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Florida GM retirees consider investing again

Thousands of GM retirees, more than 20,000 in Florida alone, are wrestling this week with one of the toughest, and unexpectedly emotional, questions of their retirement: After seeing their investments evaporate, do they dare put the reorganized company's stock back in their nest eggs?

It is a decision being talked about at retiree clubs, union halls and GM plants and offices across the country as the nation's biggest automaker prepares to become a public company again.

John McBaine of Indian Shores isn't conflicted at all: He wouldn't touch the stuff.

After working 38 years for GM, he saw nearly 40,000 shares of stock wiped out last year by the automaker's bankruptcy. The former senior human resources administrator's stake was worth $3.5 million at the stock's peak a decade ago. Even three years ago, shares traded above $40. But they collapsed to less than $1 before the government forced GM into bankruptcy in exchange for federal aid, and McBaine's not sure it wouldn't happen again.

"If they zeroed-out shareholders before, they could in the future,'' said McBaine, 65, who owns an Indian Shores condo and a home in Largo.

Carolyn Higgins of Palm Harbor is torn between loyalty to GM and fear from seeing former colleagues lose retirement savings.

"I was thinking about spending maybe $500, not a major amount,'' said Higgins, 69, who worked more than 30 years at GM as a senior accountant. "But it gives me a feeling like I'm wasting my money.''

More than 500,000 retirees and surviving spouses, as well as about 90,000 active workers in the United States and Canada and 3,000 dealers, have been given a chance to buy shares in GM's initial public stock offering.

GM has set aside 5 percent of the 365 million shares in the offering, which is expected as early as Wednesday, for current and former personnel. An average investor would not be able to buy in at the stock offering price.

If some retirees balk at buying shares, overall demand for the offering is expected to be strong among big institutional investors in the United States and overseas.

GM has been courting sovereign wealth funds, or state-owned investment funds, from Asia and the Middle East to invest in the stock and is negotiating to sell a 1 percent stake in the company to its Chinese partner, SAIC Motor Corp. The Treasury Department has said it is not opposed to the stock's being sold internationally, but it wants it to be sold "with a focus on North American investors."

It is hardly an easy call for many retirees who had banked on the benefits they earned while working at a company once called "Generous Motors," only to see their medical plans, life insurance and retirement contributions slashed in recent years.

Those who want to participate in the stock offering had to formally express interest last month but will not really have to decide until GM executives conclude their road show to institutional investors and set a final price for the offering. The preliminary range was $26 to $29 a share. But news organizations citing unnamed sources reported Monday that GM will likely price shares between $31 and $33.

A GM spokesman, Peter Ternes, declined to comment on how many retirees and workers had shown interest, or how many shares each of them could be eligible to buy. The initial paperwork indicated the minimum investment would be $1,000.

It was the retirees association, which acts as a watchdog on GM's pension investments and benefits policies, that suggested last summer to the company that it allow retirees and workers to participate in the stock sale.

GM's most famous car guy in recent years, Robert Lutz, is one retiree who is unabashedly bullish on the stock.

"I'm going to buy every share I can get my hands on," said Lutz, who retired May 1 as GM's vice chairman. "We are making more competitive products now than we ever did."

Even though the new GM has a better shot at success than the old one, the retirees know that its improvements came at a cost.

"I'm planning to buy some stock because the earnings are looking very good," said David Daniels of Overland Park, Kan., who retired in 1998 after 39 years with GM. "But I had to see an awful lot of people get put out of work to get it to this point."

Times staff writer Steve Huettel contributed to this report, which uses information from the New York Times.

Behind the numbers

Questions and answers on the initial public offering. 10A


The initial public offering

Can I buy shares in the stock if I'm not a GM retiree

or employee?

Yes, but if you don't have an existing account with one of the IPO underwriters — investment banks that market the stock — your chances are slim to none.

Who are the underwriters?

Among the big names are Morgan Stanley, JP Morgan, Barclays Capital, Bank of America, Merrill Lynch, Credit Suisse and Citi. But some, like Credit Suisse, don't deal with small investors.

Who sets the price of shares in the initial public offering?

The underwriters, GM and the U.S. Treasury. The federal government owns a majority stake in the automaker.

When will we know the price?

The price will be made public Wednesday. Citing sources close to the deal, news organizations reported Monday that the price for common stock will be between $31 and $33 per share. That's up from the $26 to $29 per share that GM announced earlier this month. GM is expected to put shares up for sale Thursday.

Sources: Wall Street Journal, Times research

Florida GM retirees consider investing again 11/15/10 [Last modified: Monday, November 15, 2010 11:22pm]
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