GM IPO: Tough sell for Obama administration?

U.S. taxpayers were already mad about getting stuck with a $50 billion tab for bailing out a poorly managed General Motors.

Now, the Obama administration will try to convince a skeptical public that a sale from a better-run GM is in their best interests.

GM turned a profit in the first quarter and Chief Executive Officer Ed Whitacre said this week's second quarter results will be "impressive." But investors will have to believe that a company that lost $88 billion from 2005 through the first quarter of 2009 and wiped out equity investors when it declared bankruptcy last spring is worthy of another bet.

Whitacre said on Thursday that GM was preparing its IPO filing. GM will be pushing its IPO while car sales are still well below pre-crisis levels and a full recovery of the U.S. auto industry is still questionable.

"If the market looks at GM as a company that is on the brink of failure, nobody really wants to get between them and that brink," said Rob Enderle, principal analyst at the Enderle Group in Santa Clara, California.

The date for GM to file its IPO registration, originally expected for mid-August, has been delayed and both the Obama administration and the U.S. automaker's top boss have gone on the defensive, acknowledging that there are concerns about the IPO but offering few specific reassurances.

As GM readies the thick sheaf of papers it needs for the nearly $20 billion offering, hoping to shed its "Government Motors" label, the level of concern is increasing.

"With the government's involvement and the extremely unusual bankruptcy that it went through, there are a number of stakeholders who have very conflicting interests," said Linda Killian, a portfolio manager at Connecticut-based Renaissance Capital.

"They need to be very clear about what the plans are for the company and who is going to be making the decisions," Killian said.

There is uncertainty over whether investors will chance a company that lost tens of billions of dollars for previous shareholders' savings and pensions, and, more fundamentally, whether consumers will buy and whether GM can sell shares.

But the biggest questions right now are how shares will be sold and how transparent that process will be.

"We have not yet determined what the exact (deal) structure will be. That will be certainly something we and the company discuss extensively in the period ahead. We are aware of those concerns that have been raised and we're certain that this IPO ... will be done in a fair way," Ron Bloom, Obama's point man for auto industry restructuring said in an interview with Reuters Insider on Thursday afternoon.

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