Ever wonder how General Motors is holding onto its top talent? 

After a traumatic bankruptcy and series of federal bailouts, the company still owes billions of dollars to the U.S. and Canadian governments. It lost $1.2 billion in its latest quarter, and only sees a slight uptick in auto sales next year.    

The days of banner-year profits and bonuses must seem far off for GM’s executives and finance staff.  GM’s Chairman has already said pay caps imposed on companies by the U.S. government’s pay czar make it tough to hire executives.

While other job opportunities are obviously limited in Detroit, and they may have nowhere better to go in the industry,  the company’s plans for a 2010 IPO has emerged as a key staff retention tool, one of its top executives said on Tuesday.

In comments to the Financial Executives International Current Financial Reporting Issues conference in New York, Nick Cyprus, vice president, controller and chief accounting officer at GM said:

“I have a tool that my peers don’t have. We have an IPO coming up in the next half-a-year to a year or whatever it takes. That’s a great tool, too. Getting the experience of taking General Motors public again is not only a great tool from an experience perspective and resume builder, but it’s also a great experience in that if things work out well there are potential wealth opportunities. In essence, the taxpayers get paid back and people who have delivered get an opportunity to make some money.”

GM  is planning to arrange a revolving line of credit in preparation for an eventual IPO, which would probably be one of the biggest in 2010 if it is able to keep up with its time schedule.

If you were a GM employee, or an investor for that matter, how excited would you be about this IPO?

Major automakers don’t sell cars to American consumers; they sell to dealers. And the biggest U.S. dealership chain by a wide margin is Fort Lauderdale, Florida-based AutoNation, which sold over 440,000 new and used vehicles last year.

So when AutoNation CEO Mike Jackson talks, auto executives listen — or so you would think.

In an interview with Reuters, Jackson said Detroit automakers had largely ignored his warnings over the past decade that the U.S. industry was headed for a crisis.

“I think I was usually able to reach an intellectual agreement on where the industry was headed. Where we disagreed was how much time we had to get there. On that, even I was wrong. Time was up,” Jackson said.
 
Jackson thinks GM and Chrysler can be fixed. But he also thinks Washington should let either or both fail if their current turnaround effort backed by $60 billion in taxpayer funds falters.
 
Here are excerpts from the interview and Jackson’s view of where GM, Chrysler, Ford and their rivals stand now in the marketplace:

Q: Are GM and Chrysler capable of change?

A:I think they had a near-death experience. When you really get down to the point where we either get this done or we won’t exist anymore, then it happens. …My sense is that absolutely Sergio (Marchionne) is providing leadership at Chrysler and (Fritz) Henderson at GM. It’s under way, and it’s going to happen.
Q: You’re looking to buy Ford and GM dealerships. Why is that?

A: We always bet on the biggest, broadest brands. Now we’ll take a look if the pricing and the opportunities are right. We love Chevy and we love Ford. Those are the brands that will succeed in the future. Those are the brands that are going to get the majority of the product and marketing dollars from those companies. They’re also the broadest brands. You can sell everything from Chevy from a Corvette to an Aveo. It’s unbelievable how well accepted and how approachable those brands are for the American consumer.

Q: Are you withholding judgment on Chrysler?
 
A: I think Chrysler has the biggest challenge of any of the companies that are out there. It’s been through the biggest turmoil for the longest time. It’s product pipeline is the most disrupted so let’s wait and see. But with Ford you can see that they’re clearly gaining momentum. The product development at GM was not nearly as disrupted as what happened at Chrysler, so they’re in good shape. Chrysler has the most difficulty, so we’ll take a wait-and-see there. Plus they don’t have an anchor volume brand like a Chevy or a Ford. They have a great brand in Jeep. There’s always a place for Jeep in the world. They have a good brand in Dodge but it can’t compare to a Chevy or a Ford. Then you have Chrysler, which is probably a head-scratcher of a brand. It’s a more complicated situation over there.
 
Q: Is the government’s role finished in supporting the U.S. auto sector?

A: The catastrophic economic crisis that hit its peak with the bankruptcy of Lehman Brothers, and I say this as a Republican,  was so massive and catastrophic, the only entity that had the size and scale and skill to step in and save the day was the U.S. government. It needed to do everything or we were looking at the next Great Depression and industries like automotive would have been swept away. So, they did it. You can criticize this and you can criticize that but they saved the day. Now they have to gradually unwind it and you need to look at the lessons learned so that we never again face a systemic collapse of the American economy and free enterprise. We were on the brink of that.
 

Q: But the government’s direct role is finished now?
 
A: I think so. Here’s my view: The economy is going to gradually improve and if one of  these companies — GM or Chrysler — falters, they’re going to let it go. At 10 million (unit sales) facing the Great Depression, we couldn’t handle one of these companies going down and the domino effect it would have on the entire industry. But if two years from now one of these companies is faltering and the economy has recovered and sales rates are up to 12 or 13 million, then they should face the consequences of that.
    
Q: Popular opinion would seem to agree with that.
 
A: Well, I agree from a business point of view. I think Chrysler and GM understand that. They know that this is their one shot and I think that’s understood by the boards and it’s understood by management. That’s why I’m so optimistic that change is going to happen.

(Writing and Reporting by Kevin Krolicki, Detroit Bureau Chief. Reuters photos by Rebecca Cook.)

Once upon a time, when $1 million was big money, General Motors spent millions on an advertising campaign on three U.S. television networks featuring the sing-along slogan, “Baseball, hot dogs, apple pie and Chevrolet.”

Powered by the link between Chevrolet and other American loves, GM’s share of U.S. auto sales was 35 percent in 1980. In 2009, GM’s share of the American auto market is a mere 19 percent, as it struggles with a backlash from an unpopular federal bailout and bankruptcy.

Chevrolet is hardly as American as apple pie anymore, but Chevrolet and GM will soon launch an aggressive marketing campaign to change deep-set perceptions of American consumers that GM cars and truck are inferior to imports like Toyota and Honda. The campaign, which will feature new company chairman Ed Whitacre and the slogan, “May the best car win,” will challenge notions of inferior products and will be waged on a myriad of television networks and print publications, but will also employ the Internet.

It will be an uphill battle. Perceptions are hard to change.

“This has been a problem for a long time for GM,” said David Cole, who heads the Ann Arbor, Michigan-based Center for Automotive Research. “It’s always the case that perception lags reality — no matter which direction you are heading in. The Japanese companies faced this for years.”

In the early 1970s, the mention of a Japanese car including today’s global sales leader Toyota and of the highly rated Honda , brought snickers from Americans. “Made in Japan,” was a punchline for jokes by American comedians, which reinforced the perception of poor quality.

But within a couple of decades, helped by sharp increases in U.S. gasoline prices in 1973 and 1981, Japanese cars became known for quality and for producing models that got great gas mileage.

GM relinquished the leading global automaker mantle to Toyota last year, mostly because of the perception of poor quality autos developed over several decades. This notion was supporeted by surveys and road tests done by groups like Consumer Reports.

Recently, GM brands Chevrolet, Buick, Cadillac and GMC Trucks have gotten improving marks from reviewers.

In June, J.D. Power and Associates said its surveys showed that Chevrolet and Ford had almost wiped out the gap with Toyota in new car quality. To back up its faith in its products, GM will next week introduce a 60-day money-back guarantee for its new cars and trucks. It is part of what GM vice chairman Bob Lutz called a “barrage” of advertisements.

Lutz said that while readers of auto publications may be aware of the narrowing quality gap, most American consumers will be much harder to convince that GM has caught up with the likes of Honda and Toyota.

“This is a big bet on the power of communication and effective advertising in changing public perception,” GM Vice Chairman Bob Lutz said.

A web site set up in advance of the GM ad campaign underscores the hurdle it faces with consumers. The site — www.thebestcarwins.com — invites visitors to rank vehicle brands for fuel economy, safety and quality.

As of Thursday evening, leaders of the survey in the five categories were:

Fuel efficiency - Toyota

Safety - Volvo

Quality - Honda

Performance - BMW

Best car - BMW

That will ultimately be the question asked about what kind of a future the German carmaker Opel faces.

Parent General Motors said on Thursday that it indeed wanted
to sell a majority stake in the unit to Canadian auto parts
group Magna and Russia’s Sberbank, a decision long favoured by the German government under Chancellor Angela Merkel.

With about two weeks to go until a general election in
Europe’s biggest economy, this would clearly be a political
victory — but the question remains whether it will also be an
economic one.

Merkel said that GM’s recommendation — which would see
Magna’s Brussels-listed rival bidder RHJ International losing
out in the battle that has dragged on for months — is going to
be tied to conditions.

Although she said that those conditions would be manageable and
negotiable, doubts remain about whether this will be the new
beginning the company is hoping for.

“The most meaningful choice would have been a global company
that produces several millions of cars (per year), such as GM or
a Chinese producer. Magna is not a producer of cars in the
classic sense, and I could imagine that some other producers
could be upset about the decision. As a consequence, Opel may
lose some contracts,” said NordLB analyst Frank Schwope.

“This seems to be a political decision rather than an
economical one.”

What do you think?

As of Friday, there was no knowing how much longer funding for the program will last. The Obama administration has reassured car shoppers and dealers that any trade-ins over the weekend will be honored at rebates for up to $4,500. Meanwhile, the U.S. House rushed to triple funding  for the program, adding another $2 billion in a bill that heads to the Senate where it could face tougher scrutiny.

U.S. car sales for July, set to be released on Monday, are expected to show a turbocharged boost from the government program, a sleeper success in a string of policy steps aimed at stabilizing the U.S. auto industry that has included government-sponsored bankruptcies at GM and Chrysler.

Before the rush of clunker trade-ins, analysts had been looking for industry-wide July auto sales to top 10 million units, the highest rate of 2009 and an encouraging sign the market has turned the corner. Investors have discounted some of that recovery. Shares in AutoNation, the No. 1 dealership group, have gained 48 percent since the start of the second quarter. Shares in the No. 2 dealership group, Penske Automotive Group, have more than doubled.

With inventories tight, automakers also stand to gain as production — and revenues — increase in the second half. July sales data will help sort the winners from the losers, but the early anecdotal evidence suggests that the some of the biggest gains have gone to the automakers that were already outperforming.

Porsche isn’t the only family-controlled German company that has got itself into a complete pickle bidding for a far larger rival.

    Indeed, if you want a test case of how ambition can land a company in serious financial difficulties, look no further than Schaeffler, a privately-owned ball bearings maker which has
seriously overextended itself following a bid for listed car parts maker Continental last year.

    Despite snapping up 90 percent of Conti’s stock, Schaeffler could easily lose control of its intended prey and may end up being swallowed by it.

    Following the bid battle, Schaeffler holds a 49.9 percent direct stake in Conti. A further 39.36 percent is held by Schaeffler's banks -- Sal Oppenheim and Metzler -- in a sort of warehousing deal to reflect the fact that Schaeffler does not actually have the money to buy the whole of Conti. Schaeffler has signed an agreement that it will not increase its stake above the current level prior to August 2012.

    This leaves Schaeffler in an awkward spot. It cannot consolidate Conti and the two companies continue to be run as separate units in an uncomfortable stand-off. Conti is not paying a dividend, meaning that Schaeffler can only finance the stake out of its own earnings. Meanwhile, Conti’s share price has fallen sharply from the 75 euros Schaeffler paid a year ago
to around 25 euros now.

    Both companies are highly leveraged. Schaeffler has debts of about 11 billion following the Conti takeover, while Conti has net debts of a similar amount -- just over 11 billion -- mostly the result of its purchase of VDO from Siemens. Its debts are equivalent to 71 percent of its enterprise value.

    It is Conti’s high debts which, paradoxically, may allow the target to turn on its pursuer. It must repay 3.5 billion euros ($5 billion) by the middle of next year and intends to raise equity to meet part of this liability. The only alternative would be to sell assets at low prices, which would hurt Schaeffler. There is talk of an equity issue to raise 1.5 billion euros.

    Unless Schaeffler was able to come up with the 750 million euros it would need to follow its money, its direct stake would be diluted. It is hard to see why its banks would invest either -- especially if they are relying on Schaeffler to take them out of their holdings at some point.

    Even though Schaeffler’s representatives dominate Conti's supervisory board, it would be difficult for them to torpedo a fundraising unless they had an alternative funding plan. Moreover, a cash crisis at Conti would hurt them very severely.

    Conti seems to be talking about issuing shares at a discount of around 15 percent to the current level. This looks very tight. But were it to do this, and Schaeffler did not invest, its direct stake would fall to 35 percent. And assuming its banks did likewise, the total stake would fall to 63 percent.

    Conti's chief executive Karl-Thomas Neumann, wants to seize the initiative and merge the two businesses. Following the capital raising, Conti’s equity value would be a touch under 6 billion euros. Neumann clearly thinks that would make it considerably bigger than Schaeffler. His proposal would be to push together the two businesses under Conti’s control.

    Unsurprisingly, the Schaefflers do not welcome the idea of being scrunched down in this way. True it would give them access to a listing, synergies from the merger and the possibility of repaying some of their heavy debts. But it might also deprive them of control.

    They are wriggling on the hook. They seem to believe, with the advice of JP Morgan, that their private company has an equity value of some 10 billion euros. On this basis they have rejected Conti’s advances.

    Meanwhile, Schaeffler is trying to get to grips with its own debts, hiring restructuring experts Houlihan Lokey to help out. It has bought itself some time with a 1 billion euro bridge loan.

    The outcome is likely to be decided by the bankers. And here it looks as if Conti has the edge. It is taking steps to cut its debt, while pushing for a resolution of the stand-off between
itself and Schaeffler. Meanwhile, Schaeffler looks to be playing for time while trying to stave off a deal by relying on what may be an unrealistic valuation for its own business.

    Conti has recently attacked Schaeffler publicly, accusing it of destroying value and behaving irresponsibly. If the bankers decide they want a deal, it may well be on Conti’s terms.

A U.S. federal judge has authrorized the sale of General Motors’ most profitable assets to a “new GM,” backed by the government, in a move seen as crucial for the automaker to exit bankruptcy protection.

The decision by Judge Robert Gerber of the U.S. bankruptcy court in Manhattan came after three days of hearings to address the 850 objections to the restructuring plan. In his 95-page opinion, Judge Gerber wrote that the sale would “prevent the death of the patient on the operating table.”

Under the terms of the revised deal, G.M. would sell its best assets, including the Chevrolet, Cadillac, Buick and GMC brands, to a new company owned largely by the American and Canadian governments and a health care trust for the United Automobile Workers union.

That still leaves the question of the “old GM,” which includes Opel, Vauxhall and Hummer. Just as people thought that GM’s plan to sell Opel and Vauxhall to Canadian auto supplier Magna International was a done deal, China’s Beijing Automotive Industry Holding made a concrete offer to buy both brands for $924 million. That leaves the future of Opel uncertain for now.

Also not a done deal: GM’s plan to sell Hummer to China’s Sichuan Tengzhong. The potential buyer is in talks with Chinese regulators to win approval for its acqusition, but there are no guarantees it will get the green light.

GM cleared several of the hurdles on its way out of bankruptcy Thursday at a court hearing in Manhattan. The federal bankruptcy judge gave GM the final ok to tap the rest of its $33.3 billion bankruptcy financing and a lawyer for asbestos claimants withdrew a request for official committee status. Other obstacles including the status of non-union retirees rights to healthcare benefit– are on the agenda for the afternoon. We’ll be filing updates from the hearing in the live headline box below and on our Twitter feed.

What’s surprising: Talks for General Motors Corp’s Opel failed to yield a deal.

What’s not-so-surprising: GM needs cash. Again.

Talks that ran all through Wednesday night to sell Opel to one of four final bidders narrowed the race to two but failed in sealing a deal. German ministers, emerging in the early hours of Thursday morning after more than 12 hours of talks, blamed GM and the U.S. Treasury for the failure.

Why? Because GM, the ministers say, shocked participants by announcing it needed 300 million euros ($415 million) more in short-term cash from the German government to  keep Opel operating.

Italian automaker Fiat and Canadian auto parts supplier Magna remain in the race to buy Opel. Belgian private equity firm RHJ International is out. China’s Beijing Automotive Industry Corp was not present at the meeting but the option for it to return with a more detailed offer remained open.

Meanwhile, GM, which has lost $82 billion in the past four years and has received $19.4 billion in government funding since the beginning of this year.  It has also said it would likely need $7.6 billion from the U.S. Treasury after June 1. Buy GM cars or not, they sure are getting your money.

Reuters’ Emily Chasan will be sending live updates from the Indiana pensioners’ challenge to Chrysler’s bankruptcy in U.S. District Court scheduled to begin at 11:30 am on Tuesday. Read her updates on DealZone or follow the DealZone Twitter account.