A few kinks to work out
Post-bankruptcy, General Motors has been busy with reforming and cost-saving plans, along with a focus on expanding operations and reducing liability. However, the company's maximum focus is on its $10.8 billion pension discrepancy. A large pension underfunding can result in huge liability for a company and its consequences can be damaging.
For example, in March 2010, Ford
As of June 30, 2011, General Motors had a $10.8 billion underfunding in its U.S. pension funds. The company paid $4 billion in 2010, and another $2 billion so far this year, to curtail the pension deficit. The company has been reshuffling and reorganizing pension plans to decrease its liability. It has also undertaken restructuring and early-retirement programs in Europe, including in Spain, the U.K., Belgium, and Germany in 2010. This affected 5,000 employees along with the closure of the Belgium facility. The company has $32.8 billion in cash and short-term equivalents; it is therefore wise to contribute to the pension fund to quickly regain financial stability.
The company's other priorities include dealership expansion in the U.S., reorganizing its Europe division, and investing in established companies with technological expertise.
A lot of competition is expected from Toyota
The GM Europe division, which has seen extensive reform, posted a net loss of $288 million, up from a net loss of $637 million in the first half of 2010. Post-2011, the company expects no further restructuring initiatives in Europe.
The company is also investing in startup companies through its $100 million venture capital fund. The startup companies create novel technologies providing competitive edge for GM vehicles.
The Foolish bottom line
It's beginning to come together for the once-beleaguered U.S. carmaker. The company has come out of bankruptcy with a better management strategy, strong products, full-year profitability, and good cash levels. I believe General Motors could take care of its investors in the long run. To stay up-to-speed on GM, click here to add it to your free, personalized watchlist. To read Fool John Rosevear's take on how GM has dodged a bullet, click here.
Abantika Chatterjee doesn't own shares of any company mentioned. The Motley Fool owns shares of Ford Motor. Motley Fool newsletter services have recommended buying shares of General Motors and Ford Motor. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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