The GM IPO: Wall Street celebrates impoverishment of auto workers [View All]

[Hannah Bell]

General Motors will conduct an initial public offering of nearly 500 million shares today, seventeen months after the giant US automaker declared bankruptcy and was removed from the New York Stock Exchange. At the price of $33 per common share and $50 for preferred stocks, the IPO is expected to net $23 billion, making it one of the largest, if not the largest, stock sale in history.

The US Treasury, which is reducing its ownership stake from 61 percent to as low as 33 percent, is expected to lose as much as $10 billion from the sale of its shares. The real money will be made by major Wall Street firms, with share values set to rise 10 to 20 percent on the first day of trading.

Morgan Stanley, J.P. Morgan, Bank of America, Citicorp, Goldman Sachs, Barclays Capital, Credit Suisse and Deutsche Bank were selected by the White House to oversee the IPO and will get first access to purchase the stock. The underwriters reportedly sought an even cheaper opening price. However, the Obama administration expressed concern that an even greater windfall for the banks would convince the public that the IPO was another handout to Wall Street―exactly what it is.

The potentially huge fortunes for the financial elite come at the direct expense of auto workers, their families and working class communities throughout the Midwest. More than a dozen factories in Michigan, Ohio, Indiana and other states have been shut down. Tens of thousands of workers have been thrown out of work, and current and retired workers have seen wages and benefits slashed. In addition, an entire generation of new auto workers is working for $14 an hour, half the wages their parents once earned in the industry.

The number of US hourly employees grew from 51,000 to 53,000, largely through the addition of tier-two workers making $14 an hour. In 2008, there were 74,000 UAW hourly workers in the US.

On Thursday, the UAW is expected to sell 102.3 million shares, netting the union bureaucracy more than $3.38 billion. The union will retain a 13-14 percent stake in GM, giving it an incentive to push through further concessions...

GM is no longer responsible for the health care obligations it owes to more than 340,000 retirees and their spouses. The UAW will now be in charge of retiree medical care and is expected to cut benefits because its trust is under-funded. GM pension obligations are also underfunded by $27 billion.
http://www.wsws.org/articles/2010/nov2010/gmip-n18.shtml