Timing Looks Right for New GM Offering : Automobiles: Investors are expected to snap up the 55 million shares. Company should also benefit from an infusion of more than $2 billion.
Investors hoping to cash in on the hot run of automotive stocks are expected to snap up General Motors Corp.’s huge 55-million-share offering when it goes on sale today.
The common stock sale, among the largest in American corporate history, couldn’t have come at a better time for the company and investors, say analysts who follow GM and its competitors, Ford Motor Co. and Chrysler Corp.
GM is in the process of a massive reorganization that will cut layers of redundancy from its operations. That is expected to lead to higher earnings and, in turn, a higher stock price--good news for investors who are looking for better investments than, for example, the current low yields offered by certificates of deposit.
GM should also benefit from the sale, which will bring in an estimated $2.15 billion.
The stock, priced at $39 a share late Tuesday, had firm commitments from a syndicate of eight large brokerages who will begin selling to investors today.
GM stock has been on the rise. It closed down 12.5 cents Tuesday at $39.25 on the New York Stock Exchange.
Individual investors and mutual funds are expected to be more interested in the stock than big institutions such as pension funds, which already have increased their stakes in auto issues.
Auto stocks, depressed during the recession, rebounded this year as the domestic auto industry began its own recovery. GM’s stock has risen 36% in 1992, whetting investor appetites for the new GM shares.
The industry’s production is up, meeting increasing demand from consumers who had held off replacing their cars during the recession. Meanwhile, Japanese auto makers, under financial pressure at home, are slowing exports to the United States, prompting more consumers to buy American.
Analysts expect GM to use the money to speed its restructuring. That may include offering attractive retirement packages to its aging blue-collar work force.
Personnel cuts and plant closings are expected to begin making a noticeable earnings difference in late 1993. GM plans to close 21 plants, eliminate 74,000 jobs and reduce from 20 to seven the number of its basic car frames by 1995.
The company had a surprising $179-million first-quarter profit, which has also helped generate interest in the new stock. Analysts estimate that GM will earn as much as $1.32 a share in the second quarter--and that’s with no dramatic turnaround in its North American automotive operations, which lost $7 billion last year.
