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GM, Chrysler Will Gush Profit at 15 Million Units, Rattner Says

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GM, Chrysler Will Gush Profit at 15 Million Units, Rattner Says

By John Hughes and Tom Keene - Oct 21, 2010

General Motors Co. and Chrysler LLC will lead automakers to “gushing profits” when annual U.S. sales reach 15 million vehicles, said Steven Rattner, the former head of the federal government’s auto task force.

GM reduced costs and liabilities during its 2009 bankruptcy proceedings, allowing the company to make a profit when fewer U.S. vehicles are sold, Rattner said today on Bloomberg Television’s “Surveillance Midday with Tom Keene.”

“This industry has been restructured to make money,” Rattner said. At 15 million vehicles a year, “they will be gushing profits.”

The auto industry is recovering a bit slower than expected and eventually will return to a pace of 15 million a year, Rattner said. U.S. carmakers in September sold vehicles at a rate of 11.8 million, up from 9.4 million a year earlier, according to researcher Autodata Corp. on Oct. 1.

A pace of 15 million vehicles is needed “simply to accommodate new drivers and the aging of the fleet,” Rattner said. “It will happen, it’s only a question of when.”

Rattner, 58, led President Barack Obama’s auto task force from February 2009 until July last year, after GM emerged from a bankruptcy backed by $50 billion in government aid. He has since written a memoir called “Overhaul: An Insider’s Account of the Obama Administration’s Emergency Rescue of the Auto Industry.”

GM’s unwanted businesses in bankruptcy, known as Old GM, today won conditional approval for the largest manufacturing reorganization in history, as a judge said the rights to a potential $1.5 billion in lawsuit proceeds would be determined later.

Rattner said today the slumping global economy will test U.S. companies and create a challenge for the auto industry.

“In the short term, I think we have a cyclical recovery, certainly the auto sector and elsewhere, but the global competition is not getting easier,” Rattner said. “It’s getting harder.”

To contact the reporter on this story: John Hughes in Washington at jhughes5@bloomberg.net

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net.



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