Three years after receiving a government bailout, General Motors aims to raise its profit margin to 10 percent over the next several years. If it succeeds, its net income could rise to $10 billion or more — an outcome that Steven Rattner, former US Treasury auto advisor, said is not “a crazy ambition.”
The world’s top-selling automaker is on track to report net income of about $8 billion for 2011 — two years after undergoing a taxpayer-funded bankruptcy in 2009. GM releases results on February 15.
“As you know, we had a very strong January in the U.S., and I’m reasonably optimistic for the rest of the year, so $10 billion in net income is not a crazy ambition,” the former White House “car czar” told CNBC.
He added that the company has "enormous operating leverage" and as sales rise and as it maintains its pricing discipline, a "huge amount" of those incremental sales will drop to its bottom line.
Achieving a 10 percent margin would place General Motors at the top of the automaker league, Rattner said. While he said he is "delighted" that GM has set this goal, he cautioned it is not necessarily going to happen any time soon.
Among the company's challenges are the return of its Japanese competitors to the market and the problems plaguing the European market.
“And I think while they’ve made great strides in terms of their own internal processes, I think they would be the first to say that they still have a way to go on best practices, really being best in class in terms of just the management efficiency of the place,” he said.
Although China has contributed substantially to GM’s bottom line and been a “wonderful success” for the company, Rattner said it's the North American market that still contributes the vast bulk of the company’s profits.
“[China] does not contribute the same amount to the bottom line,” he said. “We all want and expect China to hold up, but China is not what is going to determine GM’s success or failure at reaching these kinds of profit goals.”
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Disclosure information was not available for Steven Rattner.