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GM posts $865 million Q1 profit

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GM posts $865 million Q1 profit

May 17, 2010 - 8:34 am ET

DETROIT -- General Motors Co. says it rode cost cuts and strong sales of new models to an $865 million first-quarter net profit, boosting its plans to go public as soon as this year.

The automaker said its operating profit from January through March was $1.2 billion. GM was able to match the industry's 16 percent U.S. sales gain in the first quarter of this year while selling Saab and winding down Hummer, Saturn and Pontiac.

The figures reinforce the projections of CEO Ed Whitacre, who said last month the quarter would show "solid operating results" and pave the way to a possible initial public stock offering late in 2010.

The U.S. Treasury Department is currently interviewing Wall Street bankers to advise the government on a GM IPO, the Wall Street Journal reported. Among the firms competing for the advisory role are Greenhill & Co, Lazard Ltd. and Perella Weinberg Partners, the newspaper said Saturday, citing sources.

Wall Street analysts have said investors would need to see two consecutive profitable quarters before an IPO could be successful.

In April, GM said it lost $4.3 billion between early July, when it emerged from bankruptcy largely owned by the U.S. and Canadian governments, and the end of 2009. The 2009 loss marked the fifth straight year without a profit.

GM also said last month it had fully repaid the balance on more than $8 billion in U.S. and Canadian government loans extended as part of its bankruptcy. The repaying of the loans and the completion of the 2009 accounting results were two key steps GM needed to make toward launching an IPO.

In addition to the nearly $7 billion in direct loans to GM, the U.S. Treasury extended $43 billion in bailout cash in 2009 -- for a total $50 billion investment.

The potential loss on paper to taxpayers on GM alone was once thought to be as high as $30 billion, according to the White House budget office. The projected shortfall is now under $8 billion, according to market calculations.

Whitacre said last month he was optimistic the taxpayers would get all of their money back.

Read more: http://www.autonews.com/article/20100517/OEM/100519883/1424#ixzz0oBuX2bNs

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$865M GM's first quarterly profit in 3 years

Robert Snell / The Detroit News

Detroit -- General Motors Co. made $865 million during the first quarter -- its first quarterly profit in almost three years -- in a show of progress made possible by a rebound in sales and the company's bankruptcy filing, which helped GM shed billions in liabilities and lower its break-even point.

Operating income was $1.2 billion from January through March, during which time GM posted revenue of $31.5 billion. GM also generated $1 billion in free cash flow during the quarter.

The $1.66 per-share profit compared to a $6 billion net loss a year earlier, or $9.78 per share, as GM teetered on the brink of bankruptcy.

GM Vice Chairman and Chief Financial Officer Chris Liddell will discuss the results at 1 p.m. with financial analysts and reporters.

"We're pleased with our first quarter performance, in particular achieving profitability," Liddell said in a prepared statement. "In North America, we are adding production to keep up with strong demand for new products in our four brands. We're also steadily growing in emerging markets, keeping our costs under control, generating positive cash flow and maintaining a strong balance sheet. These are all important steps as we lay the foundation for a successful GM."

The results show GM is getting closer to selling shares of the company to the public. GM has said it wants a string of profitability before launching an initial public offering, which could happen later this year, or in early 2011.

GM's financial position has improved to the point that the automaker already returned unused government loans to repay the government $6.7 billion. But taxpayers are still on the hook for $43 billion in aid that was swapped for a 61 percent majority stake in GM.

GM lost $4.3 billion last year in the months after it emerged from bankruptcy, but the bulk of the red ink was the result of one-time charges.

Come back to www.detnews.com for updates throughout the day.

From The Detroit News: http://www.detnews.com/article/20100517/AUTO01/5170352/1148/$865M-GM-s-first-quarterly-profit-in-3-years#ixzz0oBvS2TcI

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GM posts $865-million profit for first quarter

BY TIM HIGGINS

FREE PRESS BUSINESS WRITER

General Motors this morning announced an $865 million net profit for the first three months of the year, the first time the Detroit automaker has posted positive quarterly results since 2007 and a major victory coming out of bankruptcy reorganization last summer.

GM reported an operating income of $1.2 billion on $31.5 billion in revenue.

“We’re pleased with our first quarter performance, in particular achieving profitability,” Chris Liddell, GM vice chairman and chief financial officer, said in a statement. “In North America we are adding production to keep up with strong demand for new products in our four brands. We’re also steadily growing in emerging markets, keeping our costs under control, generating positive cash flow and maintaining a strong balance sheet. These are all important steps as we lay the foundation for a successful GM.”

GM executives had been signaling that the company’s business was improving through the first quarter and some had suggested GM would show a profit.

While not publicly traded, the company said the net income attributed to common stockholders was $1.66 per share on a diluted basis, a major difference than a year ago when the first quarter results were a loss of $9.78 per share.

The new results are perhaps the cleanest look at GM’s operations since emerging from bankruptcy on July 10. From that time until the end of 2009, GM lost $4.3 billion in large part of one-time charges associated with ongoing restructuring.

GM’s bankruptcy turnaround plan called for the automaker to make $1.6 billion in 2010 on an operating basis, also known as earnings before interest and taxes, according to records filed with the bankruptcy court.

Liddell had said the company was within $600 million of breaking even in the fourth quarter.

GM’s $31.5 billion in revenue during the first quarter was up compared to a year ago when revenues were just $22.4 billion. Those revenues had dropped nearly 50% as the company looked destine toward bankruptcy.

As a different company a year ago, GM lost $6 billion in the first quarter, news that was announced just weeks ahead of its June 1 bankruptcy filing. Those results followed losses of $30.9 billion in 2008 and $38.7 billion in 2007 — the two worst years ever for GM.

A year’s time is making a lot of difference for GM.

GM’s sales were up 16.8% during the first three months of 2010, according to Autodata Corp.

New vehicles such as the Buick LaCrosse and Chevrolet Equinox are helping the company as is an improving economy that’s boost sales industry wide.

That’s translating into an improving business for GM’s North America operations, which reported operating results of $1.2 billion for the first quarter up from a loss of $3.4 billion during the final three months of last year.

link:

http://www.freep.com/article/20100517/BUSINESS01/100517010/1331/GM-posts-865-million-profit-for-first-quarter

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smk4565    351

Perhaps the tide is turning. Without the dead weight of Saturn, Saab, and Hummer dragging them down GM should be able to keep this up. This is a huge improvement, but I'd like to see them carry it out for a whole year before we claim that they are out of the woods.

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ZL-1    160
Perhaps the tide is turning.

So it seems.

Without the dead weight of Saturn, Saab, and Hummer dragging them down GM should be able to keep this up. This is a huge improvement, but I'd like to see them carry it out for a whole year before we claim that they are out of the woods.

1. Saturn, SAAB and Hummer were not the reason GM was losing money the way it was: 3 small brands do not account for USD 100 billion in losses in a few years time, and even if you add Pontiac in there, I don't think the 4 brands were the reason GM was doing so poorly; it was the cost structure in NA (costs related to overcapacity and legacy costs) and in Western Europe (costs related to overcapacity) that was dragging GM down. Apparently, even tiny SAAB can even break even at sales levels GM was capable of achieving and surpassing! I strongly suspect (i.e. I am 99% sure) that all cash positive operations within Old GM (whtever they were - you and me and people outside GM don't know the real numbers, just the ones GM disclosed) were being allocated costs and charged fees by Detroit in order to sustain the NA and some European operations that were, in reality, Old GM's "cancer".

2. What I would follow re GM in the months leading to an IPO (and after that) wouldn't be Earnings, it would be Cash Flow from Operations. But that's just me, someone who likes to see real cash being generated.

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GM Achieves Milestone With $865 Million Q1 Profit

By James M. Amend

WardsAuto.com, May 17, 2010 9:38 AM

General Motors Co. posts first-quarter earnings of $865 million, or $1.66 per share, riding cost-cutting initiatives and the popularity of its newest products to a profit.

Including the sale of Saab Automobile AB to Netherlands-based niche-vehicle maker Spyker Cars N.V. earlier this year, GM’s profit swelled to $1.7 billion before interest and taxes on revenue of $31.5 billion.

The auto maker’s cash reserve, which it drained last year on the way to an historic bankruptcy, stands at $35.7 billion.

In the same period last year, GM lost $6 billion, or $9.78 per share.

“We’re pleased with our first-quarter performance, in particular achieving profitability,” GM Vice Chairman and Chief Financial Officer Chris Liddell says in a statement.

“In North America, we are adding production to keep up with strong demand for new products in our four brands. We’re also steadily growing in emerging markets, keeping our costs under control, generating positive cash flow and maintaining a strong balance sheet. These are all important steps as we lay the foundation for a successful GM.”

GM North America earned $1.2 billion in the quarter before interest and taxes, bouncing back from a loss of $3.4 billion in fourth-quarter 2009. GM Europe, which continues its reorganization, lost $506 million.

The auto maker’s international operations, which include the booming markets of China, India and Brazil, earned $1.2 billion, up $500 million from fourth quarter.

GM worldwide sold 1.9 million cars in the quarter, up from 1.6 million year-ago. Its global market share held steady at 11.2%. And with four fewer brands in its most important home market, share stayed at 18.4%.

The financial report marks a milestone for GM in its bid to recover from last year’s federally backed bankruptcy and represents a good first step towards fulfilling Chairman and CEO Ed Whitacre’s expectations to earn a profit in the full year and perhaps go public again.

If GM were to accomplish that, it would be its first year back in the black since 2004.

link:

http://wardsauto.com/ar/gm_q1_profit_100517/

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GM posts $865 million Q1 profit as sales, production rebound

Staff

and Wire Reports

Automotive News -- May 17, 2010 - 8:34 am ET

UPDATED: 5/17/10 4:24 p.m. ET

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DETROIT (Reuters) -- General Motors Co. posted a first-quarter profit as production snapped back and said it was making progress on a turnaround expected to put it on track toward its first full-year profit since 2004.

Analysts said the results underscored the progress GM made by slashing costs in a bankruptcy funded by the Obama administration and kept open the prospect of the automaker launching an initial public offering as soon as this year.

GM recorded a net profit of $865 million, compared with a loss of $5.98 billion a year before, as it ramped up production by nearly 57 percent from year-earlier levels to meet steadier demand in the United States and a sales boom in China.

"Now that we have achieved profitability, the next step is to achieve sustainable profitability," CFO Chris Liddell told reporters.

Liddell said GM had a "good chance" of making a profit for all of 2010, although gains from ramping up production would fade after the first quarter.

He declined to offer a forecast for the rest of 2010. He also put some conditions on the timing of a possible initial public offering.

GM will make an IPO only “when the markets and the company are ready,” he said. “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.

GM received $50 billion of U.S. government financing for its restructuring in bankruptcy. It has been aiming to launch an IPO that would allow the U.S. government to reduce its stake of nearly 61 percent in the automaker.

“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.”

Revenue soars

First-quarter revenue was $31.48 billion, a 40 percent advance from a year earlier, when GM was on the brink of bankruptcy after collapsing U.S. demand sent the industry into a tailspin. 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's first-quarter global sales rose 23 percent to nearly 2 million vehicles, including sales of GM's affiliate brands in China: Wuling and FAW-GM.

GM used bankruptcy to drop brands, cull U.S. dealerships and reduce debt. At the end of the first quarter, GM had debt and preferred stock of just over $20 billion, down from $54 billion a year earlier with government creditors taking the place of bondholders.

"The promise of the bankruptcy was to reduce costs, and it worked. That bodes well for the future," said John Wolkonowicz, an analyst with IHS Global Insight.

GM posted a $4.3 billion loss in 2009, from the time it emerged from bankruptcy in early July until the end of the year. The automaker fell into bankruptcy after losses of about $88 billion from 2005 through the first quarter of 2009.

Analysts have said GM still faces steep challenges in repairing the reputation of its brands led by Chevrolet in its home market. Another area of weakness is Europe, where GM posted a first-quarter loss of $506 million and sales for its Opel and Vauxhall brands were down almost 1 percent.

"They're headed in the right direction, but one quarter is not going to turn the ship around," said Mirko Mikelic, a portfolio manager for Fifth Third Asset Management.

GM's market share was stable at 11 percent of global sales and at about 18 percent of North American sales.

U.S. rivals

IHS Global Insight's Wolkonowicz said the results showed GM was in a stronger position than its smaller rival, Chrysler, while still lagging Ford Motor Co. Ford posted a $2.1 billion first-quarter profit and has forecast that it will be solidly profitable for 2010.

In a step aimed at strengthening its ability to compete with rivals, GM has been looking at options to re-establish a captive auto financing arm, people with knowledge of the plans said last week.

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 raise cash.

Detroit-based 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.

Liddell said it was "incredibly important" for GM to have a strong financing partner but said it was "debatable" whether that needed to be a captive finance firm as GMAC once was.

Read more: http://www.autonews.com/apps/pbcs.dll/article?AID=/20100517/OEM/100519883/1424#ixzz0oEFnSHwi

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hyperv6    774

Goal one accomplished. Make a profit.

Now lets see if they can string together a series of quarters like this.

It is early in this game yet.

  • Upvote 1

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