GM makes progress toward profitability
DETROIT — The first detailed financial report from General Motors since its bankruptcy showed a company that has largely stanched the hemorrhaging in its day-to-day business but is still cleaning up problems left over from its collapse last year.
GM said Wednesday that it had positive cash flow of $1 billion in the six months after it emerged from bankruptcy protection last July, but that it lost $4.3 billion in that period, mostly because of the cost of settling with the United Auto Workers union over retiree health benefits, one of the burdens that helped bring the company to its knees.
The automaker said that with those matters behind it and the economy improving, it could make a profit in 2010, echoing previous predictions. Officials said the company made progress toward that goal in the first quarter, without being specific.
"It would be a really impressive achievement if they were able to make a profit," said Rebecca Lindland, an analyst with the research firm IHS Global Insight. "They’ve been able to do an awful lot and all of those things should lead to a profitable picture."
The bankruptcy cleared $83 billion in liabilities from GM’s balance sheet, the company said. Wiping out that debt already has saved GM billions of dollars in interest; it paid $28.6 million a day in interest in the months before bankruptcy, but those payments dropped 86 percent, to $4 million a day, after bankruptcy.
With those debts gone, GM said gross margins on vehicle sales edged into positive territory, at 1.9 percent, compared with negative 18.5 percent in early 2009.
Cash-flow was a positive $1 billion from July 10, when GM emerged from bankruptcy by selling its desirable assets to a new company, to Dec. 31. The old GM, which remains in bankruptcy protection as it liquidates closed plants and other discarded assets, burned through $13.1 billion in cash in the second half of 2008.
Excluding one-time charges, the emerged company lost about $600 million in the fourth quarter, GM’s chief financial officer, Christopher P. Liddell, said. GM reported an operating loss of $5.9 billion in the same period a year earlier.
"We don’t need to make that much improvement to get to profitability," Liddell, who came to GM from Microsoft earlier this year, said on a conference call. "It’s getting close to break-even if you get rid of those one-off items that happened in the fourth quarter."