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GM predicts $2.1B for 3Q as it readies for IPO

DETROIT - General Motors Co. is forecasting that it earned as much as $2.1 billion from July to September, a strong financial performance as the company prepares for an initial stock offering Nov. 18.

The third-quarter earnings, which GM will report next week, bolster the company's contention that it is leaner and more profitable since restructuring under a government-funded bankruptcy last year.

GM earned $2.2 billion in the first half of this year after it cut brands, lowered debt and offered popular new models of cars and crossovers.

Last month it announced moves to reduce what it owes its pension plans.

GM Wednesday predicted net income of between $1.9 billion an $2.1 billion in the third quarter and said revenue could reach $34 billion.

"We will deliver a solid and profitable first year post-bankruptcy, and we are continuing to improve our balance sheet and most importantly, the quality of our vehicles," chief financial officer Chris Liddell said in a statement.

Under the IPO, three of GM's four owners - the U.S. government, Canadian and Ontario governments, and a union health care trust - will sell 365 million shares, or about a quarter of the company's outstanding common stock, for between $26 and $29 a share.

That will raise about $10 billion for the owners and allow the largest, the U.S. government, to reduce its stake in the company from 61 percent to about 43 percent.

The reduced stake is symbolically important for GM, because some Americans resented the company's taxpayer-funded bailout. The perception that GM stood for "Government Motors" has hurt the company's car sales, GM has claimed.

The U.S. Treasury will sell 264 million shares and will make about $7 billion if the shares sell in the middle of the $26 to $29 price range. The Canadian governments and union trust are expected to make about $3 billion.

After the IPO, GM would still owe U.S. taxpayers around $33 billion. The government hopes to get the balance back in several follow-up stock sales.

That's possible over the next three years, but GM would have to perform extraordinarily well during that time, said Joe Phillippi, president of AutoTrends Consulting Llc in Short Hills, N.J.

Guy LeBas, chief fixed-income strategist for Janney Capital Markets, said there's a 50-50 chance that the government will get its investment back, and any loss would be relatively small.

- AP

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