General Motors reported a relatively small loss for 2009 and said it has "a chance" at profits this year – a sign that the largest US automaker is making headway toward recovery from its collapse into bankruptcy.
That's good news for the domestic auto industry, the state of Michigan, and for American taxpayers.
GM said it lost $4.3 billion in the second half of 2009, since it emerged from bankruptcy with a lighter debt load and a big financial assist from the US Treasury. The losses are much smaller than GM was posting before its restructuring, although the company acknowledges that it's just a step to revival.
Next steps include repaying Treasury loans by June, earning actual profits, and returning to shareholder ownership with a public offering of stock. For now, the company is owned mostly by its rescuers, the US and Canadian governments.
“We are building the foundation that will allow us to return to public ownership,” said Chris Liddell, GM's chief financial officer, in a statement Wednesday. "There is still significant work to be done," he added. "However, I continue to believe we have a chance of achieving profitability in 2010."
GM is making faster progress than was expected when the government rescue was put in place, Obama administration officials have said.
The strides come as many other bailed-out firms – from some banks to insurer AIG – also appear to be recovering faster than expected.
That doesn't mean the overall TARP fund, the Troubled Asset Relief Program, will end up turning a profit. AIG still has challenges, while bailed-out automaker Chrysler is losing market share. Still, forecasts of overall TARP losses for US taxpayers have been shrinking.
For the first three months of the year, GM clawed its way to a slim gain in US market share compared with a year ago, according to Ward's Automotive Group. But its 18.8 percent share of light-vehicle sales is much smaller than it used to be.
Chrysler has declined to a 9.2 percent market share, while Ford's share has surged to 17.2 percent. Ford, which did not seek government aid during the recession, recently reported a $2.7 billion profit for 2009.
GM has been refocusing on core brands including GMC and Chevrolet. GMC has benefited recently from strong sales of the new Terrain, a crossover vehicle that puts sport-utility features on a car platform.
Despite the progress by Detroit carmakers, Asian rivals are still outselling US-based firms – a historic shift in a market long dominated by American brands.
GM is working to pay off a $6.7 billion Treasury loan by June or earlier. The Treasury also has a major equity stake in the firm through common and preferred stock. Whether taxpayers get all their money back from rescuing GM will depend on what price the Treasury can get by selling its stake to other investors over time.
A lot will depend on how the overall auto market fares over the next year or two. For the first three months of this year, sales are running 16 percent higher than in the first quarter of 2009. But the pace is still far lower than it was before the recession.