Special Report: Global Financial Crisis >>
General Motors Corp. President and CEO Fritz Henderson speaks during a news conference at company headquarters in Detroit, Monday, Nov. 16, 2009. General Motors Co. says it lost $1.2 billion from the time it left bankruptcy protection through Sept. 30, far better than it has reported in previous quarters and a sign that the auto giant is starting to turn around its business.
General Motors Co. said Monday it lost $1.2 billion from the time it left
bankruptcy protection through Sept. 30, far better than it has reported in
previous quarters and a sign that the auto giant is starting to turn around its
business.
The company also said it will begin repaying $6.7 billion in USgovernment
loans with a $1.2 billion payment in December. It plans to repay the debt over
the next eight quarters, but could pay it back as early as next year. But the
money will come from funds loaned by the government.
GM said its improved performance was fueled by new products including the Chevrolet Camaro muscle car, and the Chevrolet Equinox and GMC Terrain midsize
crossover vehicles. The company's top sellers through October were the
Chevrolet Silverado pickup truck and Impala full-size car.
The better showing also reflected lower debt payments. The automaker paid
$250 million in interest for the latest period, far lower than the $1.1 billion
it had to pay in the first quarter, before it went into bankruptcy protection.
Before Chapter 11, GM was weighed down by a huge debt of almost $95 billion that
has since been cut to $17 billion.
GM's global presence helped the company, particularly in China, where its
sales of 478,000 inthe third quarter increased 6 percent over the second
quarter. GM earned $429 million before taxes and interest at its Asia Pacific
unit, which includes China, and $245 million in Latin America. It had pretax
losses of $651 million in North America and $437 million in Europe.
"We have significantly more work to do, but today's results provide evidence
of the solid foundation we are building for the new GM," CEO Fritz Henderson
said in a statement.
The company cautioned that the earnings numbers mean little because they
don't comply with USaccounting standards and cover only the part of the quarter
after GM left Chapter 11 bankruptcy protection on July 10.
Even more unusual is the $79.4 billion profit the troubled automaker reported
for the first nine days of the third quarter, when it remained under bankruptcy
court protection but was able to scrap colossal amounts of debt and other
obligations.
"Direct comparisons are not necessarily applicable," said Chief Financial
Officer Ray Young. "You can make some judgments in terms of trends."
GM maintains the numbers show a company making progress, riding dramatically
reduced structural costs to a far better performance than the $6 billion loss GM
reported in the first quarter, the last full quarter for which its numbers met
accounting standards.
GM took in $3.3 billion more cash than it spent for the third quarter, far
better than the $10 billion the company burned through during the first
quarter.
Its third-quarter revenue totaled $26.4 billion, an improvement over the
first quarter when its revenue dropped almost 50 percent to $22.4 billion from a
year earlier. Revenue was aided by sales boosts in July and August from the
USgovernment's Cash for Clunkers rebates.
GM said its global market share was 11.9 percent in the third quarter, up
three percentage points from the first half of the year. The USshare stayed flat
for the quarter at 19.5 percent.
Young said GM accountants are in the process of cleaning up the new company's
books, revaluing assets and liabilities and changes to pension and health care
costs that came from bankruptcy and a new contract with the United Auto Workers
union.
GM expects to meet accounting standards when it reports full-year results for
fiscal 2009, but those figures probably won't be released until March.
GM lost $78 billion from 2006 through the first quarter of this year. The
gargantuan losses and debt eventually left the company unable to operate without
government help.
GM entered bankruptcy protection with roughly $94.7 billion in debt. It
emerged with $17 billion, including the $6.7 billion owed to the USgovernment.
The government has given GM a total of $52 billion, including $45.3 billion in
exchange for a 61 percent equity stake in the company.
Young said the government placed $16.4 billion of GM's loan money into a
contingency fund in case sales worsened or other problems cropped up. Now, GM
doesn't need the contingency money and can repay it to the government, he
said.
But Hendersonsaid GM felt it was prudent not to repay the whole amount in
December, in case conditions change.
The automaker also says it will begin repaying $1.4 billion it owes to the
Canadian and Ontariogovernments in December. GM also has paid $700 million on a
$1.3 billion loan from the German government to keep GM's Opel division in
operation. The balance will be repaid this month, GM said.
Hendersonsaid a "reasonably large" part of the Opel repayment came from GM's
US-generated funds, while some came from Opel funds. He said GM is a global
company and needs to have flexibility to use the money to run global
operations.
The CEO disagreed with a report by the General Accounting Office saying that
it was doubtful the USgovernment would recoup all the money given to GM. He said
full repayment is a function of stock value, and he intends to make the stock
valuable by managing the company well.
"It is my mission to disprove the GAO," Hendersonsaid.
Although GM reported positive cash flow for the third quarter, it does not
expect that to continue into the fourth quarter because of the government loan
repayments and a $2.8 billion payment to help Delphi Corp., its former parts
division, out of bankruptcy protection.
GM has said it plans to sell stock to the public late next year so taxpayers can recoup at least part of their remaining investment. Hendersonsaid they'll be ready for next year, but the timing of a sale depends on capital markets and the company's performance.