The new General Motors (MTLQQ) has topped both its hometown rivals, Ford Motor Co. (F) and Chrysler LLC, with a profit of $2.16 billion or $1.20 per share in the third quarter of the year, 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 in North America, which had been witnessing substantial losses earlier, and impressive growth in sales volume in GM International Operations (GMIO).

Revenues during the quarter surged 35% to $34.06 billion on the back of higher prices of its vehicles and a 5% increase in sales volume to 2.07 million units. The growth in sales volume was driven by a 16% rise in sales to 1.01 million units in GMIO led by increased sales of the Chevrolet lineup.

GMNA: GM’s North American operations reported a 33% rise in operating profit to $2.13 billion from $1.59 billion in the second quarter of 2009. The improvement was attributable to higher sales of high-margin pickup trucks.

The production in the region rose 33% to 707,000 units (including a 51% rise in production of trucks to 492,000 units) from 531,000 units in the third quarter of 2009. However, sales volume dipped 4% to 661,000 units.

GME: Results in GM’s European operations were disappointing during the quarter. It posted an operating loss of $559 million, which was more pronounced compared with a loss of $160 million in the prior quarter of the year. The production in the region went up 5% to 286,000 vehicles. However, sales volume fell 4% to 391,000 vehicles.

GMIO: GM’s International Operations – including the emerging markets such as China and India – reported a $26 million decline in operating profit to $646 million. The region had a production volume of 1.11 million vehicles, up 22% from 910,000 vehicles in the third quarter of 2009.

Financial Position

GM had cash and cash equivalents of $27.47 billion as of September 30, 2010 compared with $22.68 billion at the end of 2009. Total debt stood at $8.57 billion as of the above date, reflecting a debt-to-capitalization ratio of 27%.

In the first nine months of 2010, GM had an operating cash flow of $8.32 billion. Meanwhile, capital expenditure was $3.11 billion in the same period.

Outlook

GM expects to be profitable in the upcoming quarter as well as in the full year 2010. However, the company has projected a lower operating profit compared to the average of the first three quarters of the year, as it will enhance production of small cars with lower margins, at the cost of trucks that have higher margins.

The IPO Deal

GM will hold its initial public offering (IPO) on November 18, 2010. Each of the 365 million common shares that make up the IPO is expected to sell between $26 and $29, reflecting a total value of about $10 billion.

Post-bankruptcy, GM is primarily owned by the U.S. government and Canada government, and by a trust fund providing medical benefits to United Auto Workers (UAW) retirees. The IPO will help the automaker to do away with government ownership in the company, which has been hurting its public image.

The lion’s share of the $10 billion will be utilized for loan repayment to the U.S. government. As a result, the government’s ownership stake in the company will be reduced to 43%.

The IPO will also allow the stakeholders of the company to sell their stakes. The government would possibly recover its remaining investment in the company through several follow-up sales.

Sources have revealed that the Canadian government is expected to reduce its stake from 11.7% to 9.6%, while the UAW retiree health care trust would cut its stake from 17.5% to 15%.

Meanwhile, the company itself will sell $3 billion worth of preferred shares, the proceeds from which will be utilized for repaying loans and for pension payments. The preferred shares will be converted to common stock in 2013.

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 leading to a plunge in industry-wide sales.

 
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