I think General Motors -- and GM shareholders -- will get reintroduced to reality with the company's Thursday earnings report.

Investors have been surprised to find that just two years after emerging from bankruptcy, General Motors (GM, news) has returned to its traditional position as the world's largest carmaker. In 2011, General Motors sold 9 million cars to take back the title it lost to Toyota Motor (TM, news) in 2008.

The good news helped propel GM shares to a 25.8% gain for 2012 through Feb. 10. That compares with a 6.98% gain for the Standard & Poor's 500 Index ($INX) for the same period.

But now the shiny new car that GM built -- with financing from U.S. taxpayers, courtesy of the Obama administration -- has to perform. The showroom gloss is gone. Investors will want to know how long it will take the new GM to go from zero to 60 -- and if the engine will blow out halfway down the track.

Mere survival is no longer good enough -- especially now that investors have bid up the value of that survival by 26%.

The outlook for 2012 is key

We'll see what this Little Deuce Coupe has under the hood -- not in the company's numbers for the fourth quarter of 2011 but in GM's guidance for 2012 and in its earnings conference call.

For the last quarter of 2011, Wall Street is looking for 42 cents a share, and I think GM's got a good chance to report a 10% surprise at 46 cents (and lay rubber in all four gears). Much of that performance, though, even the surprise, is built into the recent run-up in the stock price. (The range of analyst estimates for the fourth quarter has a huge spread from $1.08 down to 24 cents a share.)

The big challenge will come later this year. That's when the company faces its big Jan and Dean moment -- "But I'll throw you one better if you've got the nerve / Let's race all the way to Dead Man's Curve."

Image: Jim Jubak

Jim Jubak

Is GM up to climbing to the top of the global car industry and staying there, or is this simply a company that will sink back into the pack after staging its impressive return from the dead?

I've got a list of questions for the company longer than the Little Old Lady from Pasadena's drag down Colorado Boulevard. I don't expect convincing answers to all of them on Thursday, but I do think investors will be looking for a plan that starts to whittle down these uncertainties.

I'd divide my questions into two lists -- company-specific and industrywide.

Questions the company must answer

When it comes to company-specific questions, I want to know what GM plans to do to fix some longstanding problems.

How will GM fix its European operations? Europe has been a black hole for GM, sucking up profits that the company made in North America and China long before the company's bankruptcy. The company set a goal of EBIT (earnings before interest and taxes) break-even in Europe for the third quarter of 2011 -- and didn't make it. For the quarter, GM's European operations showed an EBIT loss of $292 million. That was an encouraging improvement from the $559 EBIT loss in the third quarter of 2010. But all this was before the euro debt crisis started to crush European economic growth.

With Europe headed into a recession, it's not reasonable to think GM can produce a profit there in 2012. But I'm looking for a long-term plan for after the recession.

Is the pension problem under control? GM's bankruptcy let the company take a whack at its labor costs, including health care and pensions. But the company still faces big pension liabilities in the years ahead. Lower interest rates and a faltering stock market have reduced the returns the company can reasonably expect over the next few years. Investors will be looking to see how much of a reduction the company makes in its expected rate of return for its pension plans and how much the company will have to contribute to make up for the shortfall.

What's the picture for margins in 2012? General Motors faced rising commodity and raw-materials costs in 2011, and nothing I've seen indicates that costs will fall in 2012. At its last analyst day, the company said it thought it could use efficiencies to cut costs and raise margins. Investors would like to see the details.

Is GM developing a truck (and crossover) problem? In January, GM saw vehicle sales fall by 28% from December and about 11,000 vehicles short of the 178,896 sold in January 2011. Total sales for passenger cars climbed 3% from January 2011, led by Chevrolet car sales. Truck sales fell by 6%, and crossover sales declined by 18%. Buick sales fell by 23%, and Cadillac sales dropped by 29%.

GM's undoubted success in making the Chevy brand competitive with cars from Toyota and Korean brands with models such as the Malibu, Cruze and Sonic will be a Pyrrhic victory if sales of vehicles with higher profit margins dip. GM has planned a major effort to expand Cadillac sales in 2012, with production this spring of a new technology-packed CTX luxury sedan. An all-new ATS compact luxury sedan was unveiled in January. The CTX and ATS will bookend the brand's core CTS models. Investors will be listening hard on the conference call to know how the Cadillac effort is shaping up.

Continued on the next page. Stock mentioned: Ford Motor (F, news)

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