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Ed Whitacre Out After GM Posts Best Quarter Since 2004

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On: Thu, Aug 12, 2010 at 3:48PM | By: John Welch

Ed Whitacre Out After GM Posts Best Quarter Since 2004

GM has a lot of things to be happy about lately, but are those 'things' real or imagined? GM posted a net profit of $1.3 billion dollars this morning, a far cry from the $12.9 billion net loss during the second quarter last year. Rumor has it that these numbers are inflated by fleet sales. Only time will tell; as it is, this is nothing but good news.

Another bombshell dropped today, in the form of Ed "Tex" Whitacre hanging up his ten-gallon Alan Mullay hat and stepping down as chairman of General Motors. He will be replaced by Daniel Akerson, GM board member since July 2009, after a long career in telecommunications. Akerson is 61 years of age, and there is no reason to believe that he will not be able to successfully man GM's helm when the company's IPO goes public this fall.

Full press release and hard numbers inside the post . . .

PRESS RELEASE: GM Second Quarter 2010 Results Show Sustained Progress

• GM achieves second consecutive quarter of profitability and positive cash flow

• Net income of $1.3 billion and EPS of $2.55, free cash flow of $2.8 billion

DETROIT, Mich. – General Motors Company today announced its second quarter 2010 results, marked by revenue of $33.2 billion and net income attributable to common stockholders of $1.3 billion, resulting in earnings per share on a diluted basis of $2.55. GM's second quarter earnings before interest and tax (EBIT) was $2.0 billion.

GM North America had EBIT in the second quarter 2010 of $1.6 billion, up from $1.2 billion in the first quarter. GM Europe had a loss before interest and taxes of $0.2 billion, an improvement of $0.3 billion from the first quarter. GM International Operations posted EBIT of $0.7 billion, down from $1.2 billion in the first quarter.

Cash flow from operating activities was $3.9 billion and after adjusting for capital expenditures of $1.1 billion, free cash flow was $2.8 billion. GM ended the second quarter with $32.5 billion in cash and marketable securities, including funds in the Canadian Health Care Trust escrow.

“I am pleased with our progress on achieving our business objectives,” said Chris Liddell, vice chairman and chief financial officer. “We have delivered strong product, maintained cost discipline, progressed strategic initiatives such as restructuring Europe and acquiring AmeriCredit, and delivered two consecutive quarters of profitability and positive cash flow.”

For the news on Ed Whitacre stepping down, we differ to Automotive News:

Akerson, 61, has been head of global buyouts for private equity firm The Carlyle Group since July 2009. His career was highlighted by stints as chairman and CEO of XO Communications from 1999 to 2003. He was CEO of Nextel Communications Inc. from 1996 to 1999 and also was chairman of the company's board from 1996 to 2001.

Whitacre, 68, said he would stay on as chairman until Dec. 31. When he leaves, Akerson will become chairman as well, Whitacre said during a conference call with analysts and reporters this morning.

Whitacre said the GM board has been aware since he became CEO in December that he didn't want to stay a day longer than he had to. Whitacre was named GM chairman in June 2009 and took over as CEO after the Dec. 1 departure Fritz Henderson.

That's the story, folks; now to see how it all plays out. GM has a good thing going with its Chevy Equinox and all of the thousands of variants it has spawned, as well as strong sales of the Chevy Camaro and Cadillac CTS. New GM products are making their way down the GM pipeline and things are looking up in Motown.

Howabout we don't start counting proverbial chickens before they proverbially hatch. No matter the current profit margin, or how smoothly the change from Tex to Danny is, GM's future truly rests with its pending IPO. To wit: GM needs to recoup $70 billion dollars when it opens itself up to public sale, just to cover the debt owed to various suppliers and investors. Even worse, though labeled "Government Motors" everyone tends to forget that the word "Government" applies to our friends to the north as well. Though the US government currently holds the deed for 61% of GM, the Canadian government holds 11% of the company. On top of that, 17.5% is owned by the UAW's healthcare arm, and the rest, 9.8%, is the property of "Bond Holders".

How in the eff is this going to work? If %70 billion were possible from the sale of the 61% held by Obama (not to mention, you, me, and the rest of the taxpaying public) you would still have to satisfy the UAW, Canada, and anyone with their hand in the remaining, arbitrary 9.8%. This could go down as the most successful release of a private IPO ever, solidifying Tex Whitacre Jr. as the country's wisest telecommunications executive (He said it himself, "I'm not a car-guy . .. "), but it could also be a colossal failure, pretty easily. A third scenario sees GM controlled by outside interests until the end of time, or internal combustion, whichever comes first. (My vote is time will end before we are sick of slamming hot cams into small-block V8s . . . )

Look for GM to go public before the November elections, a brilliant P.R. move that could also explode in everyone's face . . . Whitacre, Obama, Ackerson, me .. . everyone!

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