GM posts $865 million Q1 profit, cites turnaround progress
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
"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.
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.
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
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
Reuters, Jesse Snyder and Bloomberg News contributed to this report.