General Motors Co. is beginning to generate positive cash flow and could be profitable this year, the automaker's top financial officer said Wednesday when announcing a restructuring of its financial statements, one of the milestones required to allow the federal government to sell its massive stake in the automaker.
In documents the company expected to file with the Securities and Exchange Commission on Wednesday, GM outlined what it called "fresh-start accounting," or new financial statements that represent the company's current status following its bankruptcy reorganization last year.
The new financial reports show that the automaker generated $1 billion in operating cash from the time it exited bankruptcy on July 10 through the end of 2009. The positive cash flow came from $57.5 billion in revenue. During the same period, GM posted a $4.3-billion loss.
At the end of 2009, GM had $15.8 billion of debt, down from the $45.9 billion in loans held by the pre-bankruptcy GM at the end of 2008. Its cash position also has changed dramatically. GM held $36.2 billion in cash and marketable securities at the end of 2009, compared to $14.2 billion at the end of the previous year.
For the fourth quarter, GM posted a net loss of $3.4 billion on sales of $32.3 billion, but after taking out special items associated to its restructuring, the company was about $600 million short of the break-even level, said Chris Liddell, GM's vice chairman and chief financial officer.
"There is nothing that I have seen in the first quarter that changes my position that we will be profitable this year," Liddell said.
"We don't need the industry to be significantly better for us to achieve profitability," he said. But Liddell also tempered his remarks, noting that GM has been guilty of "over-promising" on its financial performance previously. He said the automaker's gains could be limited to an operating profit, depending on market conditions.
The post-restructuring accounting provides a baseline for investors to compare GM's financial performance in future years and is necessary to any public offering of the automakers stock. Liddell said it was a massive undertaking that required the adjustment of nearly 1 million ledger entries.
"We are building the foundation that will allow us to return to public ownership," Liddell said.
A profit, after five years of losses, would be critical to GM's ability to float a stock offering to repay some of the $52-billion investment and loans the federal government has poured into the company over the last year.
The government has converted much of that into a 61% stake in GM . The automaker also has repaid $2.4 billion to the U.S. government and $400 million to Canada of $8.4 billion in loans from the two nations. Liddell said GM expects to pay off the remaining government debts by June.
Last year's restructuring enabled GM to close plants and shed labor expenses. It now can make money at a much smaller sales volume than in previous years. The company also has started to produce some hot products. Led by the new generation LaCrosse, Buick sales have soared nearly 57% during the first three months of 2010.
Other hot sellers for GM include the redesigned Cadillac SRX SUV, with sales up 425% during the first quarter, according to Autodata Corp., and the Chevrolet Equinox, which has seen a 130% gain during the first quarter. Even including the Pontiac, Hummer, Saturn and Saab brands it closed or shed as part of the bankruptcy reorganization last year, GM's sales for the first quarter of 2010 reached 475,253 vehicles, a gain of nearly 17% over the first quarter of 2010, according to Autodata.
It has fended off a charge by Ford Motor Co. to remain the top auto-seller in the United States, with a 18.7% market share during the first quarter of this year, up from 18.5% in the same period a year earlier.