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  • GM Posts First Quarter Profit

    After going all of 2008 and 2009 without a single profitable quarter, General Motors has some very good earnings data. One year after filing for bankruptcy, GM posted a first quarter profit of $865 million. Detroit News reporter Robert Snell writes that much of that profit was generated in North American sales, as GM has faced some difficult times in Europe and other overseas markets. The strong quarter could also mean good news on the jobs front, as production is on the rise. Snell: The positive financial results released Monday coincided with a dramatic increase in production. GM built 668,000 vehicles from January through March, 80 percent more than a year earlier. Operating income was $1.2 billion during the first quarter, when GM posted revenue of $31.5 billion, a 40 percent increase. GM also generated $1 billion in free cash flow during the quarter. GM's last quarterly profit came in the second quarter of 2007, when it earned $891 million. The company's stint in bankruptcy court last summer helped lower GM's break-even point as the automaker shed brands, factories and slashed thousands of jobs. One quarter does not a turnaround make. As Wall Street Journal Detroit Bureau Chief Neal Boudette points out, the profit is still well under half of what Ford earned during the quarter. Still, Boudette says this is news is a very positive sign:

  • COP September Report: US Automakers, Government Ownership, and Potential Conflicts

    In its September report, the Congressional Oversight Panel (COP) looks into the impact of the use of TARP funds to keep US automakers Chrysler and GM from going under. The panel looked first at whether Treasury broke any rules in bailing out the companies, and found that the government's behavior was "largely in line with the practices of other large bankruptcies," and that no bankruptcy laws were broken. But there are now added concerns about how the intersection of politics and business puts the government in a tricky situation as part owner of the automakers. And COP, predictably, is calling for more transparency: American taxpayers now own 10 percent and 61 percent of the new Chrysler and GM companies respectively. Treasury's support for the automotive industry differed significantly from its assistance to the banking industry. The bulk of the funds were available only after the companies had filed for bankruptcy, wiping out their old shareholders, cutting their labor costs, reducing their debt obligations and replacing some top management. The government's role raises serious oversight issues, particularly Treasury's conflict between competing objectives. The Panel recommends that, to mitigate the potential conflicts and political issues inherent in owning Chrysler and GM shares, Treasury should take exceptional care to explain its decision making and provide a full, transparent picture of its actions. The Panel also recommends that Treasury consider placing its GM and Chrysler shares in an independent trust that would be insulated from political pressure and government interference. You can read the full report here . Also, COP chair Elizabeth Warren speaks about the September report in this video:

  • The Pitfalls of Bankruptcy for GM

    Chrysler filed for bankruptcy yesterday . It was a key step in the Obama Administration's efforts to save the automaker by pushing it into an alliance with Fiat. Now General Motors is on the clock. GM has until June 1 to work out a restructuring plan that meets the approval of the federal government, or it too might be filing for bakruptcy . William Holstein is the author of Why GM Matters: Inside the Race to Transform and American Icon , and he thinks bankruptcy would be a disaster for GM and the nation. Holstein says bankruptcy works when you get a number of people to the same table and work out a deal. But in the case of automakers, particularly GM, there are too many parties (all the autoparts manufacturers) to bring together. And, as he told an audience at Columbia Business School, he thinks the government's intervention in General Motors might actually prevent the automaker from making an effective transformation. Watch the full presentation here .