General Motors (MTLQQ), still known as GM, posted a profit of $865 million or $1.66 per share in the first quarter of the year, in sharp contrast to a loss of $6 billion or $9.78 per share in the last year’s quarter. This is the automaker’s first quarterly profit since 2007.
Revenues in the quarter surged 40% to $31.5 billion on strong sales of new models, including the small sport utility vehicle Chevrolet Equinox and the luxury sedan Buick LaCrosse.
Sales rose 23% to 2 million units globally, driven mainly by the doubling of unit sales in China. Meanwhile, sales were up 17% in the U.S. The automaker ramped up production by 57%, led by strong demand in the U.S. and China.
Each of GM’s North American operations and International operations reported an EBIT of $1.2 billion. However, the company’s European operations recorded a loss before interest and taxes of $500 million.
GM’s cash flow from operations was $1.7 billion during the quarter. The company’s free cash flow was $1 billion after adjusting for capital expenditures of $700 million. This led to cash and marketable securities of $35.7 billion at the end of first quarter.
GM’s Chief Executive Officer, Ed Whitacre, expects a full-year profit as auto sales in the U.S. rebound. However, the company’s Chief Financial Officer Chris Liddell has affirmed that it may be difficult to sustain the first-quarter profit level through the the year as production was higher in the quarter mainly for the spring-selling season.
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. and Canada governments, and by a trust fund providing medical benefits to United Auto Workers (UAW) retirees. The U.S. government holds a 61% stake, the UAW 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.
Last month, GM has repaid $8.1 billion in loans to the governments of 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 governments of Canada.
GM has vowed to repay the remaining $45.3 billion to the U.S. government and $8.1 billion to Canada through a public stock offering, perhaps later this year. On the other hand, the Obama administration is considering the option of getting back the remaining loan amount by selling its stake in the company.
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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