GM loses $1.2B last quarter, ready to start repaying loans
This is one of the trickier press releases we've ever had to parse, but here goes. Despite losing $1.15 billion in the third quarter of 2009, General Motors sees this as a "solid foundation." GM President and CEO Fritz Henderson continues, "With a healthier balance sheet and a competitive cost structure, our focus is on driving top line performance. We'll achieve that by winning customers over, one at a time, with vehicles that deliver performance and value."
How can he say any of that? Despite the loss, revenue for the entire quarter is up $4.9 billion from Q2. As are sales, up from 62.8 million global sales in Q2 to 67.7 million in Q3. Cash for Clunkers helped boost sales, resulting in such a healthy quarter. But despite a good three months, GM is still saddled with paying out $2.8 billion for Delphi's bankruptcy, $2 billion of "payment term adjustments," $2.5 billion owed to the US and Canadian Governments and another $1 billion in restructuring costs. Bottom line, says Henderson, is, "I've been asked 100 times, 'When are you going to start paying back the taxpayers?' The answer is now." All the sordid details are in the press release below the fold.
[Source: GM | Image Source: Bill Pugliano/Getty]
PRESS RELEASE
General Motors Announces the New Company's July 10-September 30 Preliminary Managerial Results
- Operating actions result in EBIT loss before special items of $261 million and managerial net loss of $1.2 billion
- Continued progress on structural cost reductions
- Healthier balance sheet with significantly lower debt
- $3.3 billion positive managerial operating cash flow favorably impacted by working capital; $42.6 billion third quarter liquidity position expected to decline materially in the fourth quarter
- Accelerated plan to repay U.S. and Canadian taxpayers; first $1.2 billion payment in December
"We have significantly more work to do, but today's results provide evidence of the solid foundation we're building for the new GM. With a healthier balance sheet and a competitive cost structure, our focus is on driving top line performance. We'll achieve that by winning customers over, one at a time, with vehicles that deliver performance and value," said GM President and CEO Fritz Henderson.
1See the "Editor's Notes" section of this release for details on the presentation of the reporting.
2Special items for July 1-July 9, 2009 includes a reorganization gain of $80.7 billion.
Revenue
GM posted revenue of $28.0 billion in the third quarter of 2009 ( July 1-Sept. 30, 2009), which was up approximately $4.9 billion compared to the revenue recognized by General Motors Corporation, or "Old GM," in the second quarter of 2009.
The improvement was largely attributed to a higher global seasonally adjusted annual rate (SAAR) of 67.8 million units in the third quarter, compared to 62.7 million units in the second quarter of 2009, and GM's stabilizing global share. In China, Brazil, India and Russia (BRIC), GM had 13.0 percent of the combined market share in the third quarter, up 0.2 percentage points from the second quarter of 2009.
GM's global share was 11.9 percent in the third quarter, up 0.3 percentage points from the first half of the year for Old GM. GM's U.S. market share in the third quarter was 19.5 percent, flat in relation to Old GM's U.S. share for the first half of the year.
GM finished the third quarter with U.S. dealer inventories of approximately 424,000 vehicles; a reduction of approximately 158,000 units from the end of the second quarter.
Contributing to GM's sales in the U.S. was the strong retail performance of some of its newest vehicles, including the Chevrolet Camaro and GMC Terrain, as well as the Chevrolet Equinox, Buick LaCrosse and Cadillac SRX which are generating higher average transaction prices and higher residual values than previous model year vehicles.
In other markets around the world, strong consumer appeal for a number of GM's newest vehicles including the Holden and Chevrolet Cruze, Daewoo Matiz Creative, Opel/Vauxhall Astra and Chevrolet Agile are helping to reclaim global share. In fact, the Astra recently claimed its first major award by winning the prestigious Golden Steering Wheel award by the Auto Bild magazine and the Agile was just elected the 2010 Car of the Year by AutoEsporte magazine in Brazil.
The China market in particular is proving to be a strong contributor for the company's results. Maintaining a leading market share position in China, GM and its joint venture partners continue to see an upward trend, selling more than 478,000 vehicles in the third quarter of 2009, up from approximately 451,000 and 364,000 units in the second and first quarters, respectively.
Managerial Results
After the inclusion of special items, GM's managerial earnings before tax for the July 10-Sept. 30 period was a loss of $1.0 billion. GM recorded special items for the same period of $505 million, attributed primarily to dealer restructuring, attrition-related charges and Delphi.3 For the July 10-Sept. 30 period GM posted a managerial loss after-tax of $1.2 billion.
GM managerial earnings before interest and taxes (EBIT) before special items for the July 10-Sept. 30 period was a loss of $261 million, with GM North America reporting a loss of $651 million and GM International Operations reporting a profit of $238 million. Managerial earnings before interest, taxes, depreciation and amortization (EBITDA) was $1.5 billion before special items.
Total structural cost for the company has been significantly reduced by the resizing and delayering of the company including salaried and hourly headcount reductions, engineering savings and volume related savings. GM structural cost for the period July 10-Sept. 30, 2009 was $9.1 billion. Structural cost for Old GM for the period Jan. 1-July 9, 2009 was $22.0 billion. For the 9-month period ending September 30, 2008, Old GM had structural cost of $37.8 billion.
3Details on all special items are included in the "Highlights" section of this release.
Structural Cost
While financial statements between Old GM and GM are not comparable, the above structural costs breakdowns for the two companies are provided for perspective.
Balance Sheet and Cash
For the period July 10-Sept. 30, GM had positive managerial operating cash flow before special items of $3.3 billion, reflecting the favorable working capital impact from production start up, timing of supplier payments and lower capital spending. The favorable working capital impact is not expected to repeat itself in the fourth quarter (see the "Looking Ahead" section below). For the period July 1-July 9, Old GM had negative operating cash flow of $3.6 billion, reflecting extremely low production in North America.
As of September 30, 2009, cash and marketable securities totaled $42.6 billion. Included in this amount was $17.4 billion held in escrowed funds from the United States Treasury (UST) and Export Development Canada (EDC), with $8.1 billion of this amount allocable for future repayments of the UST and EDC loans, $2.8 billion for the recently completed Delphi settlement and $900 million for healthcare in Canada, leaving a remaining escrow cash balance of $5.6 billion.
In light of improving global economic conditions, stabilizing industry sales and its healthier cash position, GM announced today that it plans to accelerate repayment of its outstanding $6.7 billion in UST loans as well as the C$1.5 billion (US$1.4 billion) in EDC loans ahead of the scheduled maturity date of July 2015.
GM plans to repay the United States, Canadian and Ontario government loans in quarterly installments from escrowed funds, beginning next month with an initial $1.2 billion payment to be made in December ($1.0 billion to the UST and $192 million to the EDC), followed by quarterly payments. Any escrowed funds available as of June 30, 2010 would be used to repay the UST and EDC loans unless the escrowed funds were extended one year by the UST. Any balance of funds would be released to GM after the repayment of the UST and EDC loans.
In addition, the company has begun to repay the German government loans which were extended to support Opel, and had a balance of €900 million (~US$1.3 billion) as of September 30, 2009. Opel has already repaid €500 million (~US$0.7 billion) of that in November, and will repay the remaining €400 million (~US$0.6 billion) balance by the end of the month. The cash balance in Europe as of September 30, 2009 was US$2.9 billion.
GM's total debt as of September 30, 2009 was $17 billion, including $6.7 billion in U.S. government loans, $1.4 billion in Canadian government loans, $1.3 billion in German government loans and $7.6 billion in other debt globally. The $17 billion debt level does not include the UAW or CAW VEBA notes or preferred stock, which are $2.5 billion, $0.7 billion and $9 billion, respectively. While GM has reached settlements for the UAW and CAW VEBAs, the debt associated with the agreements will not be recognized until all preconditions are met and they become effective, which will be December 31, 2009 or later. Prior to the start of the new GM, total debt of Old GM was $94.7 billion as of July 9, 2009.
Looking Ahead
Globally, GM expects total vehicle industry volume to moderate in the fourth quarter of 2009, with an estimated SAAR to be approximately 65.4 million units, down from 67.8 million units in the third quarter. Following the expiration of the successful 'Cash for Clunkers' stimulus program in the U.S. which contributed to GM's strong sales in the third quarter, the company anticipates the U.S. industry total vehicle SAAR volume in the fourth quarter will be approximately 10.7 million units, compared to 11.7 million units in the third quarter.
Looking ahead to 2010, GM anticipates modest growth, with total industry volumes estimated at 62 to 65 million units, with a modest recovery in the U.S. market where the outlook for the 2010 calendar year for total vehicles is estimated at 11-12 million units.
GM expects to have negative net cash flows in the fourth quarter of 2009 due to a number of factors including cash outflows relating to the Delphi settlement of $2.8 billion, the working capital impact of payment term adjustments of approximately $2 billion, payments for U.S., Canada, Ontario and Germany government loans of approximately $2.5 billion and continuing restructuring cash costs of approximately $1 billion. As a result, global cash balances at the end of 2009 are expected to be materially lower than third quarter levels of $42.6 billion.
Editors Notes:
Results presented in this press release reflect unaudited condensed consolidated managerial results for the new company for the period July 10 through September 30, 2009, unless otherwise noted as the full quarter. The managerial financial statements do not comply with Generally Accepted Accounting Principles (GAAP), as they do not reflect the application of Fresh Start reporting for the new company, which encompasses the determination of the fair value of its assets and liabilities. Assets and liabilities are currently based on the historical cost basis acquired from Motors Liquidation Company or Old GM. GM continues to analyze time periods in which revenues and expenses were recorded along with allocations of certain assets and liabilities as acquired from Old GM. As a new company, results for GM are not comparable to prior period information for Motors Liquidation Company. GM intends to complete its Fresh Start reporting by March 31, 2010. The company intends to file a Form 8-K with the SEC today for the three- and nine-month periods ended September 30, 2009, encompassing information for both GM and its predecessor company, Motors Liquidation Company.
Forward-Looking Statements:
In this press release and in related comments by our management, our use of the words "expect," "anticipate," "ensure," "promote," "target," "believe," "improve," "intend," "enable," "continue," "will," "may," "would," "could," "should," "project," "projected," "positioned" or similar expressions is intended to identify forward-looking statements that represent our current judgment about possible future events. We believe these judgments are reasonable, but these statements are not guarantees of any events or financial results, and our actual results may differ materially due to a variety of important factors. Among other items, such factors might include: our ability to comply with the requirements of our credit agreements with the U.S. Treasury as well as the EDC and VEBA; our ability to maintain adequate liquidity and financing sources and an appropriate level of debt; our ability to realize production efficiencies and to achieve reductions in costs as a result of our restructuring initiatives and labor modifications; our ability to restore consumers' confidence in our viability as a continuing entity and our ability to continue to attract customers, particularly for our new products, including cars and crossover vehicles; significant changes in the competitive environment and the effect of competition on our markets, including on our pricing policies; and overall strength and stability of general economic conditions and of the automotive industry, both in the United States and in global markets.
Reader Comments (Page 1 of 2)
Azael 12:40PM (11/16/2009)
YAY.....?
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Jake 12:44PM (11/16/2009)
When you're in the govt., those numbers sound great.
"We'll achieve that by winning customers over, one at a time", I may be just some dumb rube, but it sounds to me like you need to win customers over at a rate more like a thousand at a time; or at least a hundred.
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gianni bardelli 1:05PM (11/16/2009)
DUH. The "60 some odd million units" is the seasonally adjusted annual rate of worldwide vehicles sales from all manufacturers not just GM.
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IOMTT 12:48PM (11/16/2009)
Well, there is the top line and then there is the bottom line. Most people are interested in the bottom line. Not sure an IPO will happen as soon as was planned. This has to get better.
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Bobmarley 12:49PM (11/16/2009)
they will pay off the debt as soon as the Volt starts rolling into production...with those huge profit margins...heh?
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Aprime 12:53PM (11/16/2009)
The reimbursement of the debt is entirely dependent upon EXPECTED capital gains made by GM's re-entrance into the stock market.
GM's losses are totally out of proportion with the other automakers', while GM's the only one who's liabilities have been nearly eradicated (from nearly 96 billion dollars to...) by government intervention.
Can't wait for Whitacre to fire that (Fritz) little overoptimistic bastard.
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Aprime 12:57PM (11/16/2009)
Speaking of which:
"Where Henderson stated that GM would need government aid to turn Opel around, Whitacre bluntly said that no help was needed at all."
Yep, he's so out.
compy386 2:42PM (11/16/2009)
I believe we call paying old obligations entirely with new obligations a Ponzi scheme.
evftw 1:15PM (11/16/2009)
Ah the classic strategy of...
"we'll lose money on each one, but we'll make it up on volume!"
The world is changing .. it's time to let the dinosaurs die off...
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Hondaman Calgary 1:01PM (11/16/2009)
Rose colored glasses much?
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jerkychew 1:02PM (11/16/2009)
So, one thing I don't understand:
"As of September 30, 2009, cash and marketable securities totaled $42.6 billion. Included in this amount was $17.4 billion held in escrowed funds from the United States Treasury (UST) and Export Development Canada (EDC),..."
" GM announced today that it plans to accelerate repayment of its outstanding $6.7 billion in UST loans as well as the C$1.5 billion (US$1.4 billion) in EDC loans ahead of the scheduled maturity date of July 2015.."
So of the 17.4 billion USD, GM only has to pay back 6.7? I was under the impression that all the money given to GM was in the form of loans that would eventually be paid back; was I mistaken?
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montoym 1:23PM (11/16/2009)
According to the MSN story, they explain it this way:
- "The government has given GM a total of $52 billion, including $45.3 billion in exchange for a 61 percent equity stake in the company.
Young said the government placed $16.4 billion of GM's loan money into a contingency fund in case sales worsened or other problems cropped up. Now, GM doesn't need the contingency money and can repay it to the government, he said." -
http://www.msnbc.msn.com/id/33961851/ns/business-autos/page/2/
So that leaves the $6.7 Billion in cash that they need to pay back, the $16.4 Billion(compared to the $17.4 Billion figure you show) apparently was never touched and will be returned as well.
I was also interested in this paragraph which really puts a lot of this into perspective:
- "The better showing also reflected lower debt payments. The automaker paid $250 million in interest for the latest period, far lower than the $1.1 billion it had to pay in the first quarter, before it went into bankruptcy protection. Before Chapter 11, GM was weighed down by a huge debt of almost $95 billion that has since been cut to $17 billion." -
So basically, they are now actually paying stuff off rather than just paying out interest. Reducing the total debt loads though bankruptcy has allowed them the additional cash flow to now to accelerate the pay off of these remaining debts which they mentioned in the press release. As someone who has gone throguh the pain of paying off significant consumer debt (without BK though), I can easily understand the position GM is in right now. It really does feel nice when you can make payments on your debts and not have virtually all of it go to interest.
chad.dawkins 1:26PM (11/16/2009)
I'm assuming the US Govt is going to try and get most of it back by dumping the stock.
MajorGeek 1:05PM (11/16/2009)
I don't think Obama expected to see the actual loan money back, IMHO just the same old "hand out the cash" that all politicians do. Oh well, now we can afford welfare recepients that cost of living increase they so desperately need ;)
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twistedbitz 1:13PM (11/16/2009)
THAT PHOTO IS BRILLIANT!!! Says it all.
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vetteracer 1:18PM (11/16/2009)
7Aprime 12:57PM (11/16/2009)
Speaking of which:
"Where Henderson stated that GM would need government aid to turn Opel around, Whitacre bluntly said that no help was needed at all."
Yep, he's so out.
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Hey idiot, you forgot to add the ricer nissan conned obama and received almost 2 BILLION of American tax dollars and did not do what the money was for !
Then you look at the tactics nissan does to stay in the black by screwing over the dumbshets that bought a POS that did a whooping 105 MPH average on the joystickers "ring"
A UK driver took his Nissan GT-R head-first into a stopped-too-fast van's tow hitch. It caused what you'd think would be fairly minor damage, until you count the pedestrian safety system going off.
Total repair bill?
An astonishing $18,355!
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The GT-R tax is alive and well in parts as much as it is in fully-assembled vehicles in this tale of horror from the British Isles.
The driver recounts a chain reaction accident were a car up ahead slammed on the brakes, the van in between did the same and despite the GT-R's massive capabilities, the driver couldn't stop quite quick enough and tapped the van's tow hitch with the front bumper.
The minor crack in the fascia was the only physical damage, but it was enough to set off the pedestrian safety system, which deployed two, one-time use rams which raised the hood to provide a cushioning gap for the pedestrian who wasn't there.
The repairs required new hood hinges, new hood rams, a new electronic controller for the pedestrian safety system, and of course replacing and paint-match the damaged bumper.
The owner took the car in and came out with a whopper of a bill: £11,000, or in US currency, $18,355.
We knew the cost of ownership was a bit much from the $2,000 regular Nissan GT-R service cost, but this is ridiculous. [GT-R Register]
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veilofmaya2006 4:55AM (11/17/2009)
what? lol, I think your the only one who knows what you mean...
Jonathon 1:19PM (11/16/2009)
I'd like to see which, if any, of you ladies and gentlemen above have business degrees and can accurately dissect the important information out of a balance sheet?
I'm guessing most of you don't, hence why you are drawing dramatically different conclusions than I am. No one, and I mean NO ONE expected GM to show a profit this quarter. They have too many re-organizational expenditures such as Opel, Delphi, etc. that limit their short term profitability. The real test will be their net income one year from now. Based on this balance sheet, it looks like they have a decent shot of turning a reasonable profit.
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IOMTT 1:25PM (11/16/2009)
Actually I do. So I expect you to invest in GM when they offer stock based on your expertise. In fact, maybe you should go all in.
Jonathon 1:29PM (11/16/2009)
Actually, I agree with your statement. I think 2nd quarter next year will be too early for an IPO. I'm referring to the other individuals who posted around you, and apologize for appearing rude. :-)