General Motors

Monica TaylorCritical Issues in Business9/25/10

General Motors Quick Facts

Found by William Durant in 1908World’s second largest automobile manufacturer behind ToyotaHeadquarters located in Detroit, Michigan, the hub of the US autoSelling its vehicles in 31 countries, GM’s largest market is China and the US, the second largest. GM Brands:

Buick, GMC, Cadillac, Vauxhall, Opel, Daewoo, Holden, FAW, Wuling, and Jiefeng

General Motors Quick Facts cont’d

A full service automobile manufacturer offering:General Motors Acceptance Corporation: finance and insuranceOnStar: safety, security, and information Service and Parts division: GM Performance Parts, GM Goodwrench, ACDelco, and GM Powertrain

General Motors Q2 and Q1 2010: Revenues

Revenues$30.5

$31.0

$31.5

$32.0

$32.5

$33.0

$33.5

Q2Q1

Shown in Billions (2010, GM.com)

General Motors Q2 and Q1 2010: Net Income

Net Income$0.0

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

$1.4

Q2Q1

Shown in Billions (2010, GM.com)

General Motors Q2 and Q1 2010 : Earnings Per Share

Earnings Per Share$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

Q2Q1

General Motors Q2 and Q1 2010: Free Cash Flows

Free Cash Flows$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

Q2Q1

Shown in Billions (2010, GM.com)

GM Comments Regarding Quarterly Results

In their press statement for Q2 of 2010, GM’s Chris Liddell (vice chairman and chief financial officer) states: “I am pleased with our progress on achieving our business objectives,…We have delivered strong product, maintained cost discipline, progressed strategic initiatives such as restructuring… and delivered two consecutive quarters of profitability and positive cash flow” (2010, GM.com).

GM August 2010

11% drop in sales for its core brands Buick, GMC, Chevrolet, and Cadillac compared to last year7% decrease in sales compared to last July 201061% YTD sales hike for Buick 50% YTD sales hike for Cadillac37% sales hike for Buick and Cadillac combined over last year

GM’s August 2010 Sales commentsAs per Don Johnson, vice president of US Sales Operations explains the results thusly: “Last year’s Cash for Clunkers program spiked industry sales in 2009, so results this August were not surprisingly a bit mixed… Importantly, three of our four divisions showed solid gains. This is further evidence that our performance is the result of balanced contributions across our brands” (2010, GM.com). Johnson remains optimistic for the remainder of the year due to the release of new products such as the new model launches for the Chevrolet brand: the Cruze and the Volt. Additionally, the continued expansion of the Buick Regal and Cadillac CTS Coupe will continue GM’s momentum (2010, GM).

Banruptcy\Bailout Highlights

GM reports at the time of filing, total assets of $82.3 billion and liabilities of $172.8 billion;Government bailout that made the American taxpayer a 60% stakeholder, Canada a 12% stakeholder and the UAW a 17.5% stakeholder of the new and reorganized GM;The divestiture of Pontiac, Saturn, Saab, Hummer brands leaving US core brands: Buick, Chevrolet, GMC and Cadillac;Idled and closure of several plant facilities throughout the US;

Bankruptcy\Bailout Highlights cont’dMore than 2000 reduction of its 6000 dealerships;

The initial shedding of 20,000 jobs that might top 100,000 after the completion of the aforementioned reduction in facilities and dealerships;Cutbacks in health insurance for 650,000 retirees and their families;GM bondholders’ investments converted to stock in the new and reorganized GM which is worth a fraction of their original investment;

Bankruptcy\Bailout Highlights cont’d

GM stock holders complete loss of investment;

GM’s removal from the NY Stock Exchange and the Dow Jones Industrial Average. (2010, Isdore)

GM Here and Now

GM proudly reported that it will have completely paid back the initial government loans (independent of the bailouts) it received from US and Canadian governments in June 2010.

GM: Future

GM has announced plans of a mid-November initial public offering (IPO) of government bailed out stock. It is expected that the American and Canadian governments will promptly make portions of their shares to facilitate a repayment of bailout funds. Q1 and Q2 results saw the return of profitability in GM which will definitely play a part in making an attractive IPO and generating demand for GM stock.

Conclusions

GM bankruptcy/bailout lessons:“Problems denied and solutions delayed will result in a painful and costly day of reckoningIn corporate governance, the right people count more than the right structureAppearance can be deceiving” (2010, Ingrassia).

The Era of the New GM Begins