After Bankruptcy, GM Rolls Forward
As it moves on to life after bankruptcy, General Motors is showing signs of moving forward for the first time since the company reeled in a down economy.
These signs are coming from GM’s first financial results since its July 10 bankruptcy.
According to the Detroit Free Press, GM has gained enough strength to start advertising its products more aggressively, and even resume investments in new vehicle development.
This news came when GM recently announced that it had gathered $3 billion in cash in the three months following the bankruptcy filing. GM’s addition of these funds brings their total cash available to more than $42 billion.
These cash levels are much higher than those reflected by GM when it filed for bankruptcy on July 10, 2009. At that time, GM was struggling to stay afloat, with cash levels that threatened to fall below the minimum level required to keep the business running.
Post-bankruptcy, GM spent months cutting their costs.
"The balance sheet has been significantly deleveraged," said GM Chief Executive Fritz Henderson. “We expect to be in a healthy position where we can support investment into our business.”
These are positive signs for General Motors, but the company still lost $1.2 billion between the beginning of July and the end of September. Some observers are critical of these losses by a company so strongly supported by the government and taxpayer dollars.
Others claim that incremental progress is more important. Corporate restructuring expert Van Conway told the Detroit Free Press said of GM’s movement forward, “it's all about baby steps.”
As GM moves forward, there is also discussion of the loan that the company received from U.S. taxpayers. Henderson cited GM’s improving financial situation when he announced the plan to repay the loan within two years. He mentioned also that the $6.7 billion loan could even be repaid by next June, if the company fares well.
“We think it's important to show our commitment to the taxpayers that yes, in fact, we will begin paying back this investment,” Henderson said in a news conference.
In the third quarter, GM posted only a $651 million loss before taxes and interest. This beat the expectation that the company would lose $2 billion in that time period.
Internationally, GM earned $238 million. These results were far rosier than the expected billion-dollar loss for the division.
There are critics to be found. Economist Peter Morici told the Detroit Free Press of GM’s financial situation, “When GM pays back government money with money that it's earned, as opposed to other government money, then we can be cheered.”
GM did make sure to clarify that the results that were announced reflected the transitional nature of the company. As a new company, they are still setting up their accounting practices and processes. Also, GM noted that the results can’t necessarily be compared with previous results. Rather, they are a way to help show the financial trends that give a sense of how the company is doing.
Currently, following the bankruptcy, GM is a privately held company, and the largest owner is the U.S. government.
Read more about cars in bankruptcy.