Tuesday, May 18, 2010

GM Turns a Profit

General Motors, which was all but given up for dead a year ago, announced that it turned a profit in the quarter ending March 31, and expects to post a profit for the full year. The New York Times has the numbers:
G.M. reported first-quarter earnings of $865 million as its revenue surged 40 percent, to $31.5 billion.
GM was last profitable in 2004. Chrysler, which posted a relatively small loss of $197 million in the quarter, also expects to post a profit for the year.
In March of last year, GM's
annual report (its last as a publicly traded company) included the chilling caveat, "There is substantial doubt about our ability to continue as a going concern." Last June the company entered bankruptcy, a procedure that seemed unthinkable just a few months earlier.
There were critics who didn't think it would work. There were others who didn't want it to work. The hard right wing was so incensed that
some began calling for a boycott of "Government Motors."
Libertarians complained about heavy handed tactics, such as forcing Rick Wagoner out as CEO and the reworking of existing contracts in bankruptcy. But isn't that what bankruptcy is for? These complaints focused largely on the treatment of bondholders, though all classes of stakeholders—workers, suppliers and dealers—saw contracts reopened or even cancelled. The U.S. auto industry will survive, though many thousands have lost their jobs, and GM and Chrysler both closed up shop in Delaware.
Those who opposed the rescue of GM and Chrysler were willing to see the Big Three reduced to just Ford to the cost of hundreds of thousands of more jobs. Without the rescue of GM and Chrysler, unemployment certainly would have climbed higher and the recession would be deeper and longer. I understand some opposed the rescue, either on principle or for political reasons. Perhaps you'd like your recession back.

GM has paid back the $6.7 billion loan from the federal government, which still owns 61 percent of the company. With sales climbing, and the company turning a profit, the government might even make money on its investment.


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