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General Motors Says It Will Invest $2 Billion In 17 U.S. Plants

Gm Invest

First Posted: 05/10/11 03:19 PM ET Updated: 07/10/11 06:12 AM ET

(Bernie Woodall) - General Motors Co said on Tuesday it will invest about $2 billion in 17 U.S. plants, including a facility here that makes transmissions for small cars, as the automaker shifts from recovery mode to investing in future products.

GM said the plans will create or preserve more than 4,000 jobs as it retools the plants in eight states. The company employs 202,000 people globally, including 77,000 in the United States.

"We are doing this because we are confident about demand for our vehicles and the economy," GM Chief Executive Daniel Akerson said in a statement.

Investors and analysts have speculated on GM's plans for its growing pile of cash as the company's liquidity has reached $36.5 billion. It earned $3.2 billion in the first quarter after posting net income of $4.7 billion for all of last year, its first full-year profit since 2004.

GM did not disclose the timeline for the investments or in what other facilities it will invest other than to say more announcements will be made "over the next few months."

Executives previously signaled GM's focus on building cars would only grow, as shown by last week's announcement to invest $131 million revamping a Kentucky factory for a new version of the iconic Chevrolet Corvette sports car. The Kentucky announcement is part of the $2 billion plan.

Another key issue as GM adds jobs is how many will be in the so-called second-tier wages that are about half those of veteran union-represented employees. The lower wage will figure prominently as major U.S. automakers face labor talks with the United Auto Workers this summer.

GM filed for bankruptcy in 2009 after the U.S. housing downturn and a spike in gasoline prices the year before that caused consumers to turn away from its high-profit but fuel-hungry trucks.

The U.S. automaker emerged from bankruptcy 40 days later thanks to a $52 billion taxpayer-funded bailout and sold shares in an initial public offering last November. Since exiting bankruptcy, GM said it has invested $3.4 billion in its U.S. plants, creating or retaining more than 9,000 jobs.

The investment is not a surprise and by delaying the details of the specific plants affected GM maximizes the attention it will receive as it works to assure taxpayers the bailout was money well-spent, said Mirko Mikelic, senior portfolio manager with Fifth Third Asset Management.

"They probably underinvested in some of these plants for the last few years," said Mikelic, whose firm has held GM bonds and preferred securities in the past and still follows the stock. "They were keeping a handle on their cash. For years, in terms of R&D, they've been behind particularly Toyota."

The U.S. government still owns 32 percent of GM's common shares and many investors see that as an overhang on the stock. Last month, sources said the Treasury could sell a significant portion of its GM shares by fall.

GM shares were up 0.4 percent at $31.51 on Tuesday afternoon, compared with their IPO price last November of $33.

(Additional reporting by Ben Klayman in Detroit, editing by Matthew Lewis)

Copyright 2011 Thomson Reuters. Click for Restrictions.

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Filed by Maxwell Strachan  |