If anyone wants to know the extent and the reality of the turnaround in products and profits at General Motors, this is the week of a key revelation: the 2011 results on revenue and income.
Reuters reports that GM is likely to report 2011 net income of about $8 billion on Thursday – the company’s richest year ever, helped by growth in China and strong profits in North America (all figures in U.S. dollars).
This is good news for Canadian and American taxpayers who still own a substantial chunk of the company. If these result hold up over time, or perhaps even improve, you and I will get all our bailout money back once GM sells the remaining shares held by governments in the U.S. and Canada. Naturally, some will argue the bailout was wrong, that it rewarded incompetence and that GM should have been allowed to fail in the best or worst capitalist way.
That’s just a nonsensical, purely ideological argument. Yes, in a nasty, brutish world – to borrow from Hobbes – GM would have been allowed to implode in 2009. That would have vaporized hundreds of thousands of jobs in bankruptcy and likely tipped the U.S. into a full blow depression – Canada with it. Fortunately, cooler heads prevailed and GM is in the midst of rebuilding its business and its products.
It appears that GM’s top leadership has its foot on the gas pedal, too. Last week The Wall Street Journal reported that GM aims to raise its profit margin to 10 per cent over the next several years, up from the current margin of about 6 per cent, Daniel Ammann, chief financial officer, told The Journal. That’s BMW and Audi territory, which is almost unheard of in a mass market auto maker like GM. Reuters reports that if GM achieves this margin, it may generate up to $15 billion in profits.
Wow. Quoting The Journal, Reuters said GM confirmed the numbers.
The man at the wheel of all this change, the man pushing for a complete cultural change at GM, is Dan Akerson, the CEO. I had a dinner-table interview with him last month in Detroit and left believing that this sixtysomething graduate of the U.S. Naval Academy at Annapolis considers himself more than a mere multimillionaire capitalist, but actually a patriot.
At first, the thought of an alumnus of The Carlyle Group now acting as a red-blooded patriot … Well, the cynical side of me could not buy into the idea of Akerson as patriot, denying his own self-interest and enrichment for a nobler cause – rebuilding GM into a global engineering and manufacturing powerhouse.
Then he told me how much he’s making at GM.
“I’m probably in the bottom 10 per cent of CEOs,” he said, noting that his pay packet by law in the United States is limited, though even with those limitations he recently turned down a raise.
“I said, ‘I can’t do that,’” not while governments in the U.S. and Canada own more than one-third of GM, and certainly not while GM remains in the early stages of rebuilding its business. For those same reasons, GM’s top 25 executives are not eligible for bonuses.
After about 18 months on the job he’s settled into a life in Detroit, not Washington, D.C., where he had lived for more than eight years before coming to GM, and where the parties are better and the scenery is prettier. He said he’s only now begun to fully grasp the complexities of running what is again the world’s largest car company.
