Posted by: David Welch on April 12, 2010
General Motors Chairman and CEO Ed Whitacre has sent out his second memo in two weeks in an effort to make his rank-and-file staffers feel better about working at GM. In his latest note, sent out on April 12, Whitacre wrote to the staff that, “I anticipate solid operating results when we report our financials in May.” This follows a March 31 memo in which the media-shy Texan said that the major executive changes are already done. The current team will take GM forward, he wrote.
Whitacre didn’t say exactly what he means by “solid operating results.” Given his impatience for real results, I’d bet that means, at long last, some black ink. Consider a few facts. If you exclude $2.6 billion in costs for a union retiree healthcare fund, $400 million in currency losses and $100 million to wind down Saturn, GM lost just $300 million in the fourth quarter of 2009. During that same quarter, sales were down 24% in the U.S.
In the first quarter of this year, GM’s sales are up 18.4%. GM has some red-hot models, such as the Chevrolet Camaro pony car and Chevy Equinox and GMC Terrain SUVs. The company is adding production for all three vehicles. The company is even boosting production for its full-sized Chevy Tahoe and GMC Yukon SUVs built in Arlington, Texas. Hey, I don’t know who wants those guzzlers, knowing that gasoline prices will rise again. But they are selling and GM will make a mint off of them while they are hot.
Don’t forget a couple other things. That healthcare trust that GM poured money into took over retiree medical benefits starting on Dec. 31. So you can trim those costs for the first quarter. Going forward, GM will also be able to hire new workers at half the pay of the assembly-line veterans. Throw in rising sales in Asia and South America, and GM might really have something. GM’s troubled European business will be drag on earnings until the company can get it fixed. But elsewhere, we are seeing the seeds of a turnaround. It all starts with a bit of black ink.