped both its hometown rivals, Ford Motor Co. (F) and Chrysler LLC, by making a profit of $2.16 billion or $1.20 per share in sharp contrast to a loss of $858 million or 73 cents per share in the year-ago quarter. Operating income was $1.85 billion versus a loss of $1 billion a year ago.

During the quarter under review, Ford reported a profit of $1.91 billion while Chrysler posted a loss of $84 million. In North America, GM earned $3,005 per vehicle due to its effort to boost truck output during the summer. In contrast, Ford earned $2,710 per vehicle and Chrysler earned $593 per vehicle in the region.

GM's profit was fueled by the company's turnaround performance in North America, which had been witnessing substantial losses earlier, and impressive growth in sales volume in GM International Operations segment.