General Motors Corp. just logged its first quarterly profit since 2007. The company also claims to have paid back its government loans "in full," and is rumored to be interested in buying back its financing arm.
But the truth of the matter is that GM isn't as far down the path to recovery as it would like the public to believe. The company's strong first quarter was greatly aided by Toyota Motor Corp.'s (NYSE ADR: TM) highly publicized recalls. Its claims that it has paid back government debt have been greatly exaggerated. And the United Automobile Workers (UAW) union is already pushing for restoration of many of the perks that it lost during the auto industry's near collapse.
General Motors reported first-quarter profit of $865 million as its revenue surged 40% to $31.5 billion. That made for the company's first quarterly profit in three years. GM - a company that took millions in taxpayer money to remain viable and came close to running out of money in 2008 - reported free cash flow of $1 billion.
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General Motors: On the Road to Recovery, but Moving Slowly
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Dodd's Departure; Cybersitter Files Suit; ADP: Service Sector Added Jobs in Dec.; Harley's Hogs to Rumble in India; GMAC to Post Record Loss; Markman Calls Dow Surge
Dodd's Departure; Cybersitter Files Suit; ADP: Service Sector Added Jobs in Dec.; Harley's Hogs to Rumble in India; GMAC to Post Record Loss; Markman Calls Dow Surge
- U.S. Sen Christopher Dodd, D-CT, said yesterday (Wednesday) that he will not seek re-election in November, potentially altering the debate over financial reform. Dodd, who is chairman of the Senate Banking Committee, in November released an 1,136-page draft bill for reform that would create several new protection agencies, increase regulation of credit agencies and derivatives, and alter the role played by the U.S. Federal Reserve in the financial system. However, analysts say that without having to worry about re-election, Dodd is likely to be more willing to compromise on objections raised by Republicans and the financial services industry." Even if Dodd wanted to get tougher, he does not have the votes to do it," Jaret Seiberg, an analyst with Concept Capital, told The Wall Street Journal. "That means compromising to get the Dodd-Shelby-Frank Financial Reform bill enacted."
GMAC to Receive Additional $3.5 Billion TARP Bailout
The U.S. government is negotiating to provide GMAC Financial Services with approximately $3.5 billion in bailout funds in addition to the $12.5 billion the company has already received, according to multiple reports.
The U.S. Treasury told the company to raise additional capital as part of government-led stress tests of large banks conducted earlier this year. The tests were designed to identify banking firms that would need more capital to continue lending if the economy faltered in 2009 and 2010.
While the government views GMAC's survival as critically important to the revival of the auto industry, the company's financial troubles are actually linked to its mortgage lending unit Residential Capital LLC, or ResCap.
The U.S. Treasury told the company to raise additional capital as part of government-led stress tests of large banks conducted earlier this year. The tests were designed to identify banking firms that would need more capital to continue lending if the economy faltered in 2009 and 2010.
While the government views GMAC's survival as critically important to the revival of the auto industry, the company's financial troubles are actually linked to its mortgage lending unit Residential Capital LLC, or ResCap.
Investment News Briefs
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