Will GM Be Profitable by 2011?

Joshua Duval

General Motors offered its first prediction of when the new GM will be profitable yesterday, stating that the new company will likely post a profit of about $3 billion before taxes in 2011. In addition, GM is anticipating that the company will be worth about $48 billion when it emerges from bankruptcy.

If GM's estimates prove correct, the government's 60.7 percent stake in the automaker will be worth about $29 billion. Including an additional $8.8 billion in debt and preferred shares, the government stands to lose about $12 billion from its roughly $50 billion investment in GM. The UAW trust fund's 17.5 percent stake, combined with $9 billion in debt and preferred shares, would amount to $17.4 billion, $3 billion short of what it was owed before GM entered bankruptcy.

The predictions come from GM's financial adviser, Evercore Partners. Evercore forecasts a loss of $17.5 billion this year, as well as $7.8 billion in profits by 2014. The figures count on the annual sales rate in the U.S. to climb back up to 16 million in 2012 from a predicted 9 million this year.

GM estimates that it will manufacture 3.8 million vehicles this year, a figure that will increase to 6 million by 2014.

Source: The Detroit Free Press

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