Less Than Two Years Out of Bankruptcy, General Motors Continues Winning Ways

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Researched by Industrial Info Resources (Sugar Land, Texas)--General Motors Company (NYSE:GM) (Detroit, Michigan) has shown an incredible resilience during the last two years. When the automaker entered bankruptcy protection in the summer of 2009, many thought that GM could only survive as a shadow of its former self. However, GM emerged from bankruptcy as a streamlined organization that was ready to do battle in the highly competitive automotive marketplace. GM, thus far, has not reverted to the principles that caused its demise less than two years ago; rather it has taken advantage of the fresh start it was given and has not looked back. GM has shown a profit for five straight quarters, each better than the last, culminating with the first quarter of 2011, when the automaker tripled its profits from only a year ago.

In the first quarter of 2010, GM only saw income of $900 million; however, a year later, the automaker posted a whopping $3.2 billion in net income during first-quarter 2011--a significant improvement, especially considering the supply issues the automaker overcame due to the Japanese crisis in March. Revenue for the first quarter also increased, rising from $31.5 billion in the first quarter of 2010 to $36.2 billion in the first quarter of this year, making the first quarter of 2011 the best quarterly performance for GM since the SUV boom in the early 2000s.

Retail sales have increased as much as 25% in recent months, as GM has reinvented itself as a more complete automaker. In years past, GM focused on large vehicles for its profits. This strategy worked for a number of years, but the problems began when gas prices spiked in 2008. Consumers were seeking more fuel-efficient vehicles, and GM simply did not offer the variety and quality of foreign automakers, so sales suffered. However, since its bankruptcy, GM has remade its lineup to be much better-rounded. The Silverado pickup is still the best seller for the automaker, but its lineup of compact and compact crossovers have made huge strides in the marketplace, with the compact Cruze now the second-best seller for GM.

With gas prices again hovering near $4 per gallon, having a more diversified lineup of vehicles is key for any automaker. Other vehicles that have made a significant splash in recent quarters are the Equinox and the Terrain, both more fuel-efficient vehicles that have appealed to consumers who prefer to purchase GM vehicles and want the fuel-efficiency and gas mileage that allows them to save at the pump. GM is also hoping that the Volt, the hybrid introduced at the end of last year, will continue to sell strongly as an alternative. Sales have been beyond initial expectations thus far, and hopefully will continue to grow.

Now that GM is on significantly better financial ground, the automaker has begun to invest in its facilities. Industrial Info Resources is currently tracking 30 GM projects in North America that are worth an estimated $2.2 billion and are scheduled to begin construction in the near future. The bulk of these projects will take place in the U.S., but Canada is also seeing its share of investment. While these investment numbers are not as significant as the amounts GM would spend annually pre-recession and bankruptcy, this is a significant step forward for the automaker. The new GM is investing less haphazardly, as they did before they failed. Investment has been significantly more strategic, and this philosophy is paying off, as evidenced by the profits the automaker is showing.

The new GM is focused on retooling and upgrading facilities it had decided to maintain after its bankruptcy, rather than constructing new plants as they used to do. With a more targeted investment in existing plants, GM is cutting down on the potential for wasteful spending, which was one of the major problems with how the old GM did business. Now GM is only investing where it actually needs to invest, focusing on flexible manufacturing philosophies rather than building a new plant for each new model of vehicle. This, plus the switch to a tighter just-in-time manufacturing philosophy, has helped GM earn its larger profits and maintain the momentum coming out of bankruptcy. While GM has had to rethink some of its supply network, thanks to the recent problems in Japan that highlighted weaknesses in the process, they only suffered minimal losses during this time period and have weathered the storm quite well.

GM is moving forward at a rapid pace, with a streamlined manufacturing operation and lineup of models. If GM had taken this approach a decade ago, it probably would not have faced bankruptcy in 2009; however, now that the automaker is finally on the right track, there appears to be no stopping it from retaking the No. 1 position in worldwide sales this year. The future is looking very bright for GM, and given the changes that have been made in how it does business, a return to bankruptcy should not occur unless it makes some major mistakes. GM is poised to take firm control of the automotive market in North America, and it will be extremely difficult for any other automaker to knock them off that pedestal.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.