Happier New Year for GM

GENERAL Motors plans to start paying back unused US government loans, starting with a $US1.2 billion ($A1.3b) installment on New Year’s Eve.

Still bleeding red ink but buoyed by what GM president and CEO Fritz Henderson described as a return to stability in the America’s biggest motor company, GM believes it might well repay the full unused $US6.7 billion ($A7.2b) lifeline put aside in a special cash account within 12 months.

GM does not have to repay the money until 2015, but, as Mr Henderson told reporters: “No time like the present.” The company also announced plans to start repaying smaller loans to the Canadian and German governments, while also stepping up its US advertising this quarter to reduce dealer stock inventories which it regards as still too high at 424,000 units.

The loan repayments are seen as much public relations exercise as financial necessity, as GM still has a further $43 billion in government rescue aid tied up in a 61 per cent ownership stake of the New GM, making the US treasury GM’s largest shareholder.

GM this week reported a third quarter pre-tax loss of $US1.15 billion ($A1.24b) on revenue of $28 billion in its first quarterly report since emerging from bankruptcy as the ‘New GM’ on July 10, contrasting with rival Ford Motor Company’s $US1 billion third-quarter profit reported two weeks ago.

Analysts in Detroit generally judged the GM result as better than expected, although most agreed with Mr Henderson when he said: “Things are looking better, but we have a long way to go.” It was certainly better than the $4.2 billion loss recorded by the ‘Old GM’ in the third quarter of last year.

This year's third-quarter result would have been a lot worse without a $238 million profit contribution from GM’s international unit, particularly the booming Chinese arm of the company.

Elsewhere, the losses continued to rack up. GM’s European operations – mainly Opel and Vauxhall – lost more than $400 million, while North American operations were down $651 million.

GM’s latest quarterly result showed a $500 million hit in the form of special items arising from restructuring its US dealer network, costs related with its bankrupt parts-making former subsidiary Delphi and other expenses.

Mr Henderson said the lion’s share of restructuring charges should be behind GM after this year.

Also on the positive side, GM generated $3.3 billion in operating cash for the quarter, taking its liquidity to a handy $42.6 billion. However, this includes the $6.7 billion in government loan money that it has committed to handing back.

Government debt aside, GM reported debts of $7.6 billion globally, not counting a $12.7 billion hole in underfunded worker pension funds.

Before the New GM was created in July, GM’s debt was $94.7 billion.

GM says it expects car sales in the US to fall this quarter in the wake of the successful government-funded cash-for-clunkers scheme that boosted sales in the third quarter.

Next year, GM predicts the US auto market to achieve modest growth, to about 11 to 12 million units, up from about 10.3 million this year.

So far this year, GM’s car and light truck sales are down 33.4 per cent, while its market share has slipped from 22.1 per cent at this time in 2008 to 19.7 per cent.