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GM Posts Second Consecutive Quarter of Profitability

12 August 2010

General Motors Company announced its second quarter 2010 results, marked by revenue of $33.2 billion and net income attributable to common stockholders of $1.3 billion, resulting in earnings per share on a diluted basis of $2.55. GM’s second quarter earnings before interest and tax (EBIT) was $2.0 billion.

GM North America had EBIT in the second quarter 2010 of $1.6 billion, up from $1.2 billion in the first quarter. GM Europe had a loss before interest and taxes of $0.2 billion, an improvement of $0.3 billion from the first quarter. GM International Operations posted EBIT of $0.7 billion, down from $1.2 billion in the first quarter.

Cash flow from operating activities was $3.9 billion and after adjusting for capital expenditures of $1.1 billion, free cash flow was $2.8 billion. GM ended the second quarter with $32.5 billion in cash and marketable securities, including funds in the Canadian Health Care Trust escrow.

Media reports say GM is preparing to file its S-1 for an IPO tomorrow or early next week.

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Can GM be trusted to properly manage a worldwide competitive vehicle manufacturing conglomerate and timely transition from ICE to electrified vehicles?

Competition will be fierce between the top 20 manufacturers. So far, Ford, Nissan-Renault, Hyundai, VW, Mercedes, BMW, Toyota, Honda, Tata, many Chinese and other manufacturers seem to adapt better.

Interesting but challenging decade ahead.

There are only three REAL EV products on market. Tesla has proven there's a healthy appetite for pure BEVs which they invented from scratch. Their new Model S looks to be a successful Camry replacement which is why Toyo has bought into the company.

With GM's return to profitability and huge following for the Volt, they become the global leader in PHEVs. For anyone wanting to address energy independence or green issues, the affordable ($350 lease) Volt is the only choice. This is the result of an excellent design, engineering and financial team operating under the GM umbrella. There is no better team in the business.

The GM IPO will accumulate cash for further expansion and give investors a chance to ride the alternative energy cyclone. And it takes the Fed's bail loans out of the game. Government Motors is no more.

Electrification of transport continues to lead the world into a sustainable future. And by limiting the reasons for energy wars - we believe more peaceful, benevolent times are ahead. Bravo!

GM is switching CEOs before the IPO. I don't know if that is a good idea, but the market will decide. They will probably lose money on every Volt the first few years, but then it could be a winner. Fragile times in a slowly recovering economy, I wish them the best but conditions do not look like green lights and blue skies right now.

If GM can sustain profitability then the govt bail out was a good thing for the U.S. It kept thousands of engineers employed and dozens of manufacturing facilities operating.
Volt: hope it sells. If it sells well it could be big plus for GM. High gas prices will help. If it sells well let us hope GM can maintain some leadership in EVs.

are they giving back all the money the government gave them ?

GM currently belongs (75+%) to Governments. It is up to them to sell or not to sell to the public (and/or speculators) at large and at which price.

Will Governments recover 100% of their investments? GM may not currently be worth that much. Who knows, GM's value may grow in a few more years or the public may be willing to pay more than it is worth? It happened many times before.

Basically, Governments should recover their investments + fair interest. Otherwise, free enterprise rules would be faulted.

Reel$$: I admire your optimism but I am a lot more cautious. I also would like to see a renewable energy cyclone...but the US economy is sputtering with no end in sight. There is a coming tsunami of tax increases (expiration of Bush tax cuts) and new corporate health care liabilities --- not good for 10% unemployment, which in turn routinely body slams the market on a regular basis when the numbers are given to Wall Street. The lack of easy subprime loans for people that shouldn't be getting them will not contribute to a rapid economic recovery either. Ultimately I think people are kidding themselves if they think 30k-40k BEV's are going to catch on like wildfire in this horrible recessionary environment.

HarveyD: I strongly believe GM will recover eventually and pay all the money back to the federal government. While Hannity and Rush belittle Obama for taking over GM, I think the Obama Administration being able to restructure the company and work with the unions are things that generations of corporate suits and other politicians could only dream of doing...and I think it's been great. Who else but a leftist president could go into GM with any credibility and do what Obama has done? This intervention should be good enough to last for decades, and with GM on a positive trajectory, I think it's just a matter of time before they pay all the money off and free themselves from the government intervention. While I think the government takeover was great, it's now time for the government to get out as quickly as possible.

"Basically, Governments should recover their investments + fair interest. Otherwise, free enterprise rules would be faulted."

In this case there needs to be a few other components to the formula.

1) Unemployment assistance avoided. Had the US car companies been allowed to fail approximately 2 million people would have been out of work. The government would have been cutting a lot of relief checks.

2) Tax revenue received. Keeping those 2 million people employed has meant that their tax money has been flowing to the government. And had those jobs disappeared it might have been many, many years before those folks started paying in once more.

(Two million = car company employees + parts/material supply company employees + those people whose income depends on the first sets spending their paychecks.)

"leftist president"

Oh heck, just call him a communist and be done with it, don't mince words.

"There is a coming tsunami of tax increases (expiration of Bush tax cuts) and new corporate health care liabilities --- not good for 10% unemployment...."

Taxes are going up only on the richest, the net result is that they'll buy fewer diamonds from Africa and fewer yachts from France. They won't cut their spending in the US. They might even travel abroad a bit less and spend more here.

The CEOs who pay more tax on their multi-millon dollar salaries won't cut employees in order to cut taxes. That would just be stupid. You're going to give up a dollar in order to pay ten cents less in taxes? Dumb.

If anything, they will grow their businesses, increase hiring, to replace the relatively small amount of money they will be contributing to funding the country.

Finally, the health reform bill does little, if anything, to raise the cost of insurance premiums for corporations. If anything the net result should be lower premiums over time.

Seeing that people get annual physicals, routine mammograms/colorectal screening, get treatment before their illness gets serious (expensive), and allows them to get their routine health care from doctor's offices/clinics rather than emergency rooms will all add up to health care cost savings. And that's only part of the money saving parts of HIR.

Folks really should inform themselves about the bill. You could start here... http://www.healthcare.gov/

There's some bogus info floating around.

Click on Understanding the New Law and then look at the timeline.


"While I think the government takeover was great, it's now time for the government to get out as quickly as possible."

And effectively that has happened with CFO Liddel's restructuring of the GM debt so that the IPO extinguishes any remaining government loans. As Bob Wallace points out, had GM not been bailed it would have cost the taxpayer huge losses in tax revenue and payment of unemployment checks.

We will see the company unburdened by fed bureaucrats able to move swifter and with more imagination. The free enterprise automaker has moved into the fast track world of silicon valley. If you cannot move swiftly - you're gonna die. This is why Toyota's CEO stopped by Elon Musk's house to chat him up for investment in Tesla. Mr. Toyoda knows he needs entrepreneurial spirit.

The automobile world is coming to realize they're now in the high end consumer electronics business. Model years are gone - brand iterations are in (Tesla 2.5.) With GM showing fat profits again they will need to rapidly expand their offering of EV/PHEVs to stay competitive with Tesla and other EV makers.

So far electrification is solidly in the hands US of technology, while BYD has cut production by 25%.

And effectively that has happened with CFO Liddel's restructuring of the GM debt so that the IPO extinguishes any remaining government loans.

Liddell did no debt restructuring. GM used a few billion of the $50b+ in taxpayer money given to them to repay a government loan.

Bob -

200k is middle class in NY. I don't think many people making 200k in New York, DC, or Boston are buying Yachts. The reality is... these new taxes aren't indexed to inflation. Couple that with the fact that the bureau of printing and engraving has been working so much OT, and it's going to impact the middle class in ~10 years. People will just adapt to a higher tax burden, which is sort of a sad reality.

As a side note with taxes... If we raise them to 1960s levels (as some liberal talking heads suggest), what is my incentive to take out 150k in loans to go to B-school or law school?

But i digress... Good luck GM.

.

Bob Wallace said: "Taxes are going up only on the richest, the net result is...

Since when are the bottom tax brackets "the richest?" Another warped, false, view of the world. The facts, which are easily verified:

The lowest bracket for the personal income tax moves up 50% — to 15% from 10%. The next lowest bracket — 25% — will rise to 28%, and the old 28% bracket will be 31%. At the higher end, the 33% bracket is pushed to 36% and the 35% bracket becomes 39.6%.

Other tax hikes include: halving the child tax credit to $500 from $1,000 and fixing the standard deduction for couples at the same level as it is for single filers.

Obama's massive tax increases will hit the working middle class especially hard.

.

Bob Wallace: Also remember that government has not figured out a way to seperate the "rich" from small business owners whose incomes put them in the same brackets as the "rich". Bill Gates, Al Gore, BHO & Michelle, all the NBA basketball players, NFL football players and so on are "rich"...but is the owner of your auto repair shop down the street rich? Or, how about the owners of the chinese fast food restaurant in your local strip mall? Or what about the franchisee running the Outback Steakhouse in that strip mall? Doctors running a private practice over by your hospital? Their incomes may be in the $200k + range, but that money is also intertwined with the bottom lines of their small businesses.

If we are going to double-triple-quadruple taxes on Bill Gates, John Kerry, Bill and Hillary Clinton, Warren Buffett, Joe Biden, BHO/Michelle & all the NFL football players & Major League Baseball players...that is one thing. Raising taxes by the same amount on people in the same income bracket but whose income is directly related to their small businesses, the true engines of our economy, is quite another...these are not the people buying million dollar yachts and trying to dodge taxes like John Kerry.

One way to lower the income tax burden for low income people is to selectively increase the non-taxable exclusions.

Exclude the first $15K for each working member of the family + $5K for each child.

Plug all loop holds, starting with tax credit for interest paid on private homes, pick-ups and large 4 x 4 etc.

At the same time, lower or remove 1001 other tax credits.

Not that this is a forum for a debate on fair taxation... but..

Harvey- Do you realize that Farmers and blue collar workers make up a large percent of truck/suv owners? I don't know a single farmer that doesn't own at least 1 pickup. I also know very few construction workers/plumbers/electricians that also don't own a pickup. If you tax those... you're taxing the middle class workers. If you want to tax rich people.. a more appropriate tax would be on cars like the prius (which would not be a good idea, and i'm not advocating).

There seems to be some consensus that helping GM may have been the right thing to do. I have seen that when people are making money, the taxes are not the major issue. When the situation contracts, that is one of the issues at the top of the list. This could have been by design.

Rich vs. poor is a tired ploy of the perpetually disgruntled.

"The U.S. recreational boating industry creates more than 200,000 jobs in the United States, and has a total annual economic impact of $100 billion, including nearly $30 billion in new sales and services each year. Boating is a middle-class activity where 75 percent of boaters have an annual household income of less than $100,000, and 95 percent of boats are under 26 feet in length."

There are currently 29.3 million recreational boaters in the U.S. - few of them rich. Yacht builders employ thousands of highly paid craftsmen who pay taxes and spread their income across community.

Manufacturing recreational products employs millions and is an area needing to grow further to strengthen economies worldwide.

Should we build pleasure boats, tanks or tractors. Tractors are the only ones that produce and thus have a gain. I have an idea of what we should produce, but when we spend $100 billion on lawn care and $500 billion on entertainment, it is hard to get people to focus on the future.

Apparently if you are John Kerry, you get to bash evil corporations that ship jobs overseas - and vote to raise any and all taxes possible on the "rich"...then turn around and buy a multi-million dollar foreign made yacht and dock it in Rhode Island to avoid tens of thousands of dollars in taxes ---- all of this while getting a free pass from the press! Must be nice!

Isn't the majority doing its best not to pay taxes? Many companies get so many tax credits that they never have to pay income taxes on their huge net profits. Too many find a trick or two or more not to pay their fair share. If everybody paid 100% of their income and sales taxes, the current high deficit would fade quickly.

When practiced on a nation wide basis, a country can go bankrupt like was the case recently in an EU country.

Bryan...The majority of 4 x 4 and pick-ups sold may not be purchased by farmers or forestry/construction workers. It seems to be the favored vehicles used by the 20% males unemployed and/or on social. Have a lot a country side bars parking lots.

It is easy to single out one person, that takes the attention off of 100 million. The numbers show if you have 100 million pay $1 you have $100 million dollars. What one person does is a matter of law and conscience.

There are 1000 billionaires and 1 million millionaires, even Warren Buffet said he pays less of a percentage than his secretary. He also said that it IS class warfare, his class is winning and they should not be.

Corporations used to pay a MUCH higher percentage of the federal budget. Over the years since the 70s, they claimed that they needed tax breaks to be "competitive". If they did not get them they would have to lay people off. They got the breaks and fired millions anyway.

"Corporations used to pay a MUCH higher percentage of the federal budget. Over the years since the 70s, they claimed that they needed tax breaks to be "competitive". If they did not get them they would have to lay people off. They got the breaks and fired millions anyway"

Plus, corporations got trillions for H2 cars never built, oil/coal tax breaks unearned, missiles/bombs that we then pay to dismantle, etc while corp/gov officers vote themselves 100's of times the average worker's pay and pension.

Then our leaders watch over a hundred American's die daily from un-affordable health care.

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