For GM IPO, the government is back-seat driver (special report)

Steve Girsky remembers sitting at his kitchen table in New York on the eve of President Barack Obama's election when he realized that General Motors was going to run out of cash.



"I put down my pad," said Girsky, a banker brought in by the United Auto Workers union to report on GM's finances. "I turned to my wife and said, 'Remember this night. This is the night we figured out GM's going out of business.'"



Two weeks later, the same realization was sinking in across America as the chief executives of GM, Ford and Chrysler -- and the head of the UAW -- flew to Washington to ask Congress for an unprecedented bailout. By November 2008, GM was on a path to become "Government Motors," with the U.S. Treasury its majority shareholder.



As Girsky put it, "the situation got infinitely more complicated" -- a controversial $50 billion bailout, a 2009 bankruptcy and an arc that took Girsky, 48, from a well connected industry analyst to the ultimate GM insider: a board member and the senior executive in charge of strategy.



Two years after Girsky's kitchen table reckoning, the agenda for GM remains dominated by the U.S. election cycle as the automaker reaches the final stage of preparation for an initial public offering to pay some of the roughly $40 billion it owes American taxpayers.



The Obama administration and GM executives say the White House has stayed good to its pledge to refrain from meddling in the day-to-day management of this 102-year-old industrial enterprise with 600,000 American workers and retirees and 12 percent of the global car market.



But a review of key events leading up to GM's IPO and interviews with people involved inside and outside the company show that the U.S. government has been running key aspects of the landmark stock deal and exerting tight oversight on management decisions seen as crucial to its success.



On the biggest questions surrounding the IPO, including its speed and size, the fees paid to the bankers and the potential involvement of offshore investors, the U.S. Treasury has called the shots, people involved in the process say.



That in turn has added a layer of complexity to a deal expected to rank as one of the top IPOs of all time by size. It also leaves open the possibility that the Treasury Department will remain an invisible hand that guides other decisions down the line, which could concern some investors.



"I'm sure that there will be some institutional investors, and even some individual investors, that it scares away," said Morningstar analyst David Whiston, who nevertheless sees a good chance for GM to be worth enough to make taxpayers whole on the bailout.



GM, its advisers, the banks and the U.S. Treasury declined to discuss the IPO and related issues publicly, citing U.S. securities regulations.



Since May, the Obama team has pushed GM and bankers to have the IPO ready for the fall. People familiar with the plans say a road show for investors will begin after congressional elections on Tuesday, which are expected to reflect voter backlash against Democratic incumbents.



That timetable represents the first step in an exit strategy for the U.S. investment in GM that was vetted by outgoing White House economic adviser Larry Summers in 2009.



The initial plan projected that GM would launch an IPO in late 2010 that would allow the U.S. Treasury to sell 20 percent of its common stock in the automaker, reducing its ownership to below majority at 49 percent. The strategy called for subsequent sales that would get the government out of GM entirely before the end of the next presidential term, according to people involved in the process.



Summers "really wanted it understood that the government was going to be out by eight years. I think everybody's hope and expectation was that we would be out a good deal faster, maybe in the three- to five-year time frame," said former autos task force chief Steven Rattner.



Treasury and the other GM investors, the UAW's health care trust and Canada, will likely make a call on how much stock to sell in the IPO in the days ahead of the offering, which is expected during the week of November 15.

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