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GM Drop in Sales May Deter IPO Investors

2 September 2010 - News - Editor

In mid-August General Motors filed the necessary documentation with US regulatory authorities for an IPO reportedly to the value of around $50 billion. GM took this step to extricate the company from the US and Canadian authorities that are currently major shareholders, holding 72 percent of GM's equity. The success of the IPO would depend largely on whether investors are prepared to give General Motors another chance, after it had to be bailed out of potential bankruptcy more than a year ago. So, with a lot riding on the success of the IPO should it be approved, it was disconcerting news that GM's US market sales for August 2010 were around 25 percent lower than August 2009. It's true that the Obama administration’s "cash for clunkers" program did much to boost sales at that time, but even taking that into account, GM's August sales are a cause for concern and may deter investors from supporting the upcoming IPO.

GM wasn't the only car manufacturer battling in August. All manufacturers, with the exception of Chrysler, appear to have been hard hit. GM's head of US sales operations, Don Johnson, noted that in the light of job uncertainty and unemployment, consumers continue to be cautious. He pointed out though, that as employment opportunities start to recover and credit becomes more freely available, it is anticipated that consumers who have been holding back will be more inclined to purchase a new vehicle.

Another indication of GM's determination to move ahead, is its continued progress in green technology and the quest for the perfection of an electric car. The main issue electric car owners, or potential owners, have with this promising green technology, is the fear of running out of power. Some have likened driving an electric car to constantly running on red in a gasoline powered vehicle – you're never quite sure if you have enough juice to get to your destination. This is especially problematic when traveling long distances on isolated roads. GM's R&D team are well aware of this obstacle, and have even coined (and filed to patent) the term 'range anxiety'. Specs for the Chevrolet Volt include the ability to drive up to a distance of 40 miles solely on electric power, and once this power runs out, a gasoline engine generates electricity to keep the wheels turning – thereby doing away with range anxiety. Certainly, with more and more consumers becoming aware of their personal carbon footprint and the need to be socially responsible, research and development on alternatively powered vehicles will have high priority for all major automakers.

 


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