Archive for August, 2010

GM posts another profit, moves toward stock sale (AP)

Thursday, August 12th, 2010 | Finance News

DETROIT – In a signal moment for the turnaround of the American auto industry, General Motors is edging toward a public stock sale, and its profits are now solid enough that the demanding CEO will step aside, saying his work is done.

GM said Thursday that it made $1.3 billion from April through June, its second straight quarter in the black and a complete reversal from last year, when it was forced into bankruptcy and the U.S. government took a majority stake.

CEO Ed Whitacre said he would leave his post Sept. 1. He said the GM board knew all along that he would do so after the company returned to health, and industry analysts said it was an important step leading up to the stock sale.

Whitacre, who will stay on as chairman through the end of this year, will be replaced as CEO by Daniel Akerson, a 61-year-old former telecommunications executive who sits on the GM board.

While executives would not discuss the stock sale Thursday, GM is expected to file its initial paperwork with federal regulators as early as Friday.

"Things look good. There's a foundation in place, a good foundation," said Whitacre, who was drafted out of his first retirement by the government to fix the troubled GM. "I believe we've accomplished what we set out to do."

Last year, GM lost nearly $13 billion in the second quarter alone. In the first six months of this year, GM made $2.2 billion as cost cuts took full effect, sales in China grew and people paid more for GM's revamped vehicles in the U.S.

For example, GM's crossovers, which are similar to SUVs but built on car undercarriages, are fetching $3,000 more this year than last. Crossovers such as the Chevrolet Equinox and Buick Enclave have sold well, and the company has high hopes later this year for the Chevy Cruze, its first decent compact, and the Volt, a $41,000 rechargeable electric car.

The federal government got a 61 percent stake in GM in exchange for $43 billion in aid to keep it alive. It could sell some or all of that when GM makes its public stock offering, perhaps as early as November.

GM must first reveal to the Securities and Exchange Commission how many shares it intends to sell on the open market and at what price. The government would then tell GM how much of its stake it will sell, and GM would disclose that in another filing.

If GM's shares sell for too little, the government and other stakeholders are less likely to get their money back and GM is less likely to raise money to pay off debt.

The environment for new stock offerings is less than welcoming. Six initial public offerings have been postponed since June 1, in part out of fear that they wouldn't fetch a high enough share price, said Matt Therian, an analyst with Renaissance Capital, a Greenwich, Conn., firm specializing in public stock offering research.

GM, however, may have enough cache to overcome the sluggish economy, Therian said.

"The IPO market can be a case-by-case basis," he said. "I think in many ways GM is going to be a unique story."

Scott Sweet, owner of IPO research firm IPO Boutique, said the Obama administration may be pressuring GM to sell prematurely to influence the November congressional elections and make the government's controversial investment look smart. Whitacre and the government have both said GM is in charge of the timing of the IPO.

Akerson will be GM's fourth CEO in 18 months. Like Whitacre, a former CEO of AT&T, Akerson worked in top executive positions at major telecommunications companies. He held top posts at MCI and Nextel.

Both have been described as hard-charging executives who demand results. Whitacre, 68, who was known within GM for his disdain for PowerPoint presentations and his surprise visits to factories, said Akerson shares his vision for the company.

Whitacre didn't directly address a question about whether executives with automotive experience were considered for the job. But he said Akerson has learned the auto business in his year on the board.

"Dan has been involved every step of the way," Whitacre said. "He knows this business from a board perspective and also from personal conversations."

Akerson will stay on with The Carlyle Group, a private equity firm, until he starts as GM CEO next month.

Bob Lutz, a former GM vice chairman who retired earlier this year, said in an e-mail that Akerson doesn't need auto experience to run GM because it has a solid management team. But he does need to listen to that team, Lutz said

"He's very strong, very opinionated, not always right, and needs to work on listening skills," Lutz said. "If he can bring himself to trust his now-outstanding senior executive group and lead rather than direct, I think he'll do an outstanding job."

GM still faces problems. Its U.S. sales rose 14 percent in the first six months of this year, lagging behind the average industry increase of 17 percent. It spends more on car buyer incentives than any other automaker, according to

GM has also relied heavily on sales to rental car companies, governments and corporations, which are less lucrative than sales to individual customers.

GM's return to profitability and impending stock sale are milestones in the restructuring of the beleaguered American auto industry. The administration rushed to its aid last year, after the 2008 bailouts of major banks.

Ford Motor Co., which never needed government help, made $2.6 billion in the second quarter, its fifth straight quarterly profit. Chrysler Group LLC, which got $15.5 billion in federal aid, narrowed its second-quarter loss to $172 million.

GM's profits, coming at a tough time for overall car sales in the U.S., are proof Whitacre has put the company on solid footing, said David Cole, the chairman of the Center for Automotive Research in Ann Arbor, Mich.

Cole said Whitacre was smart enough to leave in place things that were working — product development, which has produced some hot-sellers, and manufacturing, which has grown more efficient — while he streamlined GM's bloated management.

GM is now using 93 percent of its North American factory capacity, compared with 39 percent in the second quarter of last year as it idled factories while in bankruptcy protection.

"I think he'll be remembered as a short-term but effective leader," Cole said.


AP Auto Writer Dan Strumpf in New York and Associated Press Writer Ken Thomas in Washington contributed to this report.

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Autodesk beats Wall Street expectations in 2Q (AP)

Thursday, August 12th, 2010 | Finance News

SAN RAFAEL, Calif. – Engineering software maker Autodesk Inc. on Thursday reported a profit surge in its latest quarter, as the economic recovery helped sales across the world.

Net income in the fiscal second quarter, which ended July 31, was $59.9 million, or 25 cents per share, compared with $10.5 million, or 5 cents per share, in the same period a year earlier.

Excluding stock-based compensation expenses, amortization charges and restructuring costs, adjusted income was 36 cents per share in the latest quarter. That beat the forecast of analysts polled by Thomson Reuters, who expected adjusted earnings of 27 cents per share.

Revenue grew 14 percent to $472.8 million from $414.9 million. Analysts were expecting revenue of $459 million.

For the current quarter, Autodesk said it expects to post adjusted net income of 28 cents to 33 cents per share and revenue between $450 million and $475 million. Analysts have been predicting adjusted earnings of 30 cents per share on $464 million in revenue.

The San Rafael-based company's shares rose $1, or 3.6 percent, to $28.45 in after-hours trading, after falling 47 cents to end regular trading at $27.45.

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GM’s outsider CEO opens door to new outsider (Reuters)

Thursday, August 12th, 2010 | Finance News

DETROIT/NEW YORK (Reuters) – Dan Akerson arrives at General Motors as CEO with the same mandate given his predecessor just eight months ago: bring new leadership to an automaker still struggling with the legacy of its government bailout.

Akerson, 61, replaces Ed Whitacre as of September in an abrupt shake-up GM announced just a day before it had planned to file for a politically charged stock offering expected to be one of the largest ever.

The suddenness of Whitacre's departure -- coming just a day after a meeting of the top U.S. automaker's board and announced at an improvised teleconference for reporters and financial analysts -- stunned insiders.

GM's financial advisers, who had spent weeks preparing an IPO filing for U.S. securities regulators, scrambled to rewrite complicated paperwork to take Whitacre out and put Akerson in, one person with direct knowledge of the private process said.

Whitacre, who served as CEO at AT&T and steered it through a series of key mergers, remains GM chairman until the end of the year. He had been expected to quit after guiding GM through an IPO to reduce the U.S. government's 61 percent ownership stake.

Just a week ago, Whitacre, 68, said he had not given any thought to resigning. "Everybody knows at my age I'm not a real longtimer," he told reporters.

A lanky Texan who confessed to feeling lost in Detroit and commuted home by plane to San Antonio on weekends, Whitacre had become the face of GM's turnaround and starred in TV commercials meant to mark its return from bankruptcy.

At GM, Whitacre became famous for spurning the PowerPoint presentations that had become a symbol of the slow decision-making process at the 102-year-old automaker.

After GM's top executives were blasted for being out of touch and riding to their offices at Detroit's Renaissance Center on a private elevator, Whitacre took pains to mix with workers, showing up unannounced in offices and factories.

But Whitacre's hands-off style of delegating also left him appearing sometimes out of touch. Last week he said GM was weeks away from an IPO filing, a statement that puzzled staff who were almost finished with the needed work.


Akerson, who will take over from Whitacre and lead GM's road show, becomes GM's fourth CEO in 18 months.

A quiet and private executive, Akerson will also face the pressure of becoming the face of GM in an industry where the CEO is often called on to be the biggest salesman.

Like Whitacre, Akerson had a long career in the tightly regulated telecommunications industry. He also has a history of dealmaking as head of buyouts at private equity firm The Carlyle Group.

Akerson became head of global buyouts at Carlyle last July, and was designated by the Treasury Department to serve on the GM board in July 2009 after the automaker emerged from its government-supported bankruptcy.

Analysts said Akerson heads off potential investor concern about executive succession.

A former U.S. Navy officer who served on a destroyer from 1970 to 1975, Akerson supported fellow Navy veteran and Republican John McCain for president.

In 2008, Akerson and his wife donated $80,800 to the Republican Party and its candidates, and nothing to the Democrats or now-President Barack Obama, according to the Center for Responsive Politics in Washington.

The Obama administration has repeatedly said that it chose its representatives on GM's board, including Akerson, for their qualifications without considering their politics.


Akerson began driving a black Cadillac CTS about a year ago, around the time the White House asked him to join the GM board.

He joined Carlyle in 2003 and was involved in some of the firm's biggest deals, including buyouts of energy firm Kinder Morgan and media company Nielsen.

Earlier, Akerson was a protege of entrepreneur Craig McCaw, a major backer of both XO and Nextel Communications, both of which Akerson headed.

"He was never an in-your-face CEO," said Jeff Kagan, an independent telecom analyst. "This is an aggressive businessman, but he's very quiet."

At Nextel, Akerson was known for taking charge of complicated engineering meetings, for his quiet manner and for his ruthless focus on the bottom line.

When he took his chief spokesman out to lunch, Akerson would head to "his favorite Scottish restaurant, McDonald's," said Daisy Khalifa, who worked with Akerson at Nextel.

Akerson lacks one quality analysts credit with giving Ford Motor Co Chief Executive Alan Mulally a leg up as an outsider -- experience in manufacturing.

Ford hired Mulally away from Boeing Co in 2006 and as CEO, Mulally has been credited with leading a surprising turnaround of the No. 2 U.S. automaker.

But GM former Vice Chairman Bob Lutz, a legendary "car guy" in Detroit, said that lack of experience won't stop Akerson.

"Like many strong leaders, he has equally strong opinions," Lutz said, adding that he would have to listen to the new layer of management Whitacre has put in place.

"If he can do that, GM will face a very bright future under his leadership," he said.

(Reporting by David Bailey, Bernie Woodall and Ben Klayman in Detroit, Megan Davies, Soyoung Kim and Sinead Carew in New York, David Lawder in Washington. Editing by Robert MacMillan)

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