Monday, June 1, 2009

IPO for GM, Chrysler?


President Barack Obama today announced the final move the government could do to help General Motors and Chrysler, two of the long established icons in the United States automobile industry for a long time now. The government's intervention to keep them back on their feet again was enlivened by the president's pronouncement over the federal government's plan to avail at least 60 percent in bailout money to help GM undergo complete restructuring, after filing the Chapter 11 bankruptcy protection.

However, the government's assurance of billions in bailout money doesn't mean that their operations will be the same again. That's the beauty of it all. But the ugly part is when GM and Chrysler would be cutting thousands of employees if only to keep their operations going. A test case scenario was already felt by a large number of auto dealers when they got notices for them to close down their outlets owing to the on-going financial turbulence that affected its operations across the country.

At least, some US$30 billion in bailout money will be infused into GM's restructuring operations. One of which is GM's plan to reinvent its manufacturing plants by producing compact cars that are economical and energy efficient to the millions of prospective buyers, not only in America, but the world over. However, some auto analysts have said that GM and Chrysler's positions in the market remains to be seen considering that competition among the world's automakers, particularly the Japanese-made cars, are very stiff at this point in time. And signs of recovery for the American automakers have yet to be tested, especially at this time when American cars are not selling good in the domestic markets. Analysts added that thousands of brand new vehicles are just piling up in various yards across America.

GM and Chrysler stakeholders are in limbo as what to do next, even after the final restructuring plan has been set up. Just how good and resourceful GM and Chrysler bigwigs are, nobody knows. But based on observations in the corporate world, having covered the stock market for a couple of years, when corporations, particularly those publicly-listed companies, are in a deadlock to source out cash to pump up their liquidity to sustain their operation, the immediate reaction in the boardroom is to seek for public offering. This means GM and Chrysler can always resort to this kind of corporate strategy if only to raise huge sums of money to keep the company afloat. Economists would agree with me in a sense that IPO is an effective instrument whereby both companies may be given the chance to revive its glory by making the last gamble, rather than turn to federal bailouts, which in most instances had earned
ires and scrutiny of the conservatives in the U.S. Congress. In fact, they now called GM as "Government Motors", with President Obama as its CEO, after the federal government had reconsidered its plan of giving another bailout money to General Motors.

I don't think that GM and Chrysler officials, who have advanced degrees in business administration, won't be able to decipher what is the best move to take, especially when corporate interests and the future of its thousands of employees, are at stake. Isn't IPO an ideal move to raise enough cash for the company's restructuring plans? Giving thousands of its employees a stake in the company's outstanding shares wouldn't be a bad idea either. If they did, how come GM and Chrysler have not preempted their downfall? With the automakers' crash, thousands of employees and their dependents will surely be groping in the dark as to what to do with their lives now their primary source of pride and income for many years had crumbled to the ground.

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