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GM posts profit, CEO Whitacre to retire

chart_gm_profits_loss.top.gif By Chris Isidore, senior writer

NEW YORK (CNNMoney.com) -- General Motors posted its second straight profitable quarter Thursday, helping clear the way for a sale of shares to the public that is needed to repay billions in taxpayer assistance it received last year.

In addition, the automaker said Ed Whitacre is resigning as chief executive effective Sept. 1, a move that will give the company its fourth chief in less than 18 months. Daniel Akerson, a former CEO of Nextel and a GM board member for just over a year, will succeed Whitacre.

The No. 1 automaker in terms of U.S. sales reported earnings of $1.3 billion in the quarter after the payment of dividends on preferred shares held by the U.S. Treasury. It was the best result in six years for GM and a stark turnaround from the $12.9 billion it lost in the year-earlier period when the company went into bankruptcy.

It was also an improvement from the $865 million it made on a similar basis in the first quarter.

Revenue reached $33.2 billion, up 5% from the first quarter and 44% from a year ago.

The biggest improvement came in its core North American automotive operations, where operating profit soared to $1.6 billion, up 31% from the first quarter and a turnaround from the $3.4 billion loss there in the last three months of 2009.

The operating loss in its European unit narrowed to $160 million, a 66% improvement from the first quarter. But profit slowed in its international operations unit, which includes its Chinese business and now sells more cars than any other region at the company. The $672 million profit there was down 42% from the first quarter.

Achieving two straight quarters of profits was seen as a necessity before GM could return to the market to start selling shares. The company is expected to file its plans to start selling those shares within days, with the initial public offering likely to take place before the end of this year.

GM Chief Financial Officer Chris Liddell refused to comment Thursday on plans for the IPO timing.

"We'll look at an IPO when the markets are right and the company is right," he told CNNMoney.

But he said the company is pleased with its second-quarter results, which he said were better than internal targets going into the period.

In a series of television interviews, Liddell said he is particularly pleased that a company that essentially ran out of cash a year ago generated $2.8 billion in cash in the quarter, leaving it with $31.5 billion on the balance sheet at the end of June. That's up from only $22.8 billion in cash it had on hand at the start of the year.

The strength of the balance sheet is one of the factors that will be weighed by investors when GM starts selling shares again.

While Liddell said the company expects to be solidly profitable this year, he believes profits could slip a bit in the second half. He said results so far this year have been helped by the need to rebuild dealer inventories.

IPO key to repaying bailout

The sale of shares will be a key event in the company's efforts to repay most of the $50 billion in federal assistance it received last year to continue operations before and during its bankruptcy reorganization. The U.S. Treasury Department has already been repaid a $7 billion loan by the automaker, as well as received $405 million in preferred stock dividends so far this year.

But most of the help was given in exchange for a 61% stake in the automaker. Treasury is expected to start selling some of those shares as part of the IPO, although it is unlikely to dump all of its shares on the market at that time. A trust fund set up to pay retiree health care costs and former bondholders of the bankrupt company are the other major shareholders in the company.

In May, when it reported first-quarter results, analysts estimated that the company would have a total market value of between $64 billion and $90 billion once it went public, a range that would allow Treasury to break even or make a profit on the bailout.

But such a value is by no means certain. It would not only dwarf the current $42 billion market value of rival Ford Motor (F, Fortune 500), it would also be the most GM stock has ever been worth in its history. According to the the Center for Research in Security Prices at the University of Chicago, the company's greatest value was $61 billion in May 1999. To top of page

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Data as of Apr 29


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