General Motors and Chrysler are reasonably positioned for growth after U.S. intervention saved the companies last year, and government support for the auto sector will begin to be pulled back, the manufacturing adviser to the president said on Thursday.
Ron Bloom, a Treasury adviser, said the intervention into GM and Chrysler was justified and both could succeed.
I think it has been justified by the fact that, so far anyway, the signs are good, Bloom said of the intervention. I think you will see us continue to try to pull back.
Speaking at a Federal Reserve conference on small business lending in Detroit, Bloom said automakers and auto parts suppliers made extremely difficult decisions during the restructuring of the auto industry and so far the signs are good.
Certainly no one is declaring the situation fixed, but I think we could all agree that in the last year a remarkable series of changes have occurred and we now do have a General Motors and a Chrysler and an auto industry that is at least back on its feet, Bloom said.
Chrysler, now operating under the control of Fiat SpA, posted a net loss of $197 million for the first quarter but said last month that it could raise its financial forecast for all of 2010.
GM, which is aiming to launch an initial public offering of shares as soon as this year, posted a net profit of $865 million in the first quarter and said it could post a full-year profit.
Both GM and Chrysler were restructured in 2009 in bankruptcies steered and funded by the Obama administration. Bloom, a former investment banker and adviser to the United Steelworkers union, was one of the senior officials tasked with steering the restructuring of the two U.S. automakers.
We now do have companies that are reasonably positioned for growth and as the overall economy improves I do think there is a real opportunity for these companies to succeed, Bloom said.
Chrysler and GM used their bankruptcies to cut labor costs and dealerships in the United States in a bid to become profitable at much lower industry sales rates.
U.S. auto sales for the year to date are running at an annualized rate of just over 11 million vehicles, up from a 27-year-low of 10.4 million vehicle sales in 2009.
The U.S. government holds a nearly 61 percent stake in GM after the reorganization that included $50 billion of support. A GM IPO would allow the government to reduce its stake in the automaker.
(Reporting by David Bailey and Soyoung Kim; Editing by Tim Dobbyn)