GM Shows Signs of Recovery Despite Quarterly Loss
General Motors, whose very survival was in doubt earlier this year, is showing signs of life after its brief tour through bankruptcy this summer.
GM said Monday that while it was still losing money, it had stabilized enough that it could take an important symbolic step and begin returning some of the $50 billion that the federal government provided to help give it a second chance.
The Obama administration said it was “encouraged” by GM’s initial performance since emerging from bankruptcy in July.
Others who had supported a GM bailout, despite widespread skepticism that the company’s problems were too big and numerous to fix, said GM had taken a big step toward a lasting recovery.
“The company is on its way to fulfilling its promise to American taxpayers,” said Rep. John D. Dingell, D-Mich.
Analysts said it was too soon to give high grades to its management team and board simply because they had stabilized the company.
“I’d say their grade is incomplete,” said David E. Cole, director of the Center for Automotive Research. “They have done what they needed to do in the bankruptcy, but what’s critical is getting the fundamentals of the business on the right track.”
Paying back a portion of its government loans is only a first step in the rehabilitation of GM, which collapsed after years of heavy losses and bad decisions in the marketplace.
GM’s management and its new board of directors must show that it can create value for its biggest shareholder, the U.S. government, by attracting consumers with cars that they want to buy without resorting to deep discounts.
GM’s results showed a healthier balance sheet, ample cash, and factory production much more in line with consumer demand — improvements it owes largely to the bankruptcy process, the helping hand of the federal government and a modest increase in car sales.
Even with that help, the nation’s largest automaker still lost nearly $1.2 billion in the third quarter.
But GM’s managers and directors have also made some fast decisions to help the company. They have shaken up the company’s famously bureaucratic culture. And they have used aggressive marketing, including a 60-day money-back guarantee, and some well-received new products, like the Cadillac SRX crossover, to bring shoppers back to showrooms.
As a result, even though GM has shed four of its brands, it has managed to hold onto roughly a fifth of the overall car market in the United States. The company is also generating cash now, rather than bleeding it.
That is why the company is in a position to begin paying back $6.7 billion in federal loans as soon as next month. “We think it’s important that we show the taxpayer we can repay this investment,” GM’s chief executive, Fritz Henderson, said Monday.
GM is still faring poorly compared to its cross-town rival, Ford Motor Co., which earned a $1-billion profit in the third quarter without the benefit of any government assistance.