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Roadblocks remain on GM's path to recovery


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Roadblocks remain on GM's path to recovery

Automaker vows to fix debt, European woes

Christina Rogers / The Detroit News

With its long-awaited initial stock offering in the rearview mirror, General Motors Co. still has some obstacles to full recovery: fixing Europe, paying down debt, and fully embracing smaller, more fuel-efficient cars.

Still, while acknowledging the challenges, CEO Daniel Akerson said Thursday the automaker is "in a much better place than we were a year ago."

GM expects to use proceeds from sales of its preferred shares to pay down liabilities, including pensions.

It also said it intends to focus on fixing its flawed European operations. GM has long struggled in this market, where its pretax losses deepened this year by more than $1 billion.

"We still need to fix Europe," Ackerson said last week, when GM reported its third-quarter earnings.

GM is working toward curing its problems in Europe. It shuttered a plant in Antwerp, Belgium, and is trying to better match production with consumer demand — a strategy similar to the one it used to right its operations in North America.

"The blueprint for addressing our issues in Europe is basically similar to what we did in the United States and Canada," Akerson said Thursday.

He noted GM's one strength in Europe — its car and truck lineup — which he described as being in "good shape."

With the changes, the automaker hopes to break even in Europe and even turn a profit there by 2012, Akerson said.

The company is focusing on paying down its debt, fully funding pensions and tidying up its balance sheets, said Chief Financial Officer Chris Liddell.

GM, having shed billions of dollars in debt during bankruptcy, continues to wrestle with its pension obligations. The shortfall is $29.4 billion.

Liddell said GM plans to take on a "modest" amount of debt next year to help establish credit, but its goal is to be debt-free, with fully funded pensions, in a few years.

"We used to be a $100 billion finance company and $100 billion pension plan with a small car company attached," Liddell said. "We have to get away from that model."

GM has relied heavily on its truck business for profits in recent years. But Akerson said the automaker intends to bulk up its small car lineup in North America, where this year's sales are up 22.1 percent for its four remaining brands.

Fortunately for GM, the wind is at its back. Auto sales are on the upswing, and GM is turning heads with two new cars on the market: the compact Chevrolet Cruze and the range-extending electric Volt.

The Detroit automaker also has a strong foothold in China, the world's fastest-growing auto market, is making inroads in India and Brazil, and has hot sellers in North America, such as the new Buick Regal and Chevrolet Equinox.

"If you look at the various tentacles of GM, it has worldwide bases to build from, not only in North America, but globally," said Dennis Virag, president of Ann Arbor-based Automotive Consulting Group.

The reduction in the government's stake also is good for GM's marketability, but the U.S. Treasury will call the shots on future stock sales, Akerson said. The government still owns 500 million shares, a 33 percent stake in the automaker.

From The Detroit News: http://detnews.com/article/20101119/AUTO01/11190361/Roadblocks-remain-on-GM’s-path-to-recovery#ixzz15jdJhnrj

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