GM IPO filing expected Tuesday

NEW YORK (Reuters) – General Motors Co has completed the paperwork for an initial public offering, and timing of its filing with the U.S. securities regulators rests with the board of the top U.S. automaker, sources familiar with the process said on Monday.

The initial prospectus, expected to be for $100 million, is likely to be filed with the U.S. Securities and Exchange Commission on Tuesday, two people said, asking not to be named because the preparations for the IPO are private.
GM updated its several-hundred page S-1 document to add a management risk factor after Chief Executive Ed Whitacre said on Thursday he would step down and be succeeded by Dan Akerson effective in September, the source said.
The surprise announcement last week was a factor delaying GM's IPO filing by several days, several people close to the process have said.
GM's IPO is expected to raise between $15 billion to $20 billion in one of the largest IPOs ever, the source said.
A group of 10 banks that committed to be the major group of creditors in GM's $5 billion credit line will also serve as underwriters for the stock offering, sources said.
The underwriting syndicate for GM's IPO will not be finalized until closer to when the deal prices, but will include minority firms, one source said.
The banks that have agreed to provide the credit line include Bank of America Merrill Lynch, Barclays Plc, Citigroup Inc, Credit Suisse, Deutsche Bank AG, Goldman Sachs, JPMorgan Chase, Morgan Stanley, UBS AG and Royal Bank of Canada, several sources said.
The source said that GM will add more banks to the credit line while keeping the amount unchanged at $5 billion, reducing banks' commitments from $500 million each.
The full syndicate for the credit line is expected to be finalized by the end of September, one source said.
CHALLENGES AHEAD
An IPO filing would be a step toward independence for GM and a way for the U.S. automaker to begin shedding its "Government Motors" nickname. A successful offering would also be a major coup for the Obama administration, which owns a 61 percent stake in the company after a $50 billion bailout last year.
As the offering nears, U.S. officials and GM executives are facing delicate decisions over potential investors.
GM is considering selling a part of the carmaker's stock to institutions that would commit to buy and hold major stakes, people familiar with the discussions said.
Such "cornerstone" investors could help attract additional investors by showing they are willing to stake large sums on the IPO.
But the plan could also spark political criticism if foreign investors or union-linked pension funds appear to be getting too good of a deal.
Obama appointee Ron Bloom, who oversees the U.S. government's investment in GM and Chrysler, and Herb Allison, the former Fannie Mae chief executive officer who now oversees the Troubled Asset Relief Program, have been consulted on the question of how to balance access to the offering by retail investors against the potentially competing goal of maximizing returns for U.S. taxpayers, a source previously told Reuters.
There are also challenges with GM's management.
A quarterly filing by GM with the SEC on Monday listed the appointment of Akerson, 61, a veteran financial executive with experience in the telecommunications industry, and the appointment of former Microsoft executive Chris Liddell as chief financial officer as risks for the company's operations.
"Within the past year we have substantially changed our executive management team," GM said in the filing on Monday in language expected to be echoed in its IPO registration.
"We have elected a new chief executive officer ... and a new chief financial officer ... both of whom have no outside automotive industry experience."
(Reporting by Soyoung Kim and Clare Baldwin in New York, and by Kevin Krolicki in Detroit; editing by Phil Berlowitz, Robert MacMillan and Andre Grenon)

Why China is winning the economic war

During the ‘cold war,’ a term used to describe the tension between communist and capitalist countries that lasted from 1947 to 1991, one of the fears was a military conflict between Russia or China and the U.S.

It didn’t happen. The potential of a military war instead morphed into an economic war.

The U.S. was winning hands down for a long time, but not so much anymore. It used to be that the U.S. was number one in pretty much everything: education, technology, standard of living, economic and military strength, admired world leadership. It was leading the rest of the world into the future with the demonstrative power of democracy and free markets, new technological breakthroughs in automation, computers, communications, energy, medicine, space travel, to name a few.
In recent years, a number of countries have surpassed the U.S. in specific areas, including consumer incomes, standard of living, and health care. The true economic powerhouse, however, has been China. Some of the statistics, and the speed with which they have changed, have been startling.
Over the last ten years China’s economy has surged past those of Canada, Spain, Brazil, Italy, France, and Germany, and is expected to pass Japan this year, to become the second largest economy in the world, behind the U.S.
Whether it’s manufacturing efficiency, high-speed rail-line technology, nuclear power plant construction, clean air energy technology, education, China is making impressive global inroads, even in areas where the U.S. still has significant dominance. Much of it has to do with China’s massive population, about which the U.S. can do nothing.
For instance, while U.S. Internet companies dominate global headlines, China now has the world’s largest internet market as measured by the number of users. Yet internet use has only penetrated 22 percent of the population versus 75 percent in the U.S. Meanwhile, U.S. Internet giants like Google, Yahoo, eBay, Amazon, Facebook and Expedia are experiencing problems trying to transport their dominance into the Chinese market. Part of it is obstacles placed in their way by China’s government, in support of China’s state-controlled corporations. The result is Chinese internet companies like Tencent, and Baidu, cannot help but become world leaders.

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Starbucks' latest blend: Social-digital network

Want a little community with that coffee? Starbucks is launching a new in-store digital network in an effort to make customers’ coffee house experience a little more social.

Whether Starbucks' digital network will make people feel more involved with their neighborhood has yet to be seen.

It’s the coffee giant’s latest shot in its battle against independent coffee houses.
With over 16,000 stores in more than 50 countries, Starbucks often is mocked for the ubiquity of its outlets and a cookie-cutter feel of its corporate-owned outlets. Starbucks' latest weapon in the fight against that image is to deploy free Wi-Fi and an in-store digital network that will offer news and entertainment as well as localized content to encourage neighborhood involvement. Customers will be able to access the digital network later this fall.

Whether this digital network actually draws people out or simply buries them more deeply behind their digital devices remains to be seen.
As Starbucks removes the fees from its Wi-Fi network — a move announced in June — some independent coffee shops have started ditching the digital connection. Many say it creates an isolating environment or encourages squatters who consume more bandwidth than coffee.
But Starbucks is sticking with its digital vision as part of a turnaround effort that seems to be working. The coffee chain was among the first to feel the pain of the recession, but Starbucks CEO and founder Howard Schultz has taken back the reins, and the results have been impressive, with profits up 37 percent in its latest quarter.
After researching what people are doing before and after they enter its stores, Starbucks teamed with content partners to offer customers digital one-stop shopping for their activities. When customers log into Starbucks' Wi-Fi network, they will come to a splash page for the Starbucks Digital Network that they can either explore or navigate away from.
Review site Zagat will let users look up local restaurants for dinner after caffeinated drinks. Runners, bikers and walkers will be able to plan their routes through Rodale on geo-targeted maps highlighting Starbucks outlets. Patch, a community news site, will provide Starbucks patrons a chance to learn about events in their neighborhoods. Nonprofit DonorsChoose.org will suggest local educational projects they need funds.
“In some ways one of the most interesting and important aspects of the Starbucks Digital Network is that it actually can be a hyper-local, community-oriented offering,” said Adam Brotman, vice president of digital ventures for Starbucks.


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China passes Japan as second-largest economy

SHANGHAI — After three decades of spectacular growth, China passed Japan in the second quarter to become the world’s second-largest economy behind the United States, according to government figures released early Monday.

The milestone, though anticipated for some time, is the most striking evidence yet that China’s ascendance is for real and that the rest of the world will have to reckon with a new economic superpower.
The recognition came early Monday, when Tokyo said that Japan’s economy was valued at about $1.28 trillion in the second quarter, slightly below China’s $1.33 trillion. Japan’s economy grew 0.4 percent in the quarter, Tokyo said, substantially less than forecast. That weakness suggests that China’s economy will race past Japan’s for the full year.
Experts say unseating Japan — and in recent years passing Germany, France and Great Britain — underscores China’s growing clout and bolsters forecasts that China will pass the United States as the world’s biggest economy as early as 2030. America’s gross domestic product was about $14 trillion in 2009.
“This has enormous significance,” said Nicholas R. Lardy, an economist at the Peterson Institute for International Economics. “It reconfirms what’s been happening for the better part of a decade: China has been eclipsing Japan economically. For everyone in China’s region, they’re now the biggest trading partner rather than the U.S. or Japan.”
For Japan, whose economy has been stagnating for more than a decade, the figures reflect a decline in economic and political power. Japan has had the world’s second-largest economy for much of the last four decades, according to the World Bank. And during the 1980s, there was even talk about Japan’s economy some day overtaking that of the United States.
But while Japan’s economy is mature and its population quickly aging, China is in the throes of urbanization and is far from developed, analysts say, meaning it has a much lower standard of living, as well as a lot more room to grow. Just five years ago, China’s gross domestic product was about $2.3 trillion, about half of Japan’s.

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New HP CEO will face challenges right away

SAN FRANCISCO — The top job at Hewlett-Packard Co offers a singular opportunity at the helm of a powerful Silicon Valley icon — but comes with daunting challenges and high expectations.

Unlike in 2005, when Mark Hurd took over a bloated HP in disarray, whoever succeeds him as chief executive inherits a streamlined, smooth-running technology behemoth with investors clamoring for growth, not just another round of cost cuts.

Hurd remade HP, transforming it from a stodgy printer and personal computer vendor into a diversified IT powerhouse, the largest technology company in the world on a revenue basis.
But with the chief brought down by what HP calls expense account abuse, speculation is mounting as to whether the company will bring in a veteran with a steady hand at the helm, or a risk-taker to ignite the growth Wall Street is clamoring for.
Investors are clear: as interim CEO Cathie Lesjak said, what is needed is someone to "take us to the next level."
"Growth is arguably way harder than what Hurd did," said Robert W. Baird analyst Jayson Noland. "Investors will say you can't be a cost-cutter forever. We want to see organic growth."
The flip side of pursuing growth is collecting enemies. HP's competitive landscape has transformed, with powerful new rivals seeking to encroach on its turf, from Cisco Systems Inc to Oracle Corp with their forays into servers. HP itself wants to butt heads with Apple Inc and Google Inc with its purchase of smartphone pioneers Palm Inc.

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It's not just Wall Street scrutiny that the executive suite has to contend with. Analysts say rivals are keeping a close watch on the HP house, pondering ways to capitalize on the leadership vacuum — and any missteps a new CEO is likely to make.
"There's complications today that didn't exist five years ago, with Cisco and Oracle and smartphones and tablets," Noland said.
HP's sheer size and its diversity of business give it a unique profile. With roughly 300,000 employees and 77 million square feet of property around the world, it resembles a small nation more than a technology vendor.
Annual sales are expected to top $120 billion in 2010 — more than the gross domestic product of Belarus and Slovakia.
"It's like steering an oil tanker, you need a pretty significant amount of effort to go and change direction," said Needham & Co analyst Richard Kugele.
"You can't take away from what Hurd did, but to grow the top line you're going to need to do some big things, or a lot of little things," he said.
Whoever takes up the reins accepts responsibility for a company steeped in industry lore. The garage from which Bill Hewlett and Dave Packard started their $538 operation bears a plaque declaring it the birthplace of Silicon Valley.
To be sure, Hurd did oversee a period of solid growth. Sales increased 32 percent from fiscal 2005 through fiscal 2009, as the company absorbed major acquisitions such as services company Electronic Data Systems, software vendor Mercury Interactive, network equipment maker 3Com and smartphone outfit Palm.

But it was his focus on the bottom line that really shone through. In that same period, non-GAAP earnings per share soared nearly 140 percent, as Hurd cut costs and jobs.
Susquehanna Financial Group analyst Jeff Fidacaro said there is still some fat to be trimmed off HP's printing and PC groups. The restructuring Hurd began is only in the "seventh inning," he said.
But the Palm integration, where HP will look to take on Apple in the smartphone and tablet space, will also be a major challenge, he said.
Although Hurd did a great job resuscitating HP, Fidacaro said the company should look for a somewhat different set of skills in his successor.

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"What this person needs to add to the equation is that visionary product innovation, as well as understanding how to integrate multiple divisions and driving organic growth," he said.
JPMorgan analyst Mark Moskowitz said fiscal discipline became ingrained in HP during Hurd's tenure. He also used the word "visionary" to describe what HP needs, someone who can make the company less reliant on PCs and printers.
The printing group made up around 20 percent of HP's sales last fiscal year, but roughly one-third of operating income.
"HP is a solid IT portfolio company that already has capable CEO-like managers heading its key business groups. The missing pieces are meaningful participation in consulting services, software and networking technologies," he wrote in a research note.

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Ex-Paratrooper sentenced for eBay military goods sales

A former paratrooper has been given a 10-month sentence, suspended for two years, for handling stolen military goods and selling them on eBay.

Ex-Parachute Regiment warrant officer Allan Peet, 46, of Bridgend, admitted handling more than £6,500 worth of military boots, day sacks, hydration systems and ration packs.

He was caught by a Ministry of Defence (MoD) anti-theft and fraud operation.The judge at Cardiff Crown Court described his behaviour as a disgrace.
The court heard that the equipment, taken from MoD stores at RAF St Athan in the Vale of Glamorgan, should have been going to soldiers in the frontline but ended up in Peet's garage in Bridgend.
He sold the MoD goods to online enthusiasts, the court was told.
Prosecutor David Webster said: "The items involved are day sacks and military issue footwear. They are not available to members of the public.

Start Quote

It beggars belief that you would take a risk and let down so many people who think so highly of you”

End Quote Judge Rhys Rowlands

"They are sold exclusively by the Ministry of Defence and when they were noticed on eBay an investigation started."

Mr Webster said the seller's ID on eBay was traced to Peet's home and his house and garage were searched.
The court was told boots and specialist military rucksacks were found.
Mr Webster said Peet told police he had bought the equipment at a car boot sale but admitted the items were probably stolen.

Allan Peet was caught by a Ministry of Defence (MoD) anti-theft and fraud operation

Judge Rhys Rowlands told him: "It was greed on your part."
He added: "The loss to the Ministry of Defence was in the region of £5,000.
"In this present climate one is aware the limited funds are needed to support those whose lives are on the line.
"It beggars belief that you would take a risk and let down so many people who think so highly of you."
Peet was also ordered to pay £1,000 costs and undertake 250 hours unpaid work.
The court heard Peet had a long and "distinguished" military career, serving in Iraq, Sierra Leone, Kosovo and Northern Ireland in a 23-year career.
Since leaving the Army in 2004, he had trained cadets at RAF St Athan and was a paid instructor at a military preparation college.


'Disciplinary process'
A spokesperson for the Military Preparation College said: "Mr Peet's conviction has triggered a formal disciplinary process in line with the college's code of conduct.
"The college is currently closed for the summer holiday and we will be seeking to complete the process before we reopen in September.
"The college expects the highest standards from all staff and will conduct this process accordingly."

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GM CEO steps down on cusp of IPO filing

DETROIT (Reuters) – General Motors Co Chief Executive Ed Whitacre resigned on Thursday in an abrupt shift that came as the automaker hit the homestretch in preparing a stock offering to pay back its controversial bailout.
Dan Akerson, 61, a veteran private equity investor little known in the auto industry, replaces Whitacre as of September. Akerson had been appointed by the Obama administration as one of the directors meant to safeguard the government's $50 billion financing to restructure GM.

Whitacre's departure had been expected, but the timing of his announcement caught even insiders off guard, a day before the top U.S. automaker was expected to file the paperwork for a landmark stock offering just over a year after its emergence from bankruptcy.
Whitacre, who continued to commute from his home in Texas during his stint as CEO of the Detroit-based company, had said repeatedly he would be an interim leader.
Akerson, also a former CEO at Nextel, becomes GM's fourth chief executive in just a year and a half, underscoring the challenge in remaking an automaker still in the early stages of a turnaround.
"We still have important work ahead of us, but I am confident that we are building the foundation for GM's long-term success," Akerson said in a hastily arranged appearance at the end of a conference call to discuss the automaker's second-quarter earnings.
The question of Whitacre's tenure was raised at a GM board meeting about two weeks ago when former director Kent Kresa, 72, tendered his resignation, according to a person with knowledge of the private proceedings.
Kresa had been on the GM board since October 2003 and had reached the mandatory retirement age.
At the same meeting, Whitacre, 68, made it clear that he wanted to step down as CEO at the end of the year, about a month after GM is expected to launch an IPO on track to be one of the largest ever.
Board members asked Whitacre if he would consider committing to a longer term, but when he would not, the board turned to Akerson, who had been a candidate for the CEO post after the 2009 departure of former CEO Fritz Henderson, according to the person.
The U.S. Treasury said GM's board made the decision on the CEO change. Officials who asked not to be named said that there had not been any tension between Whitacre and the Obama administration on the direction of GM.

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