GM’s road to recovery continues

GENERAL Motors launched its initial public stock offering this week as it posted a four per cent rise in sales for October and the American new-vehicle market continued its rebound with an overall 13 per cent increase over the corresponding month last year.

Among a string of announcements, all of which reflect a turnaround for the US auto giant after exiting chapter 11 bankruptcy in June last year, GM said it expects to post third quarter profits of $US1.9 to $2.1 billion on revenue of about $US34 billion.

“We are extremely pleased with the level of progress the company is making,” said GM vice-chairman and chief financial officer Chris Liddell. “We will deliver a solid and profitable first year post-bankruptcy, and we are continuing to improve our balance sheet and, most importantly, the quality of our vehicles.”

From top: Chevrolet Sail, Jeep MY2011 Grand Cherokee, Ford MY2011 Focus.

GM also declared this week that it would become the first global car-maker to sell two million vehicles in China in a single year, having experienced a 35.5 per cent increase year to date in the world’s biggest automotive market.

When GM’s joint ventures are included, total sales for the first 10 months were 1,976,913 units, which include around 843,000 sales from the SAIC/Shanghai GM (SGM) passenger car joint venture, and more than one million from the SAIC-GM-Wuling (SGMW) mini-commercial vehicle JV.

In conjunction with its latest sales results, GM also this week signed a non-binding memorandum of understanding with SAIC on long-term strategic co-operation, which is designed to reinforce their existing collaboration on “certain core areas of their business” such as electric vehicles – including an EV version of its Sail compact car due for release soon in prototype form – and other small-car powertrains and budget cars designed for rapidly emerging markets such as India.

GM China Group president and managing director Kevin Wale, who is a former director of GM Holden, said the milestone represented the massive growth the company has experienced in the Chinese market, adding that “it was only three years ago that GM became the first global auto-maker to reach the one million annual sales mark in China”.

Back in its home market, where it is a clear leader, GM’s four per cent sales growth in October (with 183,543 units) was not as strong as most of its major rivals – Toyota was the exception, down four per cent for the month on 145,474 sales – with Ford up 15 per cent (157,650) on the back of strong demand for passenger cars (up 20 per cent) and light trucks (up 25 per cent).

Among Ford’s car sales, Fiesta highlighted the growth in sales – and the slowly increasing American appetite for smaller vehicles – with its best sales month ever (3846 units), while Focus was up 23 per cent for the month (12,396). The mid-size Fusion was also a standout with 17,362 sales.

“Fiesta is our strongest proof point yet that our global growth strategy is working,” said Ford vice-president of US marketing, sales and service, Ken Czubay. “Now, we’re preparing to launch the Focus – the next all-new product from Ford’s global product development system.”

Chrysler continued its resurrection under Fiat rule with an impressive 37 per cent increase for the month (90,137) across its entire group, thanks in large part to strong demand for its all-new Jeep Grand Cherokee. Sales for the SUV climbed 291 per cent over October last year, totalling 12,721.

Chrysler Group lead executive for US sales Fred Diaz said the company “remains on track as our monthly sales continue to improve over last year”.

“Our new Jeep Grand Cherokee created a consumer buzz that generated showroom traffic and sales,” he said. “Now we’re sparking more consumer excitement as we release images and details about our all-new and significantly refreshed products arriving in dealerships this quarter.”

These include a host of all-new or upgraded 2011 models, including the Jeep Patriot, Dodge Durango, Journey, Charger, Avenger, Grand Caravan and Challenger SRT8 392, and the Chrysler 200 and Town & Country.

Increases were also posted at Honda (98,811) and Nissan (69,773) – both were up 16 per cent for the month – and Hyundai-Kia, which posted 73,855 sales for a 38 per cent rise.

Comparisons with last year for GM continue to be negatively affected by discontinued brands, with Saab, Hummer, Saturn and Pontiac now accounting for just a few hundred sales combined when in October last year more than 15,000 were sold.

Now concentrating on Chevrolet, Buick, GMC and Cadillac, General Motors said this week that its sales were being driven by strong demand for crossovers and full-size pick-up trucks, and that combined sales across its continuing brands were up 13 per cent compared to October last year.

In particular, demand for the Chevrolet Equinox, GMC Terrain and Cadillac SRX increased 58 per cent (combined) compared to October last year, while the recently launched Chevrolet Silverado and GMC Sierra led the charge in the pick-up segment.

GM’s US sales operations vice-president Don Johnson said: “Our October results show that our focused plan is working, as our four brands continue to grow.”

Year-to-date sales for GM’s four brands have increased 22 per cent through October, although in overall terms its sales are up six per cent. The US industry as a whole has increased 11 per cent YTD.

GM is scheduled to release its third-quarter financial results on November 10, and has now launched its initial public offering (IPO) road show to entice prospective investors ahead of the commencement of trading later this month.

The offering will consist of 365 million shares of common stock to be sold by certain shareholders. The company will also issue 60 million shares of its ‘Series B’ preferred stock with a liquidation amount of $US50 per share.

The estimated price range for the offering of common stock is $US26 to $29 per share.

Overseas reports indicate that the IPO will allow the US government, which last year bailed out GM to the tune of $US51 billion, to reduce its share from around 61 per cent to less than 44 per cent.

Other major stakeholders, including the Canadian and Ontario governments and the UAW retiree health care trust, are also expected to sell down their shares.