GM reports $1.2B loss, says it shows progress
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GM reports $1.2B loss, says it shows progress
DETROIT (AP) -- General Motors Co. said Monday 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 said it will begin repaying $6.7 billion in U.S. government loans with a $1.2 billion payment in December. It plans to repay the debt over the next eight quarters, but could pay it back as early as next year. 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 the $1.1 billion it had to pay in the first quarter, before it went into bankruptcy protection. Before Chapter 11, GM was weighed down by a huge debt of almost $95 billion that has since been cut to $17 billion.
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. GM earned $429 million before taxes and interest at its Asia Pacific unit, which includes China, and $245 million in Latin America. It had pretax losses of $651 million in North America and $437 million in Europe.
"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 Chapter 11 bankruptcy protection on July 10.
Even more unusual is the $79.4 billion profit the troubled automaker reported 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.
"Direct comparisons are not necessarily applicable," said Chief Financial Officer Ray Young. "You can make some judgments in terms of trends."
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, an improvement over the first quarter when its revenue dropped almost 50 percent to $22.4 billion from a year earlier. 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.
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.
GM lost $78 billion from 2006 through the first quarter of this year. The gargantuan losses and debt eventually left the company unable to 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. 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. He 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 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.
Although GM 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. Henderson said they'll be ready for next year, but the timing of a sale depends on capital markets and the company's performance.
The company also said it will begin repaying $6.7 billion in U.S. government loans with a $1.2 billion payment in December. It plans to repay the debt over the next eight quarters, but could pay it back as early as next year. 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 the $1.1 billion it had to pay in the first quarter, before it went into bankruptcy protection. Before Chapter 11, GM was weighed down by a huge debt of almost $95 billion that has since been cut to $17 billion.
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. GM earned $429 million before taxes and interest at its Asia Pacific unit, which includes China, and $245 million in Latin America. It had pretax losses of $651 million in North America and $437 million in Europe.
"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 Chapter 11 bankruptcy protection on July 10.
Even more unusual is the $79.4 billion profit the troubled automaker reported 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.
"Direct comparisons are not necessarily applicable," said Chief Financial Officer Ray Young. "You can make some judgments in terms of trends."
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, an improvement over the first quarter when its revenue dropped almost 50 percent to $22.4 billion from a year earlier. 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.
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.
GM lost $78 billion from 2006 through the first quarter of this year. The gargantuan losses and debt eventually left the company unable to 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. 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. He 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 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.
Although GM 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. Henderson said they'll be ready for next year, but the timing of a sale depends on capital markets and the company's performance.
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So they are paying back their government loans with money the government loaned them?
The company also said it will begin repaying $6.7 billion in U.S. government loans with a $1.2 billion payment in December. It plans to repay the debt over the next eight quarters, but could pay it back as early as next year. But the money will come from funds loaned by the government.
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From: City of Champions, MA, USA
GM said its improved performance was fueled by new products including the Chevrolet Camaro muscle car
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From: Okemos, MI
The article makes it out to be a lot more confusing than it is.
GM: "Hey Goverment, can I borrow some money?"
Government: "Sure, here's a few billion."
GM: "Thanks, I'll pay you back later."
...
GM: "Hey Government, I didn't need all of your money, so here's some of it back early."
This is not confusing nor questionable.
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Posts: 200
Right, it's not like they took out a 2nd loan to pay back the first one (though I had to re-read that part before I understood it as such). They took out the loan, didn't need to use it all, so they're going to give some of it back.
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Posts: 805
From: MI
Actually, both answers are correct, as money is fungible.
But in either case, it's a sad state of affairs where any large company can post a $1.2 billion dollar loss and start jumping up and down as though it's a showing of good performance.
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Posts: 3,698
From: USA
To me there is a difference between saying "We are repaying our government loans", and "We are giving back money we did not need". The first one says we are making enough money now we, and see light at the end of the tunnel. The second one says..the government made our slush fund too big, and we are gonna cautiously give it back.
If a private citizen were doing something similar, it would be considered questionable.
If a private citizen were doing something similar, it would be considered questionable.
The government lent them some money. GM didn't need all of it. So they're giving it back.
The article makes it out to be a lot more confusing than it is.
GM: "Hey Goverment, can I borrow some money?"
Government: "Sure, here's a few billion."
GM: "Thanks, I'll pay you back later."
...
GM: "Hey Government, I didn't need all of your money, so here's some of it back early."
This is not confusing nor questionable.
The article makes it out to be a lot more confusing than it is.
GM: "Hey Goverment, can I borrow some money?"
Government: "Sure, here's a few billion."
GM: "Thanks, I'll pay you back later."
...
GM: "Hey Government, I didn't need all of your money, so here's some of it back early."
This is not confusing nor questionable.
No, they are paying the loans back with the profit that they earn on each car.
Actually, both answers are correct, as money is fungible.
But in either case, it's a sad state of affairs where any large company can post a $1.2 billion dollar loss and start jumping up and down as though it's a showing of good performance.
Actually, both answers are correct, as money is fungible.
But in either case, it's a sad state of affairs where any large company can post a $1.2 billion dollar loss and start jumping up and down as though it's a showing of good performance.
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Joined: Mar 2001
Posts: 13,713
From: The Golden State
The government lent them some money. GM didn't need all of it. So they're giving it back.
The article makes it out to be a lot more confusing than it is.
GM: "Hey Goverment, can I borrow some money?"
Government: "Sure, here's a few billion."
GM: "Thanks, I'll pay you back later."
...
GM: "Hey Government, I didn't need all of your money, so here's some of it back early."
This is not confusing nor questionable.
The article makes it out to be a lot more confusing than it is.
GM: "Hey Goverment, can I borrow some money?"
Government: "Sure, here's a few billion."
GM: "Thanks, I'll pay you back later."
...
GM: "Hey Government, I didn't need all of your money, so here's some of it back early."
This is not confusing nor questionable.
It's no different than someone taking out a loan on a car who manages to get the price lower than expected, and uses that extra money to pay back on the loan.
I see some people automatically jumped on the "pay government back with government money" bandwagon before thinking. It seems all you have to do is say the word government or union.
On a slightly different subject, all 3 car makers have essentially fixed their finances. Ford is now clearing over a billion a quarter, Chrysler is now breaking even, and GM is losing 1.2 billion in 5 months instead of every month. This has been done by doing somethings that should have been done many years ago:
1. Settling on making more money selling fewer cars (instead of selling cars at a loss or attempting to make up money elsewhere, cut personnel and make only what the market demands).
2. Cutting back incentives (instead of overproducing and selling the glut by discounting it, make what the market needs and selling it at the initial price... offsetting any losses by clearing more $$$ per vehicle).
3. Don't be afraid of shortages (Chrysler essentially shut down their factories this past summer, and let supply dry up. Their sales numbers suck, but they are also suddenly back in the black too).
Next the focus will be on automobiles.
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Joined: Dec 2002
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From: Charleston, WV
I see some people jump on the Chrysler is "back in black" bandwagon after the broke even for ONE month (September)...
GM also made 79.4 BILLION for the 1st 9 days of the quarter
GM also made 79.4 BILLION for the 1st 9 days of the quarter
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Posts: 9,507
From: Okemos, MI
GM also made 79.4 BILLION for the 1st 9 days of the quarter
, , etc makes it hard to tell whether you're joking.I'm sure other people will cruise by that post and take it verbatim, so I'll clarify: Those nine days were in the midst of the bankruptcy reorganization. GM's balance sheet improved by 79.4 billion because they got rid of that much debt by spinning it off into Motors Liquidation Company or whatever it was called.
Thread Starter
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Posts: 1,505
From: Charleston, WV
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Joined: Apr 2005
Posts: 957
From: Berkley, MI
Correct.
It's no different than someone taking out a loan on a car who manages to get the price lower than expected, and uses that extra money to pay back on the loan.
I see some people automatically jumped on the "pay government back with government money" bandwagon before thinking. It seems all you have to do is say the word government or union.
On a slightly different subject, all 3 car makers have essentially fixed their finances. Ford is now clearing over a billion a quarter, Chrysler is now breaking even, and GM is losing 1.2 billion in 5 months instead of every month. This has been done by doing somethings that should have been done many years ago:
1. Settling on making more money selling fewer cars (instead of selling cars at a loss or attempting to make up money elsewhere, cut personnel and make only what the market demands).
2. Cutting back incentives (instead of overproducing and selling the glut by discounting it, make what the market needs and selling it at the initial price... offsetting any losses by clearing more $$$ per vehicle).
3. Don't be afraid of shortages (Chrysler essentially shut down their factories this past summer, and let supply dry up. Their sales numbers suck, but they are also suddenly back in the black too).
Next the focus will be on automobiles.
It's no different than someone taking out a loan on a car who manages to get the price lower than expected, and uses that extra money to pay back on the loan.
I see some people automatically jumped on the "pay government back with government money" bandwagon before thinking. It seems all you have to do is say the word government or union.
On a slightly different subject, all 3 car makers have essentially fixed their finances. Ford is now clearing over a billion a quarter, Chrysler is now breaking even, and GM is losing 1.2 billion in 5 months instead of every month. This has been done by doing somethings that should have been done many years ago:
1. Settling on making more money selling fewer cars (instead of selling cars at a loss or attempting to make up money elsewhere, cut personnel and make only what the market demands).
2. Cutting back incentives (instead of overproducing and selling the glut by discounting it, make what the market needs and selling it at the initial price... offsetting any losses by clearing more $$$ per vehicle).
3. Don't be afraid of shortages (Chrysler essentially shut down their factories this past summer, and let supply dry up. Their sales numbers suck, but they are also suddenly back in the black too).
Next the focus will be on automobiles.