Finally the words Americans want to hear – General Motors is now profitable! GM has posted its first quarterly profit in 3 years; the last time that happened was in the second quarter of 2007.
The now government owned automaker made $863 million in the first three months of 2010 while revenue grew by 40% to $31.5 billion, beating analysts’ predictions.
For the record, GM has lost more than $80 billion since 2005 and hasn’t been profitable for a full year since 2004. It could be said that profits have naturally increased, due to restructuring through bankruptcy and loans from the US Government. Factory closures and major lay offs have helped reduce running costs. Global sales have increased by a good 24% as the global economy picked up after the recession. Also, GM’s North American factories are now running at 84% capacity, up from an inefficient 40% a year ago.
However, GM warned that this phase of profitability may be short lived due to a number of factors. This includes the fact that rivals Ford have better sales figures and GM have been counteracting by offering more competitive prices, thus digging into their profit margin. Other factors include slowing growth in the Chinese market and problems with GM Europe, namely the struggling Opel brand. Sales have been down for some time and GM is still trying to revamp the unprofitable German marque.
GM is being propped up by about $43 billion in government money. Although it repaid $6.7 billion ahead of schedule last month, the government (Treasury holds 61% stake in GM) can only recoup the bulk of it when GM returns to the public stock markets, which will happen anytime from a few months until next year.