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On the Eve of its IPO, a Newly Profitable GM is Still Dogged by Perception Problems

General Motors still has trouble with the respect thing. That's true despite the fact that, by most measures, the bailout of GM has been a considerable success. Thanks to $50 billion in TARP funds and a timely government-handled reorganization, GM just posted a $2 billion third quarter profit, and as it closes in on a $13 billion IPO, it's paying down its debt to the taxpayers.

What's more, the company is about to roll out its shining star, the Chevrolet Volt, at the Los Angeles Auto Show next week. It's riding high by many measures, but still getting itself into trouble on perception issues.

GM's bailout became a Tea Party target during the election, and the situation hasn't changed much now that the vote is in. Even from many Republicans normally friendly to the Big Three, there's a sense that the company pulled a fast one on taxpayers, and are still practicing some kind of sleight of hand as it announces profits and paybacks.

A Rasmussen Reports poll of 1,000 likely voters just before the election found 53 percent opposed to the GM and Chrysler bailouts, and intending to vote against any elected representatives who voted for them.

I interviewed Congressman Devin Nunes (R-CA), who says he was espousing Tea Party principles before there was a Tea Party. Nunes' "Roadmap for America's Energy Future" would fast-track 2,000 nuclear power plants and open the outer continental shelf and the Arctic National Wildlife Refuge to oil drilling.

Nunes, who calls himself "a limited-government guy," reacted sourly to the news of GM's progress. He doesn't believe in bailouts, and thinks the fate of GM should have been left to the free market. Nunes' model is Ford, which resisted a federal bailout. The injustice, the congressman said, is that Ford arguably is now in a worse financial position than GM. That's an interesting conclusion, perhaps justified by the fact that GM will emerge from its IPO worth $41 to $49 billion, equal to smaller but high-flying Ford.

But just getting to the IPO and partial payback stage is an achievement that some observers didn't think would happen. Veteran reporter Paul Ingrassia, in his book Crash Course, wrote:

It won't be easy for an IPO to raise $52 billion for the government shares. That's more than Ford Motor's current market capitalization, some $48 billion. And Ford, the only U.S. car company to avoid bankruptcy, already is profitable, which GM isn't. For GM to show sustained profits means doing business in a new way and breathing new life into long-moribund brands.
Still, the Treasury Department, and thus the taxpayers, is likely to lose $4.9 billion as its share of GM drops from 60.8 percent to 43 percent, and that is convincing some observers that the government just wants to get out as soon as possible.

Anger against GM is likely to fade as memory of its days on the federal dole are further in the rear-view mirror. But the company is still displaying public relations blind spots. For instance, it announced that it is using private charter flights to ferry some executives to meetings with prospective investors. How could they, when it was the private jets the Big Three took to Congressional bailout hearings that was a turning point in the public's attitude towards the companies?

According to Obama auto czar Steven Rattner's Overhaul, GM's Washington PR person urged the company's CEO, Rick Wagoner, to fly commercial to the 2008 hearings, but he declined. Wagoner told Brian Ross of ABC-TV, "I have meetings. I have a tight schedule." Rattner's distress over Wagoner's aloof manner as his company imploded is palpable in the book.

GM has a raft of new products, including its shining star, the "range extender" Chevrolet Volt. But its poor PR skills were on display when it became apparent that the Volt would not be, as the company had said, all-electric, all the time. Instead, it blends mechanical power from the gas engine with electric energy under certain conditions, as determined by the car's computer.

GM could have said that from the beginning, or simply declined to "go there" when talking to reporters. Further, the story seemed to change over the course of about a week, so it dragged out a crisis that had some bloggers using headlines like "GM Lied."

I talked to Jeff Ansell, a former television reporter whose new book is When the Headline is You: An Insider's Guide to Handling the Media. "What GM should have done is be forthright and honest from the git-go," he said. "This is causing GM to be lumped in the same category as Toyota when it mishandled the sudden acceleration issue. Things like this put GM behind the 8-ball, and it's hard to move forward from something like this."

The Volt will survive -- it is, after all, a really cool car, and undoubtedly more efficient because it does use the gas engine strategically. And although there was a big brouhaha on the Internet, the public isn't really going to care about this kind of inside baseball issue. But the company doesn't seem to want to acknowledge that it could have handled the whole thing better.

According to GM spokesman Rob Peterson, "From a consumer perspective, the Volt is an electric vehicle with extended range. I'm driving one myself, and I haven't used gas in 10 years. We've always said it was an extended-range car that used its gas engine in a variety of ways."

Yes, GM said all that, but still left the impression that it was covering stuff up. Who said, "Perception is reality"? It's kind of true when you talk about General Motors in the post-bankruptcy era.


Photo: General Motors