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No one is suggesting that General Motors is back in the fast lane, but chairman and CEO Rick Wagoner has managed something of a turnaround at the troubled leading US automaker. GM reported a large operating profit for the second quarter that surpassed even the most optimistic Wall Street analysts forecasts. While the cost of buyouts and early-retirement bonuses resulted in a loss of $3.2 billion for the quarter, the companys outlook appears to have brightened considerably.
Its rewarding to see our automotive business return to profitability on an operating basis and that were on the right track, but there is more work to be done, Wagoner said in a prepared statement.
What he didnt say, and what a lot of people are still wondering, was whether the improvement would be enough to remove the need for a tie-up with Nissan Motor and Renault. The French automaker and its Japanese partner have told Wagoner that they are interested in buying a significant stake in GM and including the US automaker in their alliance. The idea came from Kirk Kerkorian, GMs largest individual investor, with a 9.9% stake.
Renault-Nissan CEO Carlos Ghosn met with Wagoner in Detroit on July 14, and they agreed to study the alliances potential for 90 days. After Renault reported weaker first-half earnings, however, Ghosn appeared to downgrade the possibility of a GM deal, saying it would take place only if the potential gains exceeded the risks by 10 times.
Wagoner says GMs second-quarter operating profit is proof that his turnaround is working. It might also be enough to keep him in the drivers seat, especially if he is right in suggesting that the impact of GMs cost-cutting efforts on the bottom line will accelerate in the second half.
Gordon Platt
