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Revamped GM loses $1.2 billion
cutting costs, repaying debt CEO 'encouraged' by post-bankruptcy results

By Peter Whoriskey
Washington Post Staff Writer
Tuesday, November 17, 2009

General Motors lost $1.2 billion in the first 83 days after it emerged from bankruptcy protection in July, the company announced Monday.

But officials with the nation's largest automaker said the company is far healthier than it was before it was rescued by the U.S. government because it has pared its long-term debt and operating costs.

It will begin repaying its debt to the United States next month, years earlier than required, the company said. It plans to return $1 billion per quarter until the $6.7 billion loan is repaid.

"We've been encouraged by the results we've seen," said chief executive Fritz Henderson, who also noted that the company performed better than its internal post-bankruptcy plan.

"When you come away from it, though, we lost money," Henderson said. "Not satisfactory."

He also predicted significant hurdles ahead.

The company expects to have negative net cash flow in the fourth quarter of 2009, because of payments of $2.8 billion in a settlement with parts supplier Delphi; continuing restructuring costs; and repayments of government loans to the United States, Canada and Germany.

But the vast global company is significantly more stable.

In its last quarterly earnings report in May, the company said it had lost $6 billion. Compared with that, Monday's announcement represents a significant improvement.

Moreover, GM is much smaller and far less burdened by debt.

Global employment at GM has fallen 14 percent since the end of December, from 243,000 to 209,000, the company said. Its U.S. salaried workforce fell 7 percent during that time, to 27,000, and its hourly workforce dropped 23 percent, to 48,000.

By virtue of the government bailout, however, the company's fate may be of broader interest than it once was.

The United States has invested $50 billion in General Motors and holds a 61 percent stake in the company. The investment includes a $6.7 billion loan and $2.1 billion in preferred stock.

The $6.7 billion debt was not due to be repaid until July 2015, but the company has exceeded its internal projections, partly by going through bankruptcy reorganization more rapidly than it thought it would and partly by cutting costs.

"This is as much about management confidence as it is about consumer confidence," Henderson said. "I've been asked probably a hundred times, 'When are you going to start paying back the taxpayer?' The answer is now."

The plan to repay the U.S. government loan does not cover all of the vast sums that the United States has invested in the company, however.

How much the government will receive on its investment depends on GM's eventual stock value. A public offering of stock in the reorganized company is not expected until the second half of next year, at the earliest.

A Government Accountability Office report last month said it was unlikely that the United States would recover its investment.

"It is my mission to disprove the GAO," Henderson said Monday. "In the end, it's a question of the outlook on the stock."

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