GM Posts First Sales Increase in Two Years and Makes Positive Organizational Moves

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Researched by Industrial Info Resources (Sugar Land, Texas)--For more than two years, automaker General Motors Corporation (Detroit, Michigan) has been telling shareholders, analysts and anyone else who would listen that it just needed a little help to get back on its feet. That "little help" ended up being government-forced bankruptcy proceedings that were backed by taxpayer dollars in the form of a large bailout. However, that is now behind them, and GM is finally seeing some positive effects from the efforts of shareholders, the government and the American taxpayer.

GM saw sales rise 4.7% in October this year, the first increase in monthly sales figures in more than two years. Demand for new cars and crossovers was unexpectedly high during the month, and GM reaped the benefits of this consumer buying spree. October was a key month for the automakers following the inflated sales of September that were driven by the "cash-for-clunkers" program.

Partly due to these positive sales figures, GM will be using $2.8 billion of its bailout money to purchase a stake in Delphi Corporation (Troy, Michigan), a former subsidiary. While the size of the ownership has not been revealed yet, GM will use $1.1 billion of the money to purchase Delphi's global steering business, including four plants in Lockport, New York; Rochester, New York; Wyoming, Michigan; and Kokomo, Indiana. The plants will help GM ensure critical parts production for the company's models.

Delphi, which has struggled as an independent entity almost since it spun off from GM in 1999, filed for bankruptcy in 2005. Delphi emerged from bankruptcy October 6 after renegotiating with lenders and being promised billions of dollars in loans from GM. Delphi produces about 10% of GM's parts globally. Delphi parts are installed in every vehicle assembled by GM.

GM also has announced that it will not be selling its Opel brand to Magna International Incorporated (NYSE:MGA) (Aurora, Ontario), a major Canadian global automotive parts supplier. Magna and its Russian partner, lender Sberbank, had been negotiating with GM for the purchase of Opel and Vauxhall, a sister brand in England, for more than six months.

GM intends to reorganize the divisions for an estimated $4.43 billion in coming months. GM's leadership felt that retaining Opel would be in the corporation's best interest, with overall corporate health improving after emerging from bankruptcy proceedings. Workers at Opel recently had completed negotiations with Magna on a new contract. But those negotiations are null and void, and will have to be redone since GM has decided not to sell the brand.

GM is obviously feeling much better about itself only a few months after emerging from bankruptcy. Confidence in the company is at a high, and it is beginning to move back into a position of leadership in both the North American and the European marketplaces. While there is still much to be done to return GM to its throne, these first steps are good, solid ones that will help GM get back to where it wants to be: the No. 1 vehicle company in the world.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy related markets. For more than 26 years, Industrial Info has provided plant and project opportunity databases, market forecasts, high resolution maps, and daily industry news.