Summary:GM Loss Reduction

The article "At GM, Loss Reduction is a Good Start" found at BusinessWeek.com, discusses how GM CEO, Frederick A. Henderson, will soon give the company's first update since emerging from bankruptcy nearly 80 days ago. According to sources close to top management, GM will show much improved third quarter earnings, although the company will still be in the red. However, even a small loss would be a positive for the same company that lost over $4.2 billion during the third quarter in 2008 and over $31 billion last year. GM's earnings and cash flows will be helped in the quarter because of the fact that the company shut down many of its plants during the bankruptcy. The factories opened again when the company emerged from bankruptcy, greatly helping earnings because car makers book revenue when the car heads off the assembly line to the dealership. Another way GM has tried to cut back costs is by setting up a Voluntary Employee Benefits Trust, or VEBA. Set up the same way a pension fund pays pension benefits, VEBA will reduce union health care costs. While GM cars had an $8,000 increase in net price, recent sales have risen and market-share losses have decreased. All of these are good signs as GM tries to recover from one of the worst recessions to ever hit the auto industry.