General Motors, the largest US car maker, is back in profit thanks to its restructuring in bankruptcy last year, but the US taxpayer is still sitting on huge losses on its investment in the company.
The manufacturer posted net income of $865m (£586m) for the first three months of 2010, its first quarter in the black since 2007 and holding out the hope of its first profitable year since 2004. It has ramped up production, now that demand for new vehicles has stabilised in the West after the shock of the financial crisis and the recession.
GM – whose brands include Chevrolet, GMC and Buick in the US and Vauxhall in Europe – was kept out of liquidation by US bailout money and taxpayer loans that financed a short restructuring in Chapter 11 bankruptcy last spring. It had racked up losses of about $88bn since 2005, and between emerging from Chapter 11 in July and the end of last year, it lost a further $4.3bn.
"We have achieved profitability," its chief financial officer, Chris Liddell, said yesterday. "The next step is to achieve sustainable profitability."
The bankruptcy process allowed GM to slash the size of its dealership network and shed most of its debts, so sale increases are quickly flowing to the bottom line. It produced 2.1 million vehicles in the first quarter, up from 1.3 million in the same period last year.
The US government converted most of its loans into a 61 per cent stake in the company, and is seeking to hire investment banks to advise it on selling the stake. If GM were to be valued at the same multiple of earnings as Ford, it could be worth up to $30bn, analysts said, but that would not be enough for the US taxpayer to recoup its $49.5bn investment, of which only $6.7bn has so far been repaid.
A stock market flotation will come eventually, but Mr Liddell said no timetable has been set.