GM profit is good sign during year of change and rebuilding

General Motors Co. has come a long way in a short time. Last year it struggled through billions of dollars in losses, a government bailout, bankruptcy, downsizing, reorganization and new leadership.

In the first quarter of 2009, the company lost $6 billion. Now, at the conclusion of the first quart of 2010, GM announced profits of $865 million, the first profitable quarter since 2007.

The General Motors of today is leaner, far leaner. There are fewer makes, fewer models and a lot fewer employees — down to 205,000 worldwide, including 77,000 in the United States. In the Mahoning Valley, GM jobs and those at what remains of the former GM Delphi division are only a fraction of what they were at the peak of the company’s influence here, but they are still counted in the thousands and are vital to the local economy.

The first quarter profits are encouraging, but not likely to be replicated in succeeding quarters. Still, CEO Ed Whitacre has predicted a full-year profit, which could set the stage for a public stock offering late in the year or in 2011.

Continental complication

However, nothing is assured or simple when dealing with a worldwide company.

General Motors, which was saved from oblivion by U.S. and Canadian government intervention now finds Germany balking on bailout loans to preserve jobs at its Opel unit. Chancellor Angela Merkel’s government is facing a credit crunch after joining the European effort to bail out Greece. The German government should understand that if it doesn’t aid Opel, German workers will be the losers.

Bloomberg News quoted Michael Fuchs, deputy member of parliament’s economics committee, as saying, “We cannot possibly tell the people ‘you have to put up with higher costs’ while we’re propping up a company that is perfectly able to cope by itself.” By the same token, Fuchs and Merkel should know that U.S. and Canadian taxpayers and workers won’t look kindly on the company’s first profits being siphoned off to spare the German government and Opel workers any pain.

Last year’s bailout of GM by the Obama administration continues to come under fire from some quarters, even though by any reasonable standard it was a success. The $50 billion U.S. investment preserved an American industrial icon and tens of thousands of jobs. The political implications for GM in the United States and for the company’s supporters in Washington, however, would be considerable in the event that Germany is a prime benefactor of GM’s resurgence.

An important asset

Whatever happens over there, here in the Valley, we know that something important has been preserved.

Even as production of the Chevrolet Cobalt winds down, the small car’s sales for May were above those of the same month a year ago. And the improving sales numbers of other GM models bode well for Lordstown’s new entry in the market, the Chevrolet Cruze.

Latest word is that the Cruze will debut with a model selling for about $17,000, making it clearly competitive in its niche. Two other new GM models, the Chevrolet Equinox small sport utility vehicle and the Buick LaCrosse luxury sedan, are being given much of the credited for the profitability of GM’s North American operations. Management and labor at the Lordstown plant are working hard to maintain that momentum with GM’s newest new car when it goes into production next month.