Two Years After IPO, General Motors Now Has A $31 Billion Cash Pile

Posted Nov 18, 2012

It was about two years ago that General Motors returned to the stock market.  GM has made money for the last 11 straight quarters and piled up over $16 billion in profits.  The cars are selling at good prices and sales are strong in China, but their sales in the United States and Europe are not rising as quickly.  GM made around $4 billion in profits this year and most of that came from the United States.

Before GM had a bankruptcy in 2009, the company relied on their trucks and SUVs to make money.  But their cars were known for having a bad reputation and for poor quality.  Around 2005, the gas prices went above $3 per gallon and the demand for smaller cars went up.  GM adapted by producing more compact, subcompact, and crossovers that are more fuel-efficient than trucks and SUVs.  GM’s sales in 2008 was 32% trucks and 68% were cars and crossovers.  Trucks are now down to 27%.

GM almost ran out of cash at the end of 2008, but at the end of their third quarter this year, they have $31.6 billion in cash and securities.  GM’s debts and contracts were wiped out when going bankrupt.  The cash allowed GM to invest in products and restructuring.  They also acquired a U.S. auto finance company to help offer low-interest loans and cheaper leases.

GM is also bidding for assets from Ally Financial, the company’s former finance arm to make cheaper loans in Europe and in other areas across the world.  GM recently took out $11 billion in a new credit line, which gives them total access to $42 billion.  There is speculation that the company is preparing to buy back part of the U.S. government’s 26.5% stake in the company.

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