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Bailout of GM produces results

February 17, 2012
Salem News

The topic of government bailouts and bankruptcy protection is a touchy one. It seems that you either support them or you don't.

Such was the case when federal assistance prevented a complete collapse of General Motors in 2009. Some taxpayers wholeheartedly supported it and others were aghast. But at least in the case of GM it seems to be working. On Thursday, GM reported its biggest profit ever.

The carmaker turned a profit of $7.6 billion. That broke its old record of $6.7 billion set during the 1997 pickup and SUV boom. The company made record money last year even though U.S. sales were near historic lows of 12.8 million cars and trucks.

GM is more streamlined than it was during its past boom years, having fewer workers and a less costly contract with the United Auto Workers.

The good news Thursday should please our government. After all, it still owns 26.5 percent of GM and is still awaiting price share to rise more before regaining its bailout money. GM's stock price rose about 4 percent during trading yesterday.

In 2011, GM's global sales rose 7.6 percent to 9.03 million vehicles to help it reclaim the title of world's largest automaker from Toyota Motor Corp.

As reported by the Associated Press, the government still owns 500 million shares of GM, which it got in exchange for the $49.5 billion bailout. Through earlier stock sales and loan repayments, the government has recouped about $22.3 billion of that money. The remaining shares would have to sell for around $53 each for the government to recoup the rest.

GM did report its profit slightly fell during 2011's fourth quarter. The company is expecting to turn that around because global sales are growing and consumers will be charged more per vehicle in 2012.

According to the AP report, GM will make less money per vehicle as the mix of sales continues to shift to cars from trucks, which have bigger sticker prices.

It also expects to invest $8 billion on new products and technology, and says pension expenses will rise. The company wants to keep expenses down by freezing its underfunded U.S. pension plan for salaried workers. The company does anticipate factory and worker cuts elsewhere, in Europe and South America.

Last year, GM made the bulk of its income in North America, where its pretax profit totaled $7.2 billion. International Operations, which includes Asia, made $1.9 billion before taxes, but that was down. GM's 2011 profit of $4.58 per share was 62 percent higher than a year earlier.

GM also said 47,500 blue-collar workers in the U.S. will get $7,000 profit-sharing checks in March. The checks are based on North American performance and are a record for the company.

That should please the auto workers including many from right here who work in Lordstown. That complex's Cruze has been widely embraced and emerged as a poster child for the resurgence of General Motors.

The Lordstown work force merits praise. Our entire region desperately needs the economic buttress that Lordstown provides. It looks like that is in place. The GM bailout seems to be working across the country and right here in our own backyard. That is encouraging to see.

 
 

 

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