GM loss of $1.5 billion in 3rd quarter "not satisfactory" according to CEO
Monday, November 16, 2009 at 03:30PM Calling the loss of $1.5 billion in its third quarter "not satisfactory," GM's CEO Fritz Henderson nevertheless put a positive spin on his company's post-bankruptcy performance. The company increased its operating cash by $3.3 billion from July 10 to Sept. 30, ending the quarter with $42.6 billion on hand, prompting Henderson to remark that this is "well in excess of what we would have thought." Revenue rose to $28 billion for the quarter, up $4.9 billion from the second quarter. Reduced costs and improving sales—October sales in the US rose 5 percent for their first year-over-year gain since January 2008—will allow the company to begin paying back $6.7 billion in government loans next month, much earlier than required under the loan terms. Loans to both the American and Canadian governments could be paid back by the end of 2011, while he hopes to repay the German government entirely by the end of November.
The $6.7 billion is only a small fraction of what the company owes, however. The government owns 61 percent of the company as a result of more than $50 billion in loans given since last December. The Government Accountability Office, the investigative arm of Congress, said in a report issued earlier this month, that the automaker's share values would have to soar to levels they didn't even approach when they were healthier for the billions in taxpayer loans to be completely repaid. GM is planning to issue an IPO next year. How well its stock does will determine how much of the debt can be repaid.
While the company's financial position remains serious, it is less so than before bankruptcy when losses from January, 2005 until June, 2001 totaled $88 billion. Debt is down as well, currently at $17 billion, compared to $94.7 billion before bankruptcy. And GM has cut structural costs from $37.8 billion for the first nine months of 2008 to $31.1 billion for the same period this year. More than $2 billion has gone to cutting payroll through buyouts and early retirement, and to cutting roughly 2000 dealerships in the US.
To help clear 2009 inventory, General Motors is launching an incentive program this week on each of the four remaining brands: Chevrolet, Buick, GMC and Cadillac. Pontiac and Saturn will disappear at the end of the first quarter.
China an important market for GM
China has also emerged as an important source of profit for GM with sales in GM's sales in China expected to have doubled during the third quarter compared with a year earlier. Sales reached 478,000 vehicle sales in China, putting them about equal with sales in the US. GM is holding its US market share of 19.5 percent.
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