General Motors Corporation (GM) has announced that it will invest $163.2 million in its Flint and Bay City plants in Michigan and Defiance plant in Ohio in order to boost engine production for its Chevrolet lineups including Chevrolet Volt, Chevrolet Cruze and a new Chevrolet small car. The investment will secure 184 jobs at the plants.
The automaker will invest $138.3 million in Flint engine operations protecting 135 jobs, $12.7 million in the Bay City components plant saving 8 jobs, and $12.2 million in the Defiance castings plant preserving 41 jobs.
In the Flint engine plant, the investment will help increase production of Ecotec 1.4-liter engine that is used in the Chevrolet Cruze and a 1.4-liter variant used in the Chevrolet Volt. The plant will start producing 400 engines per day in early 2011 and will ramp up to 800 engines per day in late 2011. Further, the plant capacity will be enhanced to 1,200 units per day in late 2012.
In the Bay City plant, the investment will support increased production of connecting rod and camshafts while in Defiance plant it will boost production of engine block and crankshaft castings.
GM has invested about $700 million and protected more than 600 jobs in the above mentioned plants in less than two years. The company has revealed that the new investment brings its total investment in the U.S. to more than $3.3 billion, creating or retaining more than 8,000 jobs in 21 plants, after emerging from bankruptcy in July last year.
Recently, GM completed its initial public offering (IPO) that sold 478 million shares at the targeted price of $33, raising $15.8 billion. After the IPO, the U.S. government expects to recover about half of its unpaid loans to GM.
Of the $52 billion in loans extended by the government in exchange of a 61% ownership in the company, $6.7 billion has been repaid in April this year, leaving $45.3 billion due for repayment. The Treasury Department of U.S. has already received payments of $11.7 billion by selling 358.5 million shares in the IPO.
The Treasury would also get $1.8 billion as bankers handling the IPO exercise options to purchase an additional 53.8 million shares of its stock within 30 days of the IPO. The bankers are allowed to exercise an option to sell up to 72 million shares.
Further, the Treasury would receive $2.1 billion due to the sale of preferred shares by GM in the next month. The preferred shares will be converted to common stock in 2013.
Over and above the net proceeds from the IPO, stock options and sale of preferred shares, GM has stated that it would repay $9.5 billion to the government this year.
In the third quarter of the year, GM has topped both its hometown rivals, Ford Motor Co. (F) and Chrysler LLC, by showing a profit of $2.16 billion or $1.20 per share in sharp contrast to a loss of $858 million or 73 cents per share in the year-ago quarter. Operating income was $1.85 billion versus a loss of $1 billion a year ago.
During the quarter under review, Ford reported a profit of $1.91 billion while Chrysler posted a loss of $84 million. In North America, GM earned $3,005 per vehicle due to its effort to boost truck output during the summer. In contrast, Ford earned $2,710 per vehicle and Chrysler earned $593 per vehicle in the region.
GM’s profit was fueled by the company’s turnaround performance in North America, which had been witnessing substantial losses earlier, and impressive growth in sales volume in GM International Operations segment.