The Detroit-based automotive empire General Motors has bounced back from the brink of financial oblivion to achieve its first profit for almost three years, as American 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 $865 million (£595m) profit for the first quarter, a remarkable turnaround from its loss of almost $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,” said Chris Liddell, chief financial officer, GM. “One of those foundations is clearly achieving profitability.”
GM collapsed into bankruptcy in June 2009 and was kept afloat through an emergency investment of $61 billion from the US and Canadian governments, which now own 73 per cent 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 per cent 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 $3.4 billion operating loss to a $1.2 billion profit. But GM's European business, which includes Vauxhall factories in the UK in Luton and Merseyside, continued to struggle with a loss of $506 million , down from last year’s $814 million deficit.
“In Europe, we lost money,” said Liddell. “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 (ACEA) revealed yesterday that new car sales across the continent dropped by 7.4 per cent in April to 1.13 million registrations following the winding down of “cash for clunkers” schemes that had encouraged motorists to scrap older vehicles.
Last year, GM came close to selling its European business, which comprises Vauxhall plants and Opel manufacturing business. However, the company backed off at the last minute after deciding that a European presence was essential to sustaining its future as a global player.