GM to start repaying government loan

The biggest U.S. automaker said Monday it lost US$1.2 billion after its July 10 exit from a restructuring engineered by the Obama administration. Cash on hand totaled US$42.6 billion at the end of the quarter, and GM reported progress in cutting jobs and shutting dealers.

The results offered Detroit-based GM's first glimpse of its financial performance since emerging from Chapter 11 and shedding the remnants of the old General Motors Corp. on July 10 under the stewardship of Chairman Ed Whitacre, 68, and Chief Executive Officer Fritz Henderson, 50.

“The numbers are encouraging,” Maryann Keller, president of consultant Maryann Keller & Associates in Stamford, Connecticut, said in a Bloomberg Television interview. “What it demonstrates is that the government gave GM a reorganized balance sheet that made them more competitive.”

GM reported unaudited data for July 1 through July 9, for the pre-bankruptcy company, and for the period since July 10. Revenue was US$28 billion for the full three months. “We are ahead of the bankruptcy plan, not only in operations, but with some contingencies we provided for that we have been able to manage,” Henderson said in a Bloomberg Television interview.

Repaying Loans

Borrowing from the U.S., Canadian and Ontario governments will be repaid in quarterly installments from escrowed funds, beginning next month with an initial US$1.2 billion payment, GM said. GM filed for bankruptcy on June 1, and the loans had a scheduled maturity date of July 2015.

“Given our liquidity position, we felt strongly that we could start repaying that loan now,” Henderson told CNBC. He said repaying the U.S. and Canadian aid that financed GM's bankruptcy was a “personal” commitment. After getting an emergency loan from Germany to prop up the Opel unit in Europe, GM decided this month to keep the division, and the automaker is repaying those funds as well. The pre-bankruptcy General Motors Corp. lost US$2.54 billion a year earlier, its best three-month period of 2008. The numbers don't compare directly with the most recent quarter because of the bankruptcy and the emergence of the new company.

Shrinking Workforce

Employment fell 14 percent to 209,000 globally at the end of September, from 243,000 at the end of December, GM said. The U.S. salaried workforce was cut 7 percent to 27,000 in the same period and hourly employees declined 23 percent to 48,000. GM also said it spent US$132 million related to 1,700 employees accepting early retirement in the U.S., Germany and Australia.

GM has reached closure agreements with 2,042 dealers as of the end of October, the automaker said. In the July 10 through Sept. 30 time frame, GM reported charges of US$320 million related to its plan to thin the ranks of its franchisees. Global production fell 17 percent to 1.7 million cars and trucks, from 2.04 million a year earlier, as a decline in North American offset a gain in the rest of the world.

GM said it held a 19.5 percent U.S. market share and 11.9 percent globally. Fleet customers such as rental car companies and governments accounted for 25 percent of sales, and North American plant capacity utilization was 53 percent, GM said.

The U.S. annualized sales rate will fall to about 10.7 million cars and trucks in the fourth quarter from 11.7 million in the third quarter, in part because of the end of U.S. government vehicle incentives, GM said. Annual sales in 2010 should improve to a range of 11 million to 12 million.

Globally, GM said the sales rate will fall to 65.4 million, this quarter from 67.8 million in the previous quarter and estimated global sales of 62 million to 65 million.

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