General Motors Co. posted a profit for the first time in nearly three years, surprising Wall Street and increasing political pressure on the automaker to launch a public stock offering so the federal government can recover billions of dollars it spent on GM's bailout.
After a string of 10 consecutive money-losing quarters, GM said Monday that it swung to a better-than-expected profit of $865 million in the first quarter, bolstered by the improving U.S. economy and a massive restructuring that allowed the automaker to shed vehicle brands, factories and workers.
The first-quarter profit contrasted sharply with a loss of $6 billion in the same period a year earlier. The automaker said revenue rose 40% to $31.5 billion for the quarter.
GM was "solidly profitable" in the quarter "with results well ahead of the prior quarter and what we believe were investor expectations," said Brian Johnson, an analyst with Barclays Capital.
The quarterly results represented a major turnaround for a business that almost didn't survive the recession, and have fueled hopes that GM could be back on Wall Street for a stock offering later this year.
But a single profitable quarter may not be enough to make that happen, particularly if the stock market continues to be volatile, analysts said.
Sustained profits are seen as crucial for GM's ability to float a stock offering to repay some of the $52 billion the federal government has poured into the company over the last year. The bailout made the government GM's biggest shareholder, owning 61% of the automaker's stock. The company exited from a bankruptcy reorganization July 10.
"There is a political aspect that the government wants to get out of its GM stake as quick as it can, especially if it can recoup somewhere near the dollars invested," said Kenneth Elias, an auto industry analyst and partner at Maryann Keller & Associates.
But GM's still-recovering finances and tenuous capital markets could still leave taxpayers far from a way out.
"With the market as volatile as it is now," a financial exit "would not be available to them today," said Kirk Ludtke, an analyst at CRT Capital Group in Stamford, Conn.
But that doesn't mean that GM couldn't use some other method to partially pay back taxpayers between now and the November elections.
If it generates enough cash, it could issue a special dividend to shareholders — including the federal government — or it could repurchase a portion of the government's holdings, Ludtke said.
Such a move would be welcomed by the Obama administration, which wants to demonstrate progress in getting taxpayer money paid back, he said.
Elias believes that an initial offering of the reorganized GM's stock is premature but that a deal might get done next year.
The keys will be a stock market that is welcoming to such public offerings, continued GM profits and evidence by the automaker that it can continue to grow in North America and stem losses in Europe.
GM executives worked Monday to cool the growing ardor for a stock offering.
"I am trying to keep expectations low on this topic. It will happen when the company is ready and the markets are ready," said Chris Liddell, GM's chief financial officer.
The company at this point needs to remain focused on selling cars that consumers find attractive at profitable prices, Liddell said.
And on that account, GM is making progress, he said.
Since last year, GM has sold or closed the Pontiac, Saturn, Saab and Hummer auto brands to focus on its remaining Chevrolet, Buick, Cadillac and GMC lines. It closed four factories and idled two more and has shed thousands of workers.
New models are helping GM to recover from its slump and a bankruptcy reorganization that left the U.S. government as its majority owner. Five new-generation models — Chevrolet's Equinox and Camaro, the GMC Terrain, Buick Lacrosse and Cadillac SRX — sold in April at a combined rate nearly 300% over the vehicles they replaced. Those models accounted for more than 110,000 of the 183,614 vehicles GM sold last month.
Through the first four months of this year, GM sales have risen 14%, slightly trailing the industrywide increase of 16.7%.
The automaker has a bevy of new-car introductions coming this year, starting with the Buick Regal in June and continuing with other new models or new-generation vehicles, including the Cadillac CTS coupe, the GMC Sierra and Chevy Silverado trucks, the Chevrolet compact Cruze and finally the electric Volt.
"They have some pretty high-profile products coming out, and this will provide them with some nice momentum through the rest of the year," said Rebecca Lindland, an auto industry analyst at IHS Global Insight. "The timing for these products is very good strategically, and there is something significant from three of the four core brands."
Separately, the U.S. Treasury Department said Monday that Chrysler Holding made a $1.9-billion loan repayment. Chrysler Holding is the parent company of the automaker that filed for bankruptcy protection in 2009 and is not the same as Chrysler Group, the successor company now controlled by Fiat, the Italian automaker.
The repayment settles a $4-billion loan made to the previous Chrysler in January 2009 and that went into default when the company filed for bankruptcy in April 2009.
"This repayment, while less than face value, is significantly more than the Treasury expected to recover on this loan," the government said in a statement.