The new General Motors (MTLQQ) recorded a profit of $1.3 billion or $2.55 per share in the second quarter of the year, compared to a loss of 12.9 billion or $21.12 in the second quarter of 2009, when the automaker was in the midst of bankruptcy filing.
The profit is due to the company’s aggressive cost reduction measures and streamlining of operations since its exit from the bankruptcy protection. The automaker relied heavily on rental-car, government and corporate fleets to drive sales, which are, however, less profitable than retail sales.
Revenues in the quarter were up 5.3% to $33.2 billion, driven by higher sales in every region, excluding Europe. In the U.S., GM witnessed strong sales of redesigned models of the Chevrolet Equinox wagon and Buick LaCrosse sedan.
GM North America posted a profit of $1.59 billion before interest and taxes during the quarter, up 31% from the first quarter of the year. This was due to higher prices for cars, trucks and crossovers.
GM Europe lost $200 million before interest and taxes during the quarter, which was narrower than a loss of $500 million in the first quarter. Profits from the company’s International division, comprising its Asian and Latin American operations, were down to $700 million before tax from $1.2 billion in the first quarter of the year.
Automakers generated $3.9 billion of cash from operating activities and free cash flow of $2.8 billion during the quarter. Cash and cash equivalents, including the Canadian Health Care Trust escrow, was $32.5 billion at the end of the quarter under study. This was lower than $35.7 billion of cash and cash equivalents reported at the end of the first quarter.
The new GM was formed after emerging from bankruptcy on July 10, 2009 through the acquisition of substantially all the assets and certain liabilities of Motors Liquidation Company or the old GM.
Post bankruptcy, GM is primarily owned by the U.S. government and Canadian government, and by a trust fund providing medical benefits to United Auto Workers (UAW) retirees.
The U.S. government holds a 61% stake, the UAW union holds a 17.5% stake through its Retiree Medical Benefits Trust and the Canadian government holds 11.7%. The remaining shares went to the bondholders of the old company.
The new GM retained the Chevrolet, Cadillac, GMC and Buick core brands, along with most of its overseas operations, and dropped the Saturn, Saab, Pontiac and Hummer brands. The existing core brands will have a total of 34 U.S. nameplates by 2010.
GM received $52 billion in U.S. Treasury (“UST”) loans by selling 61% ownership stake of the company and C$1.5 billion ($1.5 billion) in Export Development Canada (“EDC”) loans while going through the bankruptcy protection last year.
In April this year, GM repaid $8.1 billion in loans to the governments of the U.S. and Canada, ahead of the scheduled maturity date of July 2015. The repaid amount constituted $6.7 billion in UST loans as well as $1.4 billion in EDC loans that it had received last year.
The $6.7 billion UST loan is equivalent to 13% of the $52 billion that the U.S. taxpayers have invested in the company, mainly for a 61% ownership stake. The EDC loans come up to 15% of the $9.5 billion in loans from the government of Canada.
GM has lost $88 billion since 2005 as its debt rose to a staggering $54 billion. The company was forced to file for Chapter 11 when it failed to cope with the downturn in the U.S. economy and the credit crunch since the second half of 2008 that caused industry-wide sales to plunge.
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