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GM finally back in the black

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GM finally back in the black

CFO tries to curb enthusiasm on stock sale

BY TIM HIGGINS

FREE PRESS BUSINESS WRITER

With a profitable quarter under its belt, anticipation is building about when General Motors will sell stock to the public again, allowing taxpayers to recoup their investment and eventually getting the government out of the car business.

The Detroit automaker said Monday it made $865 million during the first three months of 2010, the first profitable quarter since 2007 and a major victory coming out of bankruptcy reorganization last summer.

"It was an extremely good first quarter for General Motors. Posting a profit and generating positive cash flows are important steps as we work to rebuild General Motors," Chief Financial Officer Chris Liddell said.

While Liddell tried to tamp down expectations about when a public stock offering could occur, movement is clearly occurring behind the scenes to prepare.

Joseph Phillippi, a longtime industry analyst, said Wall Street banks already are jockeying for a piece of the initial public offering. The U.S. Treasury reportedly has been interviewing investment bankers to advise it on a deal.

"The IPO is the ultimate goal of" CEO Ed Whitacre. "He wakes up every morning trying to figure out how to get the company closer to the IPO," said Rebecca Lindland, an industry analyst with IHS Global Insight.

GM IPO interest grows

Liddell spent Monday trying to hold back enthusiasm about when the Detroit automaker would sell stock to the public.

The company announced that its revenue had surged 40% during the first quarter compared with the same period last year and that GM generated $1 billion in cash after capital expenditures and expenses.

"I'm in the unusual position of probably just trying to keep people's expectations low on this topic," Liddell told analysts and reporters Monday.

GM could go public next year or by the end of this year, he said, reiterating previous statements.

"The IPO will happen when the market is ready and the company is ready," he said.

Liddell acknowledged the growing interest: "There is a lot of excitement building."

GM's profitable first quarter is seen as a major milestone before such a deal could occur.

One of the major questions for an IPO, however, could be out of GM's control -- the market.

While there are signs the economy is improving, troubles in Europe and other uncertainties have caused stocks to fluctuate in recent weeks.

"What you have here is a good company in a good or improving IPO market, which is kind of perfect timing," said Van Conway, a corporate restructuring expert. "Now, if the stock market dives another 1,000 points or 1,500 then all bets are off."

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

The new results are perhaps the cleanest look at GM's operations since the automaker emerged from bankruptcy on July 10, and they generated great optimism for the year ahead.

"I think they'll be profitable for the year ... As the economy improves, I think it's going to be very difficult for them not to achieve profitability with the lower overhead cost structure and shedding so much of their debt," said Erich Merkle, an industry analyst with Autoconomy.com.

Asked about the upcoming year, Liddell said: "There's no reason to say that we shouldn't be pushing for profitability in North America on a consistent, sustained basis. That's clearly our objective, and the first quarter heartens me that we're on the right track."

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

GM's $31.5 billion in revenue during the first quarter was up from a year ago, when revenues were $22.4 billion. Those revenues had dropped nearly 50% as the company looked 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.

Major cost cutting and a year's time are making a lot of difference for GM. GM's sales were up 16.8% during the first three months of 2010, according to Autodata.

New vehicles, such as the Buick LaCrosse and Chevrolet Equinox, are helping the company, as is an improving economy that's boosting sales.

GM's first-quarter adjusted earnings before interest and taxes were $1.7 billion -- the bulk of which was driven by operations in North America ($1.2 billion) and Asia, including China, ($1.2 billion). European operations continued to be a drag on GM's performance, losing $506 million.

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http://www.freep.com/apps/pbcs.dll/article?AID=/20100518/BUSINESS01/5180324/1331/BUSINESS01/GM-finally-back-in-the-black&template=fullarticle

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