By Clare Baldwin, Soyoung Kim and Kevin Krolicki

NEW YORK/DETROIT, (Reuters) - The U.S. government islikely to take a loss on General Motors Co in the firstoffering of the automaker's stock, six people familiar withpreparations for the landmark IPO said.

Subsequent offerings of the government's holdings may beprofitable depending on how investors trade the newly listedstock, the sources said.

But the question of whether taxpayers are ultimately madewhole on GM's $50 billion bailout could be left open for years,the people said.

It could take more than three years for the Treasury tosell down its remaining stake in GM after the IPO, one personsaid. That would push a final accounting into the nextpresidential term.

A decision to price the initial GM shares below the cost totaxpayers would follow the usual Wall Street practice of givingthe first investors in a new stock a discount, but it couldalso help allay investor concern in the face of the slowrecovery of the U.S. economy and flat auto sales.

Preparations for GM's IP0 remain confidential. Both GM andthe U.S. Treasury have declined to comment, citing restrictionsby U.S. securities regulators.

The Obama administration has pledged to exit its investmentin GM as quickly as possible while holding out the prospectthat taxpayers could ultimately be paid back in full.

Treasury spokesman Mark Paustenbach declined to comment. GMspokesman Tom Wilkinson also declined to comment.

GM plans to begin a roadshow for its IPO immediately afterthe Nov. 2 U.S. midterm congressional elections, paving the wayfor a stock debut on Nov. 18, sources have said.

GM in August filed paperwork for an IPO that couldpotentially be worth as much as $20 billion, making it one ofthe biggest IPOs of all time.

The U.S. Securities and Exchange Commission is nowreviewing the automaker's S-1 filing.

Analysts and potential investors have projected a marketvalue for GM of between $50 billion to around $90 billion,based on projections for the automaker's cash flow, comparisonswith rival Ford Motor Co and trading in bonds in the oldGM which are convertible into shares in the new company.

A market value at the high end of that range would be abovethe roughly $70 billion in market capitalization that GM needsto achieve for the U.S. government to break even on its $43billion remaining investment in the automaker.

But IPOs typically price at a discount of 10 percent to 15percent to theoretical fair value to reward investors fortaking a risk on a new issue and pave the way for future stockfloats. In tough market conditions, that discount can be evenlarger.

"You have to sell people on the notion that there is anupside to what they are buying," one of the sources said.

Another of the sources said the discount could be as muchas 20 percent on the GM IPO compared with the U.S. Treasury'sbreak-even point.

Preparations for the GM stock offering remain in the earlystages. A number of the sources cautioned that the size andvalue of the deal and the size of the stake to be sold by theU.S. government have not been determined and will not be setfor weeks.

GOVERNMENT STAKE IN 'GOVERNMENT MOTORS'

The U.S. government pumped $49.5 billion worth of taxpayermoney into the automaker and took nearly 61 percent of itscommon stock.

GM has paid back $6.7 billion in debt to the Treasury andreturned another $700 million in interest and dividends. TheU.S. government also holds $2.1 billion in perpetual preferredshares in the automaker.

That leaves the government with a roughly $40 billioninvestment in the GM common stock that will debut in an IPOalong with a new class of preferred shares that will convertinto common shares under a mandatory provision.

In the days leading up to GM's August S-1 filing,Republican Senator Charles Grassley asked a special TreasuryDepartment watchdog for an analysis of the GM IPO and how muchmoney would be returned to taxpayers.

In its pitch to potential investors, GM will tout itsglobal reach, recent gains in quality and pricing in its homemarket, and its sharply lower cost of operations after its 2009bankruptcy, sources have said.

GM's $1.3 billion second-quarter profit was its biggestsince 2004, when industry-wide U.S. sales were near 17 millionvehicles compared with the 11.5 million sales rate of August.

But GM will have to address investor concern that growth inindustry car sales in the U.S. in the second half of 2010 andinto 2011 will likely be slower than analysts had expected justa few months ago.

At the same time, GM will have to confront a pensionshortfall that remains a liability from its pre-bankruptcyoperations.

GM eliminated about $40 billion in unsecured debt and otherobligations in bankruptcy, but the automaker still needs toaddress a pension shortfall estimated at about $26 billion.

A successful IPO would be a political victory for the Obamaadministration and would help GM distance itself from criticswho dubbed it "Government Motors" after its bailout. (Reporting by Clare Baldwin and Soyoung Kim in New York andKevin Krolicki in Detroit; editing by Carol Bishopric)