General Motors Co. is beginning to generate positive cash flow and could be profitable this year, the automaker's top financial officer said Wednesday while announcing a restructuring of the company's financial statements, one of the conditions it has to meet before the federal government can sell its massive stake in the automaker.
In documents the company filed with the Securities and Exchange Commission, GM outlined what it called "fresh-start accounting," new financial statements that represent the company's status after its bankruptcy reorganization last year.
"Everybody is waiting to see if they [GM] can become profitable and turn that into a public stock offering," said Bill Visnic, a senior editor at auto information company Edmunds.com.
"Everybody knows that's what needs to be done to get rid of this public perception and the baggage of being known as 'Government Motors.' "
As a result of bailing out the automaker last year, the federal government is GM's biggest shareholder, owning 61% of the company's stock.
The new financial reports show that the automaker generated $1 billion in operating cash from the time it exited bankruptcy on July 10, 2009, through the end of the year.
The positive cash flow came from $57.5 billion in revenue. Still, for the period GM posted a $4.3-billion loss because of slumping sales and restructuring expenses.
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 with $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 with its restructuring, the company was about $600 million short of the break-even point, 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."
But Liddell also tempered his remarks, noting that GM has been guilty of "overpromising" on its financial performance before. 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 against GM's financial performance in future years and is necessary to any public offering of the automaker's stock. Liddell said recalibrating the company's books 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.
While GM's total losses at the end of last year were in the billions, the huge amount of debt it has shed and its ongoing moves to reduce employment and close factories put it in a substantially better financial situation, Visnic said. He likened the restructuring to a homeowner who woke up one morning free of mortgage obligations.
A profit, after five years of losses, would be crucial to GM's ability to float a stock offering to repay some of the $52 billion the federal government has poured into the company over the last year.
The government has converted much of that into holdings in the company. The automaker has repaid $2.4 billion to the U.S. government and $400 million to Canada of a combined $8.4 billion in loans from the two nations. Liddell said GM expected to pay off the remaining government debts by June.
Last year's restructuring enabled GM to make money at a much smaller sales volume than in previous years. And the company has started to produce some hot products. Led by the new-generation LaCrosse, Buick sales soared nearly 57% in the first three months of 2010.
Other good sellers for GM include the redesigned Cadillac SRX sport utility vehicle, with sales up 425% during the first quarter, according to Autodata Corp., and the Chevrolet Equinox, which saw a 130% gain during the first quarter.
Including the Pontiac, Hummer, Saturn and Saab brands it closed or sold 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 an 18.7% market share during the first quarter of this year, up from 18.5% in the same period a year earlier.