GM back from the brink

Like This? Click to Recommend It

The hemorrhaging has stopped at General Motors.

Although the automaker lost $1.2 billion in the third quarter, its financial condition has stabilized to such an extent that it plans to return some of the $50 billion lifeline the federal government extended it last winter.

Once the world's dominant automaker, GM over the years lost market share to imports and emphasized sales of light trucks and sport-utility vehicles, a strategy that fell victim to rising gasoline prices and the public's increasing preference for more fuel-efficient vehicles.

Like Ford and Chrysler, GM was also saddled with expensive pension and health-care obligations for retirees, negotiated in rosier days for the American auto industry. Those costs amounted to about $2,000 for each vehicle GM sold.

But GM also had its own peculiar problems: a conglomeration of brands, which complicated marketing and production, and a rigid bureaucracy.

Its vulnerability was exacerbated by the last year's global financial downturn, which froze credit and suppressed demand for new vehicles. Predicting that it would run out of cash by mid-2009, GM sought federal aid. After Congress balked, President Bush approved a "bridge loan," conditioned on a revised business plan and the Obama administration then forced the company into bankruptcy and orchestrated a restructuring in exchange for a government stake.

GM emerged from bankruptcy much faster than expected and has shed thousands of jobs, revised union contracts and decided to concentrate on four core brands.

The leaner company has $42.6 billion in cash and securities to invest in new vehicles and can probably break even in a subdued new-car market.

The company still faces major challenges, especially convincing potential buyers that it is building better cars. But its prospects are far brighter than anyone expected only months ago.