GM makes dramatic reversal and drives to net profit in Q1
By Dee-Ann Durbin and Tom Krisher |
May 18, 2010, Tuesday
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Print Edition
Print Edition
GENERAL Motors Co rode expense cuts from its bankruptcy and strong sales of redesigned models to its first quarterly net income in nearly three years, drawing the company closer to a stock offering that would repay at least part of its government aid.
The US$865 million first-quarter profit is a dramatic reversal from the huge US$6 billion loss in the same period last year. The last time the company made a quarterly profit was the second quarter of 2007, when it earned US$891 million.
The Detroit auto maker said it made money because debt and other expenses were slashed by its stay in bankruptcy court, and because of strong new-model sales. It also generated higher revenue from growth in Asia and South America.
The earnings of US$1.66 per share from January through March are stunningly different from the first quarter of last year, when the largest United States auto maker lost US$9.78 per share as it skidded into bankruptcy protection.
First-quarter revenue soared 40 percent to US$31.5 billion.
GM lost US$3.4 billion in the fourth quarter of 2009 on revenues of US$32.3 billion, the company's first full quarter out of bankruptcy protection.
Chief Financial Officer Chris Liddell said it may be difficult to sustain the same level of profit for the remainder of the year because first-quarter production is usually higher than other quarters, with auto makers ramping up for the spring selling season.
"I'd still be reasonably cautious about the rest of the year," he said.
New models such as the Chevrolet Equinox small sport-utility vehicle and the Buick LaCrosse luxury sedan lifted GM's North American operations to a US$1.2 billion profit, compared with a US$3.4 billion loss in the year-earlier quarter. North America had been a continual drain on GM's profits before its bankruptcy filing last year.
CEO Ed Whitacre has predicted a full-year profit as US auto sales continue their slow recovery. That could lead to a public stock offering late in the year and full repayment of the US$50 billion in US government aid that stopped GM from going under last year. The US government now owns 61 percent of the company.
Liddell said the company hasn't committed to any date for a public stock offering. GM has said, however, that it hopes to make an initial public stock offering late this year.
In bankruptcy court, GM was split into two companies, with the old firm carrying the unprofitable assets and much of its debt, while the new entity moved forward with a much stronger balance sheet.
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