The Detroit-based automotive empire General Motors (GM) has bounced back from the brink of financial oblivion to achieve its first profit for almost three years, as US motorists returned to car showrooms in spite of ongoing sluggishness in Europe’s motor industry.
GM, which owns brands including Chevrolet, Cadillac, Buick and Vauxhall, produced an US$865 million profit for the first quarter, a remarkable turnaround from its loss of almost US$6 billion for the same period a year ago.
“We’re in the process of rebuilding a company here and putting down the foundations is one of the most important things when you’re rebuilding,” GM chief financial officer Chris Liddell said. “One of those foundations is clearly achieving profitability.”
GM collapsed into bankruptcy in June last year and was kept afloat through an emergency investment of US$61 billion from the US and Canadian governments, which now own 73 percent of its stock. The improvement in its fortunes is a result of cost cutting, strong sales of new models in the US and a jump in sales in emerging markets such as China and Brazil.
The number of vehicles sold globally by GM jumped 23 percent to 1.99 million as the company reopened factories that were temporarily idled at the worst point of the global financial crisis. In the US, the company moved from a US$3.4 billion operating loss to a US$1.2 billion profit. However, GM’s European business, which includes Vauxhall factories in the UK in Luton and Merseyside, continued to struggle with a loss of US$506 million, down from last year’s US$814 million deficit.
“In Europe, we lost money,” Liddell said. “So Europe is still the area where we need to make the most progress.”
GM is not alone in finding the European market tough. The European Automobile Manufacturers’ Association said yesterday that new car sales across the continent dropped by 7.4 percent last month to 1.13 million registrations following the winding down of “cash for clunkers” schemes that had encouraged motorists to scrap older vehicles.
“Government support has ended or begun to fade out and the economic situation remains difficult,” the association said.
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