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Can General Motors sustain momentum towards profitability?

Earlier this week we posted about how General Motors' reported first quarter $323 million loss became a $445 million profit. And this is not by some accounting fluke: analysis of the automaker's finances shows the profit stemmed from its cost-management strategies and higher revenue from sales such as its new Buick Lucerne and Cadillac vehicles. Of course, postponing the addition of its $681 million health care settlement with Delphi to the books didn't hurt either.
But analysts are wary. Eric Noble of The CarLab points out that, outside of its full-sized SUVs, none of GM's vehicles are top-notch. The automaker will lose half its income from its financial arm once the GMAC sale is completed. Finally, a union strike against GM's major parts supplier Delphi would have GM burning through savings within months if not sooner.

But the greatest threat to GM's recovery comes from rising gas prices. Inventory of its new large SUVs is beginning to increase as SUV demand softens. Frederick Henderson, vice-president and CFO of GM forsees a worse situation for the company if normally loyal truck owners migrate en masse to purchasing sedans.

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[Source: Business Week]

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