GM Future Earnings Estimate on Target: Lutz

Chevy Tahoe Hybrid
Chevy Tahoe Hybrid

The estimate by General Motors of bringing in $11 billion to $13 billion mid-cycle in earnings before taxes is on target, a former company vice chairman, Robert Lutz, told CNBC Wednesday.

“You take these operational improvements and a product line that is in high demand, coupled with the quasi-elimination of all of the legacy costs that used to burden GM in the past, and you’ve just got a powerhouse going,” said Lutz, who is also a CNBC contributor.

“I think the estimates that GM put out on mid-cycle earnings are entirely realistic.”

GM issued its quarterly report on Wednesday.

GM’s IPO on Nov. 18 is expected to raise about $10 billion for its owners, including the US government, Canadian and Ontario provincial governments, and a union health-care trust. It would allow the largest owner, the US government, to reduce its stake in the company from 61 percent to just over 40 percent, according to the Associated Press. The company filed for bankruptcy under Chapter 11 in June 2009.

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What’s also helped the company is eliminating such practices as paying workers not to work and dropping models that don’t do well, said journalist Paul Ingrassia, also a CNBC contributor.

Lutz said GM needs to revamp its GM Europe unit, the corporation’s only money-losing operation, and make sure that the parent maintains a lean operation committed to quality products. “We went through this major restructuring in the United States, which was a long time coming,” he added. “Too bad that it required Chapter 11 to get it done.”

The majority of GM's owners, including the U.S. government, Canadian and Ontario governments and a union health care trust, will sell 365 million shares, or about a quarter of the company's outstanding common stock, for between $26 and $29 a share.

Watch Ford: Rebuilding an American Icon at 9pm, ET, Wednesday on CNBC.