GM posts $865 million Q1 profit, cites turnaround progress Staff and Wire Reports Automotive News -- May 17, 2010 - 8:34 am ET UPDATED: 5/17/10 10:48 a.m. ET
DETROIT -- General Motors Co. posted first-quarter net income of $865 million and said it is making progress in a turnaround expected to put it on track toward its first full-year profit since 2004.
CFO Chris Liddell said the results showed GM had a "good chance" of turning a profit for 2010. But he declined to offer any specific forecast for the remainder of the year and said that while an initial public offering was possible over the next year, the timing remained uncertain.
"Now that we have achieved profitability, the next step is to achieve sustainable profitability," Liddell told reporters.
Revenue rose to $31.48 billion from $22.43 billion in the pre-bankruptcy GM a year earlier. The net income figure of $865 million -- after preferred stock dividends of $203 million to the U.S. and Canadian governments and the UAW -- compared with a loss of $5.98 billion a year before.
The automaker generated $1 billion in free cash flow during the quarter and said it ended the period with $35.7 billion in cash.
GM received $50 billion of U.S. government financing for its restructuring in bankruptcy and has been aiming to launch an initial public offering that would allow the U.S. government to reduce its majority stake in the automaker later this year.
CFO Liddell today put some conditions on that timing. GM will make an IPO only "when the markets and the company are ready," he said in a conference call. "What's out of our control are the readiness of the markets and the status of the global auto industry."
In addition, GM Controller Nick Cyprus cautioned that GM must further refine its internal financial controls before company managers have a clear view of financial performance. He expressed optimism that would be accomplished before an IPO.
"The unfortunate process of bankruptcy is yielding positive results," Rebecca Lindland, an analyst at IHS Global Insight, said in an interview. "It certainly keeps them on track for an IPO."
GM North America and the company's international operations each had profits before interest and taxes of $1.2 billion, while the automaker had a $500 million loss in Europe.
Government control
Under the terms of GM's restructuring, almost 61 percent of the automaker is owned by the U.S. government. Canada and the province of Ontario own nearly 12 percent.
GM posted a $4.3 billion loss in 2009 for the period between early July, when it emerged from a bankruptcy steered by the Obama administration, until the end of the year.
The results underscore the progress GM has made in slashing costs by reducing debt, cutting jobs, closing factories and dropping brands. GM now relies on four U.S. brands -- Chevrolet, Buick, GMC and Cadillac.
Analysts have said GM still faces steep challenges in repairing the reputation of its brands in its home market and reversing a long-running slide in market share.
GM was able to match the U.S. industry's 16 percent sales gain in the first quarter despite selling Saab and winding down Hummer, Saturn and Pontiac. Its market share was 18.7 percent.
Ford's rebound
Rival Ford Motor Co. posted a $2.1 billion first-quarter profit and has forecast that it will be solidly profitable for 2010, a year ahead of its previous turnaround target.
GM CEO Ed Whitacre said last month that an IPO that would make GM a listed company again was a possibility later this year or in 2011.
In a step aimed at strengthening GM's ability to compete ahead of a possible IPO, Whitacre and other GM executives have been looking at options that would allow the automaker to reestablish a captive auto financing arm, people with knowledge of the plans said last week.
Liddell said today that while GM needs access to financing, he was not sure the automaker needs a captive financial arm.
Such a move would mark a nearly complete reversal of the process that started in late 2006 when GM sold off a controlling stake in GMAC to Cerberus Capital Management in order to raise cash for its own restructuring.
GMAC, now known as Ally Financial, is 56-percent owned by the U.S. Treasury after the government injected $17 billion as part of a restructuring that also saw the finance company become a commercial bank.
Reuters, Jesse Snyder and Bloomberg News contributed to this report.
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