GM now structured to return top profits-executives

Thu Nov 4, 2010 7:06pm EDT

* GM plans broad vehicle introductions in emerging markets

* Break-even at 10.5 mln-11 mln US sales rate

* EBIT of $11 bln-$13 bln at mid-point of economic cycle

* EBIT could reach $17 bln-$19 bln at cycle peak-CFO

By Kevin Krolicki

DETROIT, Nov 4 (Reuters) - General Motors Co [GM.UL] (GM.N) is on track to generate more cash than it did in 1999, its last boom year, after slashing costs in bankruptcy, the automaker's chief financial officer said.

"We previously did not have a competitive cost structure," GM Chief Financial Officer Chris Liddell said in a videotaped presentation for potential investors in the automaker's initial public offering of stock.

The forecast of stronger earnings ahead came as two teams of GM executives led by Liddell and Vice Chairman Steve Girsky kicked off a series of meetings with institutional investors to promote the automaker's IPO.

GM filed on Wednesday finalized terms for a stock offering of $13 billion to repay part of a controversial taxpayer-funded bailout and reduce the U.S. Treasury to a minority shareholder.

The automaker plans to sell 365 million common shares at $26 to $29 each, raising about $10 billion at the midpoint.

The IPO values GM at $50 billion on a fully diluted basis at the midpoint, a slight discount to Ford Motor Co (F.N), which had a market value of $51 billion on Thursday.

Liddell said GM expected to be able to earn between $17 billion and $19 billion before interest and taxes at the "high point" of the next economic cycle.

In 1999, a year when GM was riding high on the boom in SUVs and sold almost one in three cars and trucks in the United States, the automaker earned just under $17 billion before interest and taxes.

Liddell, who was speaking in front of a display of vehicles at GM's headquarters, said the automaker's goal was to repay all of its debt and fully fund its pension, giving it a "fortress balance sheet" to withstand the sharp boom-to-bust cycles in auto demand.

After cutting its U.S. factory workforce by more than half since 2005 to near 50,000 workers, GM can break even in a U.S. auto market with annual sales as low as 10.5 million vehicles, Liddell said.

By contrast, the old GM was pushed into bankruptcy and a $50 billion U.S. bailout in 2009 when auto sales dropped to near 10.4 million vehicles.

GM said on Wednesday that it expected a third-quarter profit of up to $2.1 billion and a full-year profit for 2010, its first full year out of bankruptcy.

In addition to sharply lower costs, Liddell said GM would continue to benefit from higher pricing -- and reduced discounts -- on its newer vehicles including the Chevy Equinox, Buick Lacrosse and Cadillac SRX.

Average sale prices for the Equinox, a crossover that has won praise from Consumer Reports, have jumped about $3,900, he said.

Liddell said GM was better positioned than its closest rivals -- Ford, Toyota Motor Corp (7203.T), and Volkswagen (VOWG.DE) -- to capitalize on fast growth in the big emerging markets led by China.

Slides prepared for Liddell's presentation showed GM slashing product development costs by using common platforms for almost half of its vehicles by 2013, up from just 6 percent last year.

Another slide showed that GM planned to introduce 37 vehicles in 2013 alone, up from 17 in 2009, a year the automaker passed through bankruptcy.

Ford Chief Executive Alan Mulally has used a similar strategy to drive a turnaround at the No. 2 U.S. automaker.

"We are getting off of our heels and onto our toes, from defense to offense," GM Chief Executive Dan Akerson, who took over in September, said in a separate video message to potential investors. (Additional reporting by David Bailey, Deepa Seetharaman and Bernie Woodall; Editing by Steve Orlofsky)