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General Motors back on track to making over $10 billion annually

By Catholic Online (NEWS CONSORTIUM)
February 6th, 2012
Catholic Online (www.catholic.org)

Three short years after General Motors drove into government-run bankruptcy that required a massive taxpayer-funded bailout to keep it in business, General Motors says it's back on track to earning over $10 billion annually.

LOS ANGELES, CA (Catholic Online) - According to a report in The Wall Street Journal, GM is already on track to achieve that goal. The Journal says they have seen the company's 2011 fourth-quarter results, which are due to be reported next week. The venerable U.S. auto maker is set to report net income of about $8 billion, its highest ever, which is nearly twice the prior year's $4.7 billion figure.

Growth in China and strong profits in North America account for the improved quarterly income, the Journal reported.

GM also plans to raise its profit margin, the portion of revenue left after paying expenses from the current 6 percent level to 10 percent over the next several years. Chief Financial Officer Daniel Ammann told the Journal that it would be the highest profit margin in the auto industry.

Losing billions of dollars and facing extinction in 2009, GM was forced to take a government bailout of about $50 billion and go through a government-run bankruptcy.

According to the report in the Journal, "Bailed out by the government just three years ago, General Motors Co. has set its sights on a once-unthinkable goal: making more than $10 billion a year.

"It already is headed in that direction. On Feb. 16, GM is likely to report 2011 net income of about $8 billion, its highest ever, according to people who have seen the figures. Behind the gain to nearly twice 2010's $4.7 billion are growth in China and strong profits in North America, where GM has shed billions of dollars of costs and lately has been able to command higher prices."

Financial analyst Jay Bookman is pleased by the news. "As we know, most Republicans, including Mitt Romney, opposed the Obama plan to rescue the U.S. auto industry, predicting it would be a terrible failure. It turns out that happily, they were wrong.

"It's also important to remember how much worse things might have gotten without the rescue effort. Ford, for example, strongly supported the rescue of its rivals out of fear that they too would get pulled down if GM and Chrysler were both allowed to fail," Bookman adds.

There's even more good automotive news to go around. Last week Chrysler, which also went through a government-assisted bankruptcy, unveiled its first annual net profit since coming out of its restructuring.

The rebound in Detroit could help the reelection efforts of President Barack Obama, who signed off on the controversial decision to bail out the auto industry.

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