Summary
In the second half of 2009, GM has suffered a $4.3 billion (US) loss. Despite this, GM believes that they can make a profit this year. In the first half of 2009, GM has earned $109 billion. These figures however, cannot be compared to previous years because of the changes in accounting, which allowed GM to revalue their assets. Also, in the beginning portion of 2009, GM stated that they earned $47.1 billion in revenue and $57.5 billion in the second half. GM has also received $52 billion in aid from the US government. The company has promised to pay back $6.7 billion and hopefully before June this year as stated by the new chief financial officer of the company.
Connections
This article relates to chapter 15.3, which talks about ratios. More specifically, this article connects to to the rate of return on net sales ratio. The company made $47.1 billion in the first half of 2009 and $57.5 billion during the second half, resulting in a $10 billion dollar increase in revenue. The performance of the Detroit based company however, cannot be judged based on revenue alone. According to figures stated in the article, the net income % in the first and second half are 231.4% and -7.5% respectively. Upon further research, I have discovered that GM gained $128 billion in reorganization funds. Realistically, without the reorganization gains, GM has a net loss of $19 billion in the first half, which changes up the percentages to -40.3% and -7.5%.
Reflections
Just coming off a near bankruptcy, GM has managed to increase their revenue by 10 billion and the rate of return on sales ratio by 32.8% since the first half of 2009, both of which are more than healthy increases for the company. I think that this is a sign of good things to come for the automotive company. If they can continue to raise their revenue and more importantly, their net income, they can hopefully stay away from bankruptcy. It is clear that no one wants to see GM go bankrupt, including the US government, who has given the company $52 billion in aid. If GM does go into bankruptcy, it will definitely have an impact on the economy, let alone the automotive industry.
http://www.cbc.ca/money/story/2010/04/07/gm-loss.html
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It is amazing that GM place was able to survive through year 2009 even after having such a huge net loss. GM place was really lucky to be able to receive over $170 billion from the government and reorganizations. I believe that this was a economically smart move pulled by the government, because if a large company like GM place was to fall, that would definitely have a huge negative impact in the US market. By saving this huge company, the government has prevented recession from getting worse. With a bold statement of repaying the government $6.7 billion dollars later on this year, it seems that GM place is confident in their ability to reverse the damage they suffered from recession.
ReplyDeleteI would have to disagree with your statement regarding the optimistic future of GM. Although GM is showing signs of recovery, they're still heavily in debt as a result of the economic recession. In my opinion, I believe GM still has a long road to struggle before it brightens up. Having promised to repay $6.7 billion, GM will have a slight budget for potential investments, therefore, slowing down the development of the company. The gradual development will result limit the company's sales and profit to a certain extent. However, if GM maintains and further improves its performance, it won't be long to be back on track. That is to say that another recession will not occur in the future.
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