GM rises to hybrid vehicle challenge

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The chief executive of General Motors denied that the US carmaking group’s earnings momentum had slowed and hinted that the company would report a strong first quarter.

In an interview, Dan Akerson also said that GM’s lossmaking European Opel/Vauxhall business was “on the road to recovery” but acknowledged that it had “a ways to go” in achieving its goal of sustained profitability.

Mr Akerson, a former private equity boss and telecommunications chief executive, likened the car industry’s shift into hybrid, electric and other technologies to the move from analogue to digital telecoms.

He said that GM stood to benefit from this “propitious moment” thanks to a “fortress balance sheet” restructured during its trip through US government-bankrolled bankruptcy in 2009, which would allow it to continue investing through economic down cycles.

“I can’t think of a paradigm shift like this in my lifetime in the automotive industry,” Mr Akerson told the Financial Times at the Geneva car show.

“Now it’s here and upon us, and it couldn’t come at a better time for General Motors. Our financial strength is probably at a 50-year high.”

The words came after the company last week reported 2010 net earnings of $4.7bn, its first full-year profit since 2004.

When GM reported earnings, its share price dipped after Mr Akerson made bearish comments about rising fuel prices and the company reported fourth-quarter net earnings at $500m, the lowest of any quarter in 2010.

Mr Akerson denied that GM’s profitability was losing steam.

“Our earnings momentum has not slowed, in my opinion”, he said.

“I think our first quarter will be indicative of how we view 2011.”

Pressed on the latter point, Mr Akerson said: “Do I view 2011 as potentially higher than 2010? Yes.”

Opel, which lost $600m before interest and taxes in the fourth quarter, is gaining market share in Europe, including Germany, where its image was tarnished by a botched attempt by GM’s former management to sell the unit to outside investors.

In Geneva on Tuesday, Nick Reilly, head of GM Europe, said Opel would report a small profit this year – an uptick in the carmaker’s earlier forecast that it would break even in 2011.

Mr Akerson said GM’s European arm was “seeing green shoots” but needed to manage costs, get capacity utilisation in line and complete restructuring of its operation, which will shed about 1,200 more employees this year.

“One quarter, one year does not constitute a success,” he said.

“We have to commit ourselves to many quarters, many years of success.”

Mr Akerson became GM’s chief executive last September.

He originally came to GM in July 2009 as one of the independent directors named by the Obama administration to inject fresh blood into the company after it emerged from bankruptcy.

Mr Akerson’s status as a contributor to the presidential campaign of John McCain, Barack Obama’s opponent in the presidential race, raised some eyebrows at the time.

However, he described himself as a “Colin Powell Republican” and said he contributed to both US political parties.

“There have been years I’ve given more to the Democrats than the Republicans.”

Mr Akerson brushed aside the question of whether he had met Mr Obama, who made the decision to bail out GM.

“I don’t work for the president. I work for shareholders. We’re owned by the public now.”

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