Gm's Financials Improving

bowserb · March 14, 2009

Saw this article in the local Columbus Dispatch today, it does mention it above, but this is some decent news for GM. Just thought I'd post it and get some thoughts. It's a step in the right direction.........

GM gets results from restructuring Automaker won't need new government money for March Friday, March 13, 2009 3:13 AM By Tom Krisher

ASSOCIATED PRESS DETROIT -- It's not as good as black ink, but General Motors' news that it doesn't need government loan money this month is a sign that it is starting to bring its gargantuan expenses under control. GM Chief Financial Officer Ray Young said yesterday that the struggling automaker's fortunes have improved to the point that it won't need the $2 billion March installment, despite the request the company made less than a month ago.

But Young wouldn't say when GM might need more help, nor would he say whether it planned to reduce its request for a total of $30 billion in government financing.

General Motors, along with Chrysler, is living on government money as the entire auto industry tries to weather a global recession. In a viability plan submitted to the government Feb. 17, GM said it would need $2 billion in loans this month and $2.6 billion more in April to keep operating.

But Young said GM's restructuring efforts are beginning to take hold, resulting in less spending as U.S. auto sales dropped to their lowest level in 27 years.

"It seems like our companywide cost-reduction efforts are moving well, as well as we've been able to defer spending that we previously anticipated in January and February," Young said. "I think that's a positive development."

Industry analysts weren't celebrating, but they did credit century-old GM for its restructuring efforts, which include closing 11 factories, cutting 50,000 jobs and slashing structural costs by roughly $12 billion from 2005 to 2008.

Jim Hall, managing director of 2953 Analytics, an automotive research company in Birmingham, Mich., said GM has used its crisis to figure out how to manage costs better than at any time in the past.

"It took this horrific event for them to learn it, but now they understand that," Hall said. "It shows they can manage the business better than anyone had thought."

GM's news might not be a tremendous breakthrough, but "it's always nice when they're able to have a tiny bit of good news in an otherwise bleak world," said Pete Hastings, senior analyst with Morgan Keegan & Co., a regional investment firm based in Memphis, Tenn.

Young said on Wednesday, GM told members of the Obama administration's auto task force that it would not need the March installment.

An administration official said the announcement would not change the task force's timeline or approach to restructuring GM and Chrysler. The official spoke on condition of anonymity because the discussions are private.

GM and Chrysler, which has received $4 billion in loans and has requested an additional $5 billion, face a March 31 deadline to complete restructuring plans that include concessions from debt holders and unions.

Critics say both automakers have been slow to cut costs and relied too long on gas-guzzling pickup trucks and sport-utility vehicles for profits.

Some Republican lawmakers favor letting the companies go into Chapter 11 bankruptcy protection so they can restructure and bring their costs down.

But Republican Rep. Thaddeus McCotter, who represents a district near Detroit, said GM's announcement proves that it has been restructuring for a long time and is seeing the payoff.

"It also shows the other stereotype and myth that was out there, that there was no restructuring going on," he said.

The announcement helped GM's shares, which rose 32 cents, or 17.2 percent, to $2.18 yesterday.

Young said GM's cash burn rate, the amount of spending above revenue, has slowed since the company turned in its viability plan last month.

GM burned through $19.2 billion in cash last year on its way to a $30.9 billion net loss.