General Motor's CEO, Dan Akerson, recently proclaimed that GM's balance sheet was "pristine" and that the company was aiming to have zero debt in the future. I guess the question is, "how do you define pristine?"
The recent prospectus for GM's Preferred Series "B" share offering gives the following accounting of some of the company's liabilities: as of September 30, 2010, $10.3 billion of outstanding debt and $9 billion Preferred Series "A" obligations. In addition, there are still under-funded UAW pension obligations of over $20 billion. The Preferred "B" share offering was for another approximate $4.5 billion of shares paying a 4.75% dividend. This is money that GM already has mostly committed to UAW obligations.
The media may want to take a break from its rooting for General Motors, not to mention its hype surrounding the Chevy Volt. 
Earlier this month, General Motors made a $4 billion cash contribution to its UAW pension fund. Reports state that an additional $2 billion worth of GM common stock will be contributed to the fund. What is not being reported is where the stock is coming from.
General Motors recently reported that it has a 93 to 95 day supply of vehicles at dealerships in its latest inventory report. This is well above the industry average of a 67 day supply, as well as exceeding analysts recommended 60 day supply. According to Jim Bunnell, general manager of GM's dealer networks, the reason is because they expect strong demand for vehicles. There is a more likely reason that should be a cause of concern for GM's new shareholders.
The General Motors' IPO has lead to the Obama Administration declaring victory for a successful GM restructuring. GM executives echo the optimistic view of a now healthy auto company with a "fortress like" balance sheet since the infusion of over $50 billion of taxpayer money. There is still one major test left to see just how healthy GM is.
It would be easy to believe that the GM IPO is an opportunity to make easy money based on the reporting by television news networks. Themes such as allowing retail investors to "benefit" from the IPO imply that GM stock has no where to go but up. However, under the surface of this optimistic appearance lurk some hazards.
