GM Back in Black After Profitable First Quarter
By Bill Visnic May 17, 2010Striving to return to a solid financial footing after emerging from Chapter 11 bankruptcy last summer, General Motors Co. reported today its first quarterly profit in three years - and what may be the start of a sustainable turnaround for the former No. 1 automaker that spent years of serially racking up debt.
GM made $853 million in the first quarter this year, a substantial reversal compared with the nearly $6-billion loss for the same period in 2009 when the former GM struggled to stay afloat prior to declaring bankruptcy in June. For the quarter, GM's net revenue was $31.5 billion, a bulging 40-percent gain over the first quarter of 2009.
The company's first-quarter operating income was $1.2 billion, compared with a $5.9-billion loss in the January-to-March period last year. GM also said it produced nearly $1 billion in free cash flow during the quarter.
GM and the investment community believe it is crucial to demonstrate a pattern of profitability and healthy operating parameters if the company is to issue a public share offering and unshackle itself from its current government ownership.
"We're pleased with our first quarter performance, in particular achieving profitability," said Chris Liddell, GM's vice chairman and chief financial officer, in a statement.
"In North America we are adding production to keep up with strong demand for new products in our four brands. We're also steadily growing in emerging markets, keeping our costs under control, generating positive cash flow and maintaining a strong balance sheet. These are all important steps as we lay the foundation for a successful GM."
North America Improves, Global Sales Rise
The "old" GM often grappled with underperforming North American operations, but the enormous reduction of structural costs and debt may be prepping the unit for a U-turn of that legacy: in the first quarter, GM's North American operations made a $1.2-billion profit; in the final quarter of last year, the North American unit lost $3.4 billion.
GM's reversal in North America was offset by a half-billion-dollar loss in Europe, however. GM's International operations, which includes China, also recorded a profit of about $1.2 billion in the first quarter.
As for vehicle sales, GM's North American total of 563,000 was 50,000 units better than the first quarter last year - despite what is now the almost complete shuttering of four former sales divisions, including the high-volume Pontiac and Saturn units.
GM's large sales gain for the quarter came from the international operations, which sold slightly more than 1 million units for the period - an increase of some 300,000 units compared with last year. Deliveries in Europe were flat at 405,000 units.
In total, GM's worldwide deliveries for the quarter were 2 million units, compared to slightly more than 1.6 million in the first quarter of 2009.
Market Share Steady
Despite almost finalizing the shutdown of four brands, GM's market share in the first quarter hung tight: in North America, total share inched down to 17.8 percent from 18 percent. GM reported total global market share for the quarter at 11.2 percent, the same number as recorded for the first quarter of 2009.
GM's mix of fleet sales in the U.S. was higher than is typically considered ideal, however. The percent of passenger-car sales attributed to fleet sales was 40.9 percent, with trucks at 24.5 percent, deriving a total fleet share of 30.9 percent. The Detroit automakers have said fleet sales rebounded in the first quarter as commercial and daily-rental buyers who had postponed purchases during the recession began now-necessary restocking.
Other numbers of note from GM's first-quarter results:
> GM's capacity-utilization rate was 86.8 percent in North America, compared with a dismal 37.7 percent last year as GM had shut down or sharply curtailed production at many North American assembly plants in response to the economic downturn and leading up to bankruptcy proceedings.
> GM shed about 10,000 jobs compared with the first quarter of 2009. The company said it employed about 205,000 worldwide. In North America, the number of salaried workers held steady at 26,000 and hourly-worker ranks increased by 1,000 to a total of 52,000 workers. - Bill Visnic, senior editor
Photos by GM
LEAVE A COMMENT