GM’s $4.3 billion loss shows us lies before profits

GM’s $4.3 billion loss shows us lies before profits

DETROIT -- General Motors Co.'s $4.3 billion loss after bankruptcy last year highlights the "financial hill" the automaker must climb to pay back its government investor.

The loss in the second half of 2009, reported under post-bankruptcy GM's restarted accounting, provides the first official look at the automaker's financial condition after its U.S.-steered rescue.

Despite the loss, CFO Chris Liddell echoed executives' past statements that GM may become profitable this year. At the same time, the loss gives "some sense of the financial hill we intend to climb," he said. "General Motors should never again be in the financial position it found itself in last year."

GM said it burned through $1.9 billion in operating cash in the last three months of the year, partially because of repayments to governments that propped it up during its restructuring. Including third-quarter results, GM generated $1 billion in 2009 cash after its bankruptcy.

After exiting U.S.-sponsored bankruptcy on July 10, GM established so-called fresh-start accounting that meets regulatory requirements. The process, used when companies leave bankruptcy, involved adjusting more than 1 million records, said Nick Cyprus, GM's chief accounting officer.

Proper accounting also is needed to help the company go public, a required step for the U.S. government to start recouping the $50 billion it poured into GM's restructuring. The U.S. Treasury owns 61 percent of GM. Executives have said an initial public offering could come this year.

'Special' items

GM's net loss reflected a $2.6 billion cost related to a UAW retiree medical plan and $1.3 billion tied to remeasuring foreign currency values.

Much of GM's cost cutting is complete, Liddell said. And improving U.S. light-vehicle sales, which reached a seasonally adjusted annual rate of 11.7 million in March, can only help GM's efforts. In 2009, U.S. sales totaled 10.4 million.

Increased U.S. demand for some GM products will soon have six of GM's 16 plants in North America working at more than two 40-hour shifts weekly.

"We don't need the industry to be significantly better to achieve profitability," Liddell said. "Having said that, in the way the year is shaking out, the industry is looking better, and that's certainly helping."

Only modest improvements are needed for GM to post profits, Liddell said. Without "items which you might deem to be special," he said, GM's fourth-quarter loss before interest and taxes was $600 million.

GM's guilt

GM's first-quarter results bolster expectations that a profit is possible this year, Liddell said, although he stopped short of saying he was confident."This company has been guilty of overpromising and underdelivering," Liddell said. "I would like to turn that around. I would rather underpromise and hopefully overdeliver."

The 2009 loss marked the automaker's fifth straight year without a profit. But automotive consultant Maryann Keller, a former Wall Street analyst, predicted GM will break that trend this year.

"If they didn't make money this year, I don't know how they will make money," she said.

GM said its 2009 worldwide market share was 11.6 percent, down from 12.4 percent in 2008. That includes a 2009 U.S. share that fell to 19.6 percent, from 22.1 percent. Liddell declined to give a market share target, saying he views share as a result, not a cause, of GM's financial performance.

Last week GM made a second round of cash payments to Canada and the U.S. Treasury, on its way to repaying its $8.1 billion in loans to those countries. GM plans to pay off the loans by June.

Source: [ Automotive News ]