General Motors Co. is forecasting that it earned as much as $2.1 billion from July through September, a strong financial performance as the company prepares for an initial stock offering on Nov. 18.
The third-quarter earnings, which GM will report next week, bolster the automaker'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 after it cut brands, lowered debt and offered popular new models of cars and crossovers.
But those six months of earnings could almost be matched in the third quarter alone, if GM's most optimistic prediction pans out. GM on Wednesday forecast net income of between $1.9 billion and $2.1 billion during the period, and said revenue could reach $34 billion. GM lost $1.2 billion loss in the third quarter of last year, when it was just emerging from bankruptcy.
GM also predicted positive earnings before taxes in the fourth quarter, but said they will be lower than prior quarters due in part to the cost of launching the Chevrolet Cruze compact car and Volt rechargeable electric car.
"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.
The healthy financial outlook gives GM some positive talking points as it embarks on "road show" to pitch the company's stock ahead of its IPO. GM didn't reveal the date of the sale, but a person familiar with the plan said it would begin Nov. 18.
Under the sale, 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. The IPO will raise about $10 billion for the three owners and allow the largest, the U.S. government, to reduce its stake in the company from 61 percent to just over 40 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.
Taxpayers got their stake in GM in exchange for giving it $50 billion to survive bankruptcy protection last year. GM has reduced what it owes the government to about $40 billion.
GM confirmed the sale's details in regulatory filings on Wednesday, although most details had leaked out earlier in the week.
The shares' final pricing will be announced the day before the sale, said the person familiar with the IPO plan.
Starting this Friday, GM management will form two teams to make sales pitches for the stock across the globe. One team will be led by Liddell, while the other will be led by Vice Chairman Steve Girsky, a former Wall Street analyst. CEO Dan Akerson will join Liddell's team.
They'll fly from city to city on chartered jets because commercial flights can't move them quickly enough to get to all the stops on the packed schedule, another person familiar with the plans said.
GM's former CEO, Rick Wagoner, was castigated by members of Congress in 2008 when he and other auto executives flew to Washington in corporate jets to ask for government aid. After that, the company required executives to fly commercial.
But GM's corporate governance guidelines allow chartered flights in special circumstances, said the person. Neither person wanted to be named because they aren't authorized to speak publicly about the plans.
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.
It's more likely, he said, that the government will get only a portion of its $33 billion back. "They're probably an odds-on favorite of getting at least half back over time," he said.
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.
"The downside is not that large," he said, estimating that even under poor stock market conditions, the government would lose about $10 billion of its total investment.
The Obama administration has said the aid to GM was necessary to hold off a potential loss of one million jobs and economic devastation in the industrial Midwest.
In the IPO, GM will not sell any common stock, but it plans to raise $3 billion by selling 60 million preferred shares for $50 each. The preferred shares pay a set dividend and become common stock in three years. GM will use the money to shore up its pension plans and pay debt.
With a stock split, GM will have 1.5 billion of GM shares outstanding as it heads into the Nov. 18 sale.
Bankers running the sale have the option of selling another 55 million shares if needed to satisfy demand, and that could boost the size of the IPO to $12.2 billion.
The total number of shares likely will rise to 1.8 billion as additional stock is issued to bolster GM's pension plans and to satisfy warrants held by the union trust and old GM's bondholders. Warrants give holders the right to buy shares for set price at a certain time. The 1.8 billion figure also includes stock that will be issued when GM's preferred shares become common shares.
After the additional shares are issued, the U.S. government's stake will drop to 35 percent.
Depending on the final share price, the GM IPO will be either the second or third-largest IPO by a U.S.-based company, according to the website dealogic.com. Visa Inc.'s 2008 offering at $19.7 billion is tops, now followed by a 2000 offer from AT&T Wireless at $10.6 billion.