General Motors Positioned to Make a Come back

November 11th, 2009 • Related • Filed Under • by Debbie Dragon

During the majority of the 20th century, General Motors was one of the automobile industry’s biggest companies. General Motors was the largest car maker in the world between 1931 and 2008 (surpassed by Toyota in 2008). By fall of 2008, General Motors was begging the government for it’s share of the bailout to stay afload – despite having experienced two years of steep cutbacks in dealerships and employees nationwide.

G.M received $9 million in federal aid through President Bush in December of 2008. President Obama pushed Rick Wagoner, the chief executive out in March 2009, and gave the company 90 days to restructure itself and become a smaller company that could financially support itself.

General Motors filed bankruptcy on June 1st, and on July 10th, the assets of the company were sold to a government-owned company called Vehicle Acquisition Company– including the Chevrolet, GMC and Cadillac brands of vehicles. The Vehicle Acquisition Company will be renamed General Motors Company, with the federal government maintaining almost 61% ownership and the Canadian government, health care trust for the United Auto Workers union and individual bondholders owning the remainder of the company.

Now, the NY Times reports that even though the company is still losing money, it’s becoming more stabilized after the bankruptcy and has begun to return some fo the $50 billion it’s received through various federal government programs. Analysts of the industry feel it’s too soon to speak whether or not G.M will fully recover just because they’ve stabilized the company.

As reported in NY Times article:

“I’d say their grade is incomplete,” said David E. Cole, director of the Center for Automotive Research. “They have done what they needed to do in the bankruptcy, but what’s critical is getting the fundamentals of the business on the right track.”

Paying back a portion of its government loans is only a first step in the rehabilitation of G.M., which collapsed after years of heavy losses and bad decisions in the marketplace.

G.M.’s management and its new board must show that the company can create value for its biggest shareholder, the United States government, by attracting consumers with cars that they want to buy without resorting to deep discounts.

G.M.’s results showed a healthier balance sheet, ample cash, and factory production much more in line with consumer demand — improvements it owes largely to the bankruptcy process, the helping hand of the federal government and a modest increase in car sales.

The 60-day money-back guarantee has been part of General Motors new aggressive marketing campaign to bring car shoppers back to the show room floor. Even after losing four of it’s brands, G.M is holding onto about a fifth of the overall car market in the United States. In the third-quarter, G.M reported profits in China and South American international markets, but the comeback won’t be declared until G.M turns a profit at home – in North America.