George W. Bush set into motion the auto bailout and temporary nationalization of GM a year and a half ago.
GM has recovered faster than its critics would have liked. The 2011 Chevy Volt is perhaps the ideal symbol of the revitalized company that just posted its first profit in years. (Source: Earth 2 Tech)
The bailout appears to have worked
"Government
Motors", "socialism in the U.S." -- the insults and
criticisms hurled at General Motors and the U.S. government, which
spent billions to bail it out of bankruptcy have hardly been subtle.
However, a year after GM bled $6B USD in a single quarter, the
nation's largest industrial bankruptcy is slowly becoming a success story, as
GM has posted its first profit in three years.
For the Obama
and Bush administrations who crafted the first and second bailouts
of the automaker its not vindication of their policy of temporary
government intervention in the private sector, but its a
start.
GM reports that
it made $865M USD in the first quarter of the year and saw net
revenue rise from $22.4B USD to $31.5B USD. In April the
company sold 183,997 cars and trucks, up 6.4 percent from the 173,007
it sold a year ago.
Chris Liddell, vice chairman and chief
financial officer, comments, "In North America we are adding
production to keep up with strong demand for new products in our four
brands. We're also steadily growing in emerging markets,
keeping our costs under control, generating positive cash flow and
maintaining a strong balance sheet."
The profit may pale
in comparison to Ford Motor Company's $2B USD profit it posted last
month, but it's perhaps a bigger deal given just how bad shape GM was
in last year. The turnaround did not come easy. The Obama
administration hand-picked CEO, Fritz Henderson was forced into a
messy
resignation amid failed deals. And GM only barely
managed to offload some of its laggard brands such as Saab and
Hummer.
Still, a year later a leaner GM has emerged.
The
company has already paid
back all its government loans years ahead of schedule, using
some of the bailout money it had from the government's purchase of a
61 percent stock stake. A public offering of that GM stock
should soon come, and with it the possibility that taxpayers could
recoup most of the governments investment. In fact, some
analysts believed the government could even make a profit on
its temporary buyout of GM stock.
With models like the 2011
Chevy Volt electric vehicle coming down the pipe later this
year, GM seems exciting again. And it's profitable.
So
while it would be grossly inaccurate to bill the newfound success as
a complete vindication
of President Obama and President George W. Bush's tough decision to
bail out the auto industry and prevent the largest industrial
corporate collapse in our nation's history, the government's careful
guidance of GM and the company's newfound success certainly offer the
first conclusive indication that the bailouts might not have been the
catastrophic failure that their
opponents claimed they would be.
"We are going to continue to work with them to make sure they understand the reality of the Internet. A lot of these people don't have Ph.Ds, and they don't have a degree in computer science." -- RIM co-CEO Michael Lazaridis
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