GM Will Make First Government Loan Repayments in December
By Michelle Krebs November 16, 2009General Motors said Monday, in releasing its first financial statement since emerging from 
Chapter 11 bankruptcy on July 10, it would make its first loan repayments to U.S. and Canadian taxpayers next month. At that time, it will pay back a total of $1.2 billion.
Still, the new GM reported a loss of $1.15 billion in its first 83 days of operation. However, that was an improvement from last year.
"We have significantly more work to do, but today's results provide evidence of the solid foundation we're building for the new GM," said GM President and CEO Fritz Henderson in a company statement. "With a healthier balance sheet and a competitive cost structure, our focus is on driving top line performance. We'll achieve that by winning customers over, one at a time, with vehicles that deliver performance and value."
A $1.2-Billion Loss
GM showed a pre-tax loss of $1 billion. However, the automaker took a $505-million charge related to its dealer restructuring and Delphi Corp., the supplier made up of former GM units that just emerged from four years in Chapter 11 bankruptcy. That put GM's after-tax loss at $1.2 billion.
In a press conference Monday morning, Henderson said "that's better ... but not satisfactory."
The trouble continues to be in North America where GM lost $651 million. GM's International Operations reported a $238 million profit.
The benefit of restructuring through bankruptcy was evident in GM's results in its structural costs, which totaled $9.1 billion from the post-Chapter 11 period of July 10 to Sept. 30. Structural costs for the old GM for the Jan. 1 to July 9 period were $22 billion, putting the total nine-month structural costs for the old GM at $37.8 billion.
Cash Position
GM showed positive cash flow of $3.3 billion for the period. However, the automaker warned the trend is not expected to continue into the fourth quarter.
GM's cash position as of Sept. 30 totaled $42.6 billion, which included $17.4 billion in funds from the U.S. and Canada held in escrow. Minus those funds and some other items, GM's cash actually stood at $5.6 billion.
Paying Back Taxpayers
Beginning next month, GM said it would begin paying back the U.S., Canadian and Ontario governments in quarterly installments from its cash escrow fund. In December, GM will repay U.S. taxpayers $1 billion and $192 million to the Canadian governments. GM then will make quarterly payments from the escrow funds.
Henderson told reporters that GM could repay loans completely in just under two years, well ahead of the original schedule which called for total payback by 2015.
Henderson said he's on "a personal mission" to prove wrong a recent report issued by the U.S. General Accounting Office that said U.S. taxpayers would never recoup all of its loan money.
Henderson the No. 1 priority for GM is to repay the loans. After that, GM plans to obtain revolving credit line to provide it with more financial flexibility. In the course of all of this, GM is preparing for an initial public offering (IPO) of its stock. He said an IPO could be possible in second half 2010.
Henderson reiterated that the burden to produce results that will boost the value of any stock that eventually is issued rests on his shoulders and the rest of management.
GM said it also has begun to repay the German government the loans it provided to support Opel, which GM recently decided to keep instead of sell to Canadian supplier Magna International. GM received $1.3 billion in German government funds. It repaid $700 million of that earlier in November and will pay the remainder by the end of the month.
Higher Revenues: A Positive Sign
The new GM reported revenues of $28 billion in the third quarter, up approximately $4.9 billion compared with the second quarter of this year. Higher revenues were the result of higher vehicle sales, a stabilization of GM's global market share and better pricing for GM's new models.
In North America, GM's new models, including the Buick LaCrosse, Cadillac SRX, Chevrolet Camaro and Equinox, and GMC Terrain are showing strong sales and better pricing than previous models.
China is GM's strongest contibutor to results. GM and its Chinese partners sold more than 478,000 vehicles in the third quarter, up from 451,000 and 364,000 in the second and first quarters, respectively.
In response to a reporter's question that U.S. taxpayers are concerned their loans are being used in GM's overseas operations, Henderson said China has "been profitable from day 1" of the new GM, is reinvesting in itself and paying dividends back to the U.S. GM in the U.S. is providing no financial support to China.
Some of the repayment to the German government, however, is coming from the U.S., Henderson said.
2010 Outlook
GM's earnings statement said it anticipates "modest growth" in 2010 with total industry volumes worldwide estimated at 62 to 65 million units. GM predicts a "modest recovery " in the U.S. to 11 million to 12 million vehicle sales industrywide. -- Michelle Krebs, Senior Analyst and Editor at Large
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Good. I am glad that GM sees the moral obligation and potential good will to repay their debts to the American, Canadian, and German Peoples.
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