General Motors: 'Extraordinary Turnaround'

by: The Good News Economist

On Thursday, General Motors Corp. posted its best quarterly profit in six years in one of the clearest signs yet the ailing automaker (and its beleaguered industry) is on a road to recovery.

The record profits were posted slightly more than 12 months after a steep drop-off in sales caused by the financial crisis of 2008/2009.

GM says that the strong profits will pave the way for the company to file for an IPO and begin to rid itself of a more than US$50-billion taxpayer liability - company equity that is majority owned by the U.S. government.

Total second-quarter earnings came in at US$1.3-billion, a huge reversal from the US$12.9-billion it lost in the same period a year ago. Revenue jumped 44% to US$33.2-billion during the quarter.

Last year the government had estimated that it would take perhaps 8 years for the GM to pay taxpayers back. The quick GM rebound however has surprised even the most optimistic of forecasts.

“Given the extraordinary turnaround — frankly, faster and better than what we had imagined — I think the IPO could be very successful if the overall markets co-operate,” Steven Rattner, the Obama administration’s former Car Czar, said in an interview on Bloomberg Television.