Tuesday, May 18, 2010

GM's Coincidental Profit Number

NPR featured a report yesterday on the first quarter profit report by GM in which included this observation:
Which isn't to say GM has arrived, but the bankruptcy did give the company more of a fighting chance. Just consider that $865 million profit GM reported. Last year, before bankruptcy wiped out most of the company's debt, that was almost exactly the amount GM was paying in interest costs alone.
Of course, this is probably just a coincidence.

On the other hand, it doesn't exactly lead me to believe that the GM bankruptcy resulted in a fundamental restructuring of its business model. As I noted previously, there are billions in outstanding GM pension obligations that have to be funded, which will make a long term return to profitability incredibly difficult.

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