Tulsa World: GM reports $1.2 billion loss, says it shows progress

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GM reports $1.2 billion loss, says it shows progress

By DEE-ANN DURBIN and TOM KRISHER AP Auto Writers
Published: 11/16/2009 4:47 AM
Last Modified: 11/16/2009 10:27 AM

DETROIT — General Motors Co. says it lost $1.2 billion from the time it left bankruptcy protection through Sept. 30, far better than it has reported in previous quarters and a sign that the auto giant is starting to turn around its business.

The company also says it will begin repaying $6.7 billion in U.S. government loans with a $1.2 billion payment in December. It could pay off the full amount by 2010, five years ahead of schedule, but the money will come from funds loaned by the government.

GM said its improved performance was fueled by new products including the Chevrolet Camaro muscle car, and the Chevrolet Equinox and GMC Terrain midsize crossover vehicles. The company's top sellers through October were the Chevrolet Silverado pickup truck and Impala full-size car.

The better showing also reflected lower debt payments. The automaker paid $250 million in interest for the latest period, far lower than in previous quarters when the company was weighed down by a huge debt of almost $95 billion that has since been cut by more than 80 percent.

Also, GM's global presence helped the company, particularly in China, where its sales of 478,000 in the third quarter increased 6 percent over the second quarter.

"We have significantly more work to do, but today's results provide evidence of the solid foundation we are building for the new GM," CEO Fritz Henderson said in a statement.

The company cautioned that the earnings numbers mean little because they don't comply with U.S. accounting standards and cover only the part of the quarter after GM left bankruptcy protection on July 10.

Even more unusual is the $79.4 billion profit the troubled automaker is reporting for the first nine days of the third quarter, when it remained under bankruptcy court protection but was able to scrap colossal amounts of debt and other obligations from its balance sheet.

"Direct comparisons are not necessarily applicable," said Chief Financial Officer Ray Young. "You can make some judgments in terms of trends," Young said.

Nonetheless, GM maintains the numbers show a company making progress, riding dramatically reduced structural costs to a far better performance than the $6 billion loss GM reported in the first quarter, the last full quarter for which its numbers met accounting standards.

GM took in $3.3 billion more cash than it spent for the third quarter, far better than the $10 billion the company burned through during the first quarter.

Its third-quarter revenue totaled $26.4 billion, also an improvement over the first quarter when it saw revenue drop nearly 50 percent from the same period in 2008 to $22.4 billion. Revenue was aided by sales boosts in July and August from the U.S. government's "Cash for Clunkers" rebates.

GM said its global market share was 11.9 percent in the third quarter, up three percentage points from the first half of the year. The U.S. share stayed flat for the quarter at 19.5 percent.

Many customers stayed away from GM showrooms in the first and second quarters as it headed into bankruptcy protection, fearing the company wouldn't be around to honor warranties and service their vehicles.

Young said GM accountants are in the process of cleaning up the new company's books, revaluing assets and liabilities and changes to pension and health care costs that came from bankruptcy and a new contract with the United Auto Workers union.

GM expects to meet accounting standards when it reports full-year results for fiscal 2009, but those figures probably won't be released until March as accountants go through the complex process of figuring out just how much the company is now worth.

But Young said the third-quarter results still are useful to management in spotting trends and measuring whether the company is making progress.

GM lost $78 billion from 2006 through the first quarter of this year. The gargantuan losses and debt eventually choked the company to the point where it could no longer operate without government help.

GM entered bankruptcy protection with roughly $94.7 billion in debt. It emerged with $17 billion, including the $6.7 billion owed to the U.S. government. The government has given GM a total of $52 billion, including $45.3 billion in exchange for a 61 percent equity stake in the company.

Young said the government placed $16.4 billion of GM's loan money into a contingency fund in case sales worsened or other problems cropped up. Now, GM doesn't need the contingency money and can repay it to the government, he said.

But Henderson said GM felt it was prudent not to repay the whole amount in December, in case conditions change.

The automaker also says it will begin repaying $1.4 billion it owes to the Canadian and Ontario governments in December. The loan repayments will come from escrow accounts set up for the company by the U.S. Treasury Department and Canadian governments. GM also has paid $700 million on a $1.3 billion loan from the German government to keep GM's Opel division in operation. The balance will be repaid this month, GM said.

Henderson said a "reasonably large" part of the Opel repayment came from GM's U.S.-generated funds, while some came from Opel funds, but Henderson said GM is a global company and needs to have flexibility to use the money to run global operations.

The CEO disagreed with a report by the General Accounting Office saying that it was doubtful the U.S. government would recoup all of the money given to GM. He said full repayment is a function of stock value, and he intends to make the stock valuable by managing the company well.

"It is my mission to disprove the GAO," Henderson said.

Young would not detail how much GM paid in interest per quarter before it entered bankruptcy for comparison to the $250 million in interest paid in the latest period, but he said significantly reduced interest payments helped its third-quarter peformance.

Although the company reported positive cash flow for the third quarter, it does not expect that to continue into the fourth quarter because of the government loan repayments and a $2.8 billion payment to help Delphi Corp., its former parts division, out of bankruptcy protection.

GM has said it plans to sell stock to the public late next year so taxpayers can recoup at least part of their remaining investment, though GM Chairman Ed Whitacre said last week the timing of any GM IPO remains uncertain and depends on when the company returns to profitability.

By DEE-ANN DURBIN and TOM KRISHER AP Auto Writers

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	Report Comment Daven, Tulsa (11/16/2009 8:19:59 AM) Good for them. I wonder what all those who were against this will say now?
	Report Comment Dr. Strangelove, Tulsa (11/16/2009 8:23:12 AM) GM just posted their 3rd quarter results and they lost $1.8 billion in 83 days of government control. This article is laughable, what a disasterous mess.
	Report Comment Dr. Strangelove, Tulsa (11/16/2009 8:24:27 AM) I'm sorry, they only lost $1.2 billion in 83 days, I exagerate.
	Report Comment Dr. Strangelove, Tulsa (11/16/2009 9:11:47 AM) Bingo Zoltar, it's all smoke and mirrors. Get this, they say they are repaying $1.2 billion to the U.S. and Canadian governments next month. Since they are losing money, where do you think they are getting the money? From the government of course! It's coming out of an escrow account set up that currently has a balance of $17 billion. So they are paying government money back with government money. Then again, they're government controlled, so it's really just one big circle jerk to make the bailout $ look like a good idea. Welcome to the new reality!!!!
	Report Comment Daven, Tulsa (11/16/2009 9:42:49 AM) GM entered bankruptcy protection with roughly $94.7 billion in debt. It emerged with $17 billion, including the $6.7 billion owed to the U.S. government. Hmmm. I think they will be OK in the long run.
	Report Comment FIRE GUNDY, TULSA (11/16/2009 10:10:47 AM) The headline should really read- "GM Not Using All of the Bailout Money, Thinks They are Losing Money Slower Than Expected"
	Report Comment Bob 1, BA (11/16/2009 11:35:00 AM) Not sure how you figure an operating loss as showing progress. My bank would laugh themselves to death if I told them I was having a loss and showing progress..........
	Report Comment Rimshot, Corn, OK (11/16/2009 3:50:02 PM) Oh come on people. The only reason GM did as well as they did last quarter is because the governemt subsidized new car purchases with the cash for clunkers handout. Theyllbe back onthe skids next quarter.
	Report Comment JR, (11/16/2009 6:31:43 PM) Hocus Pocus BS presented by the minister of enlightenment and propaganda, Washington, DC. Gleichschaltung, moving along quite nicely..........
	Report Comment dslat, Tulsa (11/16/2009 11:51:08 PM) Ford was lucky to sell Land Rover, Jaguar, Aston Martin, part of Mazda, and Hertz rental before the recession. GM got caught off guard, even if they should have seen it coming. It is a lot harder to weather a recession if you don't dramatically downsize and that was Ford's great solution, just give up market share.
	Report Comment FUTURE WORLD, Tulsa (11/17/2009 12:13:09 AM) We'll see what happens. I'm not willing to doubt their intentions just yet. If GM ca pull of the stock sale, then I say we made a good investment in the company. What people don't see is, it was better to bail GM out than to have them collapse and drive down everyone associated with them. That was the republican plan. To have the whole system collapse. Again for strictly for political purposes. I hope voters remember this.

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