(Bloomberg) — General Motors Co. generated $1 billion in cash last year after leaving bankruptcy in July as Chief Executive Officer Ed Whitacre cut half of the U.S. brands and shuffled management to push for a profit in 2010.
The net loss was $4.3 billion from its Chapter 11 exit through Dec. 31, Detroit-based GM said today. Cash and marketable securities totaled $36.2 billion at year’s end, according to slides prepared for an analyst call.
GM needs cash to meet a goal of repaying government loans in 2010 and market the new models pivotal to Whitacre’s demands for increased sales. The results offer the first look at the 2009 financial performance of the biggest U.S. automaker since it emerged from the remnants of General Motors Corp.
“They should make money this year,” said Maryann Keller, president of consultant Maryann Keller & Associates in Stamford, Connecticut. “If they didn’t make money this year, I don’t know how they will make money.”
GM posted a fourth-quarter loss of $3.4 billion and used $1.9 billion in cash. For the third quarter, a period that began with the end of bankruptcy on July 10, GM generated $3.3 billion in cash and lost $1.15 billion, the company said Nov. 16. Revenue for 2009 was $57.5 billion.
‘Important Step’
“Today marks an important step for the new GM,” Chief Financial Officer Chris Liddell said on a conference call. “While these results are somewhat dated, it gives you an idea of the financial hill we have had to climb. Despite the results for the fourth quarter, I believe we have a chance of achieving a profit” in 2010 before interest and taxes.
Profitability is “the most important foundation” before selling shares to the public, said Liddell, who didn’t give a timeline for an initial stock offering. The U.S. government now owns 61 percent of the company.
GM’s 8.375 percent bonds due July 2033 rose 0.18 cent to 37.05 cents on the dollar at 11:58 a.m. in New York, according to Trace, the bond-pricing service of the Financial Industry Regulatory Authority. The bonds were issued by General Motors Corp. and will convert into equity in the new GM as part of the bankruptcy agreement.
Liddell said GM seeks to repay all of its bankruptcy- related borrowing from the U.S. and Canada by “June 2010 at the latest.” GM said it repaid $2.4 billion to the U.S. Treasury and $400 million to Canada of the original $8.3 billion in government debt.
“No wonder they’re paying the loans back,” Keller said. “They have more than enough cash.”
Whitacre’s Changes
Whitacre, 68, who is also chairman, took on the CEO’s job on Dec. 1 and stepped up changes among senior leadership. He recruited Liddell from Microsoft Corp. and named new executives for sales and marketing in North America, the company’s largest region.
Some of GM’s new cash will go for developing vehicles such as large pickups and some will go toward promoting new models, including the Chevrolet Equinox and GMC Terrain mid-sized sport- utility vehicles. The Buick Regal and Chevrolet’s Volt electric car and Cruze small sedan are due later this year. GM hasn’t given a breakdown on its spending plans.
GM’s U.S. sales rose 16.8 percent in the first quarter, outpacing the 15.5 percent industrywide increase, according to industry researcher Autodata Corp. of Woodcliff Lake, New Jersey. Its U.S. market share climbed to 18.7 percent from 18.5 percent a year earlier.
Excluding interest and taxes, GM said its fourth-quarter operating loss was $4 billion. The net loss included $2.6 billion in costs to finance a union retiree medical fund, $400 million from currency adjustments and $100 million for winding down the Saturn unit after GM failed to find a buyer.
Cutting Brands
Saturn is among four U.S. brands being unloaded so GM can focus on its remaining U.S. vehicle lines — Chevrolet, GMC, Buick and Cadillac. GM sold Saab last month to Dutch luxury-auto maker Spyker Cars NV and is shutting Hummer and Pontiac.
The automaker said it lost $3.4 billion in North America on an operating basis in the fourth quarter. GM posted losses before interest and taxes of $814 million in Europe and a profit of $738 million on that basis in other international operations. GM sold 7.48 million cars and trucks worldwide last year, down from 8.36 million in 2008.
Excluding the quarter’s one-time charges, GM is closer to break even, Liddell said. “We don’t need to make that much improvement to get to profitability,” he said.
Years of Losses
GM amassed $88 billion in losses from 2004 through last year’s first quarter under former CEO Rick Wagoner, who was asked by the government’s auto task force to step aside in March 2009. He was replaced with Fritz Henderson, who was ousted by the board in favor of Whitacre eight months later.
The automaker’s restructuring in bankruptcy allowed GM to slash $10.6 billion in costs by cutting plants, payroll, health- care costs and debt payments.
As part of so-called fresh-start accounting after bankruptcy, GM said it valued property, plant and equipment at $19 billion, an $18 billion drop. GM recognized $30 billion in goodwill and $16 billion in intangible assets as well as $8 billion in equity and cost-based investments, according to the slides.
GM was also sued by the United Auto Workers yesterday over claims the automaker owes $450 million to a retiree fund of partsmaker Delphi Corp., a former GM unit.
–With assistance from Katie Merx in Southfield, Michigan. Editors: Ed Dufner, John Lear
To contact the reporters on this story: Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net; David Welch in Southfield, Michigan, at dwelch12@bloomberg.net.
To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

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