Thanks, taxpayers! GM tallies biggest profit ever

But the automaker misses forecasts because of global troubles, and the record earnings may not thrill the still-struggling people of a nation that bailed the company out.

By InvestorPlace Feb 16, 2012 10:29AM

By Jeff Reeves


General Motors (GM) earned its highest profit ever last year, a staggering $7.6 billion on revenue of more than $105 billion.


Yay for GM, right? Well, not really.


Unfortunately, Wall Street was already expecting dramatic profits -- and the automaker actually fell short. What's more, sales overseas were very ugly, including at European and South American operations that were in the red. And let's not forget the outrage some taxpayers are feeling after a money-losing bailout of the Detroit automaker that has helped it rake in record profits.


It all adds up to a very sticky situation for this "successful" automaker in 2012.


First, let's cover the numbers for GM: Two years after declaring bankruptcy, the company posted fiscal 2011 profits of $7.6 billion, a dramatic jump of 62% over 2010 numbers. Revenue also was up 11% to $150 billion.


Interestingly, despite a big focus recently on overseas sales, North America led the way for GM as sales slumped in the troubled European market and in South America. General Motors actually posted a loss for operations in both regions.


Though the headline profits sound great, those drags held back GM substantially in the end of last year. Fourth-quarter 2011 profits were flat at $500 million. Adjusted earnings were 40 cents per share, while Wall Street had expected 42 cents.


So when you look at the details, investors actually are more disappointed than pleased with GM right now. They had expected better.


Contrast that with taxpayers, many of whom felt that Uncle Sam had absolutely no business bailing out automakers to begin with in 2009. About $82 billion in government cash was plowed into General Motors in 2009 -- no small chunk of change in good times but even more galling considering the focus on fiscal austerity right now to bridge our yawning deficit.


That's to say nothing of the philosophical objections that many "free market" defenders have voiced so loudly.


To make matters worse, in December the former auto czar for the Obama administration said the government would lose about $14 billion on the Detroit bailouts!


So even if you're OK with the government meddling in private enterprise, taxpayers have to be OK with a money-losing bailout, too. And even if you're OK with a money-losing government bailout, taxpayers have to be OK with record profits at the company that took Uncle Sam's cash.


It all adds up to an untenable situation for GM's public-relations department. If you're not successful enough, Wall Street is going to be disappointed with your lack of growth. If you're too successful, taxpayers are going to be furious.


It's hard enough for companies like Ford (F) and Toyota (TM) to sell cars these days amid tough competition and tight consumer spending. Though the broader stock market is up, Toyota's stock is off about 8% in the past year and Ford's is down almost 25%.


Throw in the uncomfortable politics of the automaker bailout, and GM has a rough road ahead in 2012.


What's next for fellow bailout bait Chrysler? Read about how the company's future is riding on a single car, the revamped Dodge Dart.



Jeff Reeves is the editor of InvestorPlace.com. Write him at editor@investorplace.com, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. As of this writing, he did not own a position in any of the aforementioned stocks.




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301Comments
Feb 16, 2012 11:22AM
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OK, so they made money........ Now pay back the balance, PLUS interest. The profit should not go to employees, unions, nor the guys at the top. The "COMMON taxpayer" saved their asses. Now give back what is do. 
Feb 16, 2012 1:47PM
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I am having a hard time with all the negativity about saving an industry that was one of the most prominent in shaping our nation...your tax dollars are spent everyday on programs that many of you would never support. did any of you miss a meal, get less welfare...I just don't understand. yes the big three needed to change, and they are changing read JD Powers on who is building the most reliable cars NOW! we find out who we are when times are the darkest, these companies are embracing change,their product and reliability has been noticed and I believe they will prosper. Have you been out of school so long that you can't recall that these same automakers converted their factories in WW2 to build tanks and planes,or do they not teach that in school anymore,I am not sure what industry beside agriculture has defined this country more...all these comments about letting them fail.. come on...does buying from an American Company mean anything? do you think Japanese automakers support your local,state or federal programs? Are they putting there profits back into the US economy?
Feb 16, 2012 12:27PM
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Let's start out with this was a terrible article. Jeff is obviously a pro-"anyone but the General kind of guy". He does however owe his readers accurate reporting. How about the fact that GM (and Chrysler) have already paid back any and all money due the government, with interest, ahead of time. I did not like the bail out more than anyone else. But the truth is if the government hadn't done it, not only would GM and Chrysler be gone, (too bad right?) but all of the employees of those companies would have been out of work and on unemployment, but people get a clue, do you realize how far the fingers of the auto industry stretch? how many millions of peoples jobs would be gone or been effected drastically if  the auto industry went down? It's the second biggest industry in our country! Gm, the largest corporation! You really think we as a nation could handled that? Yes things have been bad, yes they still aren't good. Are they better than three years ago? I believe so!  And in conclusion, last time I looked we are a capitalistic nation, (and that's a good thing) We want our companies to be successful and to thrive for OUR SAKE! I am not a Democrat  or a Republican. so please, no twists. The facts are the facts!  Move on, FORWARD! and above all ,find something positive in where you are in life. Hang on to it, build on it, and have a nice day.
Feb 16, 2012 1:03PM
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What a masterful deceptive piece of writing. Jeff Reeves must be a troll for the foreign auto market. It has been reported today that four out of the top ten brands in JD Powell’s latest reliability survey are GM and Ford. Yet the focus is on the government bailout.

 

Let’s talk bailout – in reality, Japan, Korea, and especially China, bailout their auto industry every day. How? By making it difficult and expensive to buy an American product. For instance, while the United States imposes no onerous impositions on the import of foreign cars, the red tape involved in selling cars in Korea and Japan increase the price substantially making the US car uncompetitive.  In China, a Chrysler 300 that sells for $32,000 in the US sells for $78,000 in Shanghai. Why because of the layers of bureaucracy that China deliberately sets before the car can be sold in the so called free market.

 

The answer – Buy American!

 

Feb 16, 2012 1:13PM
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When can we the taxpayers expect our dividends checks for the stock we own?

Feb 16, 2012 1:14PM
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Awesome, now they can finish paying back the taxpayer.
Feb 16, 2012 11:24AM
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I hope some of their "profits" will be used to pay back the loan from us U S Treasury.
Feb 16, 2012 1:50PM
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If the US treasury owns 25% of GM, this is a good thing. This article is trying (unsuccessfully) to make the picture seem that GM is running away with the taxpayers dollars but in reality, this means that the US successfully invested into a now very profitable company and its investment dollars did exactly what investment dollars should do - provide a return to investors by giving companies the needed capital to turn their company around or grow. 

Additionally, the $82 billion USD invested was invested into 3 organizations, not just GM so the $14 million lost is due to more than just GM. This was written to be intentionally misleading. 

Shame on you Mr. Reeves...
Feb 16, 2012 1:11PM
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F%*K Wall Street. What we need, more than ever, is a strong manufacturing base. The bailout for GM and Chrysler was the best decision Dubya every made. I'm happy that GM is doing well, although I'm a Ford man. We sent way more money to the "investment bankers" aka gamblers and all they do is push paper around. The rest of the world respects only a US that can build, create, inovate things you can actually hold in your hand.

Feb 16, 2012 12:54PM
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I worked for G.M. for 27 years, until they spun us off (hahaha) and called us Delphi. I worked for Delphi for 3 more years and retired with no incentives at all. Three years later Delphi (GM) eliminated all of Salaried medical benefits plus my extended health care benefits I paid $30/month for 28 years and got nothing in return for my investment. One year later Delphi (GM) reduced Salaried Pensions 25-50%. Now GM shows an 8 Billion profit, not hard for me to figure out where this came from. It certainly isn't their car sales, it is from their bailout and my pension and medical benefits. Thank you GM (Government Money)
Feb 16, 2012 3:16PM
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My grandpa was a GM guy, my dad was a GM guy, I have been a GM guy.  My next new truck will be a FORD. 

Feb 16, 2012 11:26AM
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So what else is new?  The government should get out of the free enterprise system.  When the government gets involved, it is no longer "free" to succeed or fail based upon its own merit.

Wake up America!!!  Your fundamental rights are being stripped away!  Defend our constitutional republic.
Feb 16, 2012 2:17PM
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Boy, there are a lot of GM and Obama haters on this thread.  Here's the deal:  Even George W. Bush said recently he would have done the same thing Obama did for the auto indsutry.  Most of the foreign transplants went to government to encourage a bailout of the auto industry in 2009 because they rely on the same parts manufacturers and suppliers.  It GM and Chrysler would have been liquidated, Ford would be gone by now, and a lot of foreign transplants would move their plants out of here.  It would have shut down most of the parts manufacturers and suppliers, hurt the transportation industry,  closed thousands of dealerships, made it harder for classic car collectors to get parts and new engines, destroyed Michigan and the city of Detroit, and deprived valuable tax dollars to the U.S. Treasury, and weakened our economic and national security for years.  Can you imagine all of the hi-tech, designer, and engineering jobs lost, too?  You people who bash GM and Chysler don't know your history about how they were part of building the middle class and helping us win WWII.  They put food on the table for millions and millions of American families.  If we were Germans, S. Koreans, or the Japanese, we would praise the efforts of the government to help the Big 3.  Most of our competitors subsidize their auto industries already.  We have a "sink-or-swim" mentality in this country, which is B.S.  You people who buy foreign brands like to justify your purchase or say, "well, it was made in the U.S." You forget that most of the profits go overseas with the tax benefits to prop up their economies.  The transplants owe the our country billions in subsidies and tax breaks.  Why don't you complain about that.  Your beloved Hyundais and KIAs use 0 (zero) domestic parts in the few models assembled here. In fact, the Big still overall on average use the most domestic parts and employ thousands more Americans than the foreign transplants. Keep driving foreign, but don't complain when you drive that foreign car to a crappy job fair to find a minimum-wage job.
Feb 16, 2012 11:34AM
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For some reason, I am having trouble swallowing this happy pill.  I have friends who own a GM dealership and things are not good.  One has only to look around  and see the empty car lots both new and used, hardly anyone is buying anything because they are afraid to part with what money they have.  Food costs have increased as with everything else because gas keeps going up and expected to go further.  Everyone is in a wait and see mode.  People I have talked to in the car business say it's the worst they have seen it.  Are they counting the bailout money and including this in the profit figure for GM?  Of course, just prior to an election we need to be fed as much positive BS so the current president can take credit for the ecomony.  Why is it the economy suddenly becomes much better prior to an election.  Our country is already in the toilet.  All we are waiting for is whether or not the handle will be pulled to flush it come this Nov..
Feb 16, 2012 2:19PM
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While it's popular to bash the bail-out policy, what's often NOT discussed is what would have happened if the auto industry was allowed to collapse.  Already massive unemployment would have increased big time.  The emotional fallout of America's iconic employers declaring bankruptcy would have further damaged the American people's confidence in their economy, and would have plunged the US economy into a depression so deep that it would have dwarfed what actually happened.  Republicans and Democrats alike recognized this at the time which is why two different administrations supported the "bail-out" policy.

 

Of course, NONE of them want to take credit for it now, but it was the right thing to do, despite the rants of ill-informed people.  Some politicians are trying to stifle the economic recovery to make political hay in the next elections.  These folks are the people that should anger most folks...they are concerned more about what is good for their political party than what's best for the American people.

 

By the way...the same goes for the so called bank "bailouts".  The economic realities of allowing massive bank failures were too great NOT to intervene.  It simply could not be allowed to happen.  Like it or not, things would have been a LOT worse if the federal government had done nothing.

Feb 16, 2012 11:25AM
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Great!  Now they can repay the taxpayers the 14 Billion they still owes us, and perhaps some interest.  Oh, and they can make the GM Bond holder, mostly 401(k) participants (regular folks) whole after the refinancing deal totally screwed them over.
Feb 16, 2012 1:46PM
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Let's see. GM paid back their loan, and now is actually turning a big profit. Toyota was exposed for making less than quality vehicles (remember the massive recalls?), and the damage control TV commercials are still happening. Recently Chrysler turned a big profit, and also repaid their loan. Now, this isn't going to be an endorsing statement for our current president, but this was handled correctly. GM and Chrysler are domestic auto companies that employ more Americans than Toyota ever will. There is no need to place a US flag on a GM or Chrysler vehicle (like the Toyota owners feel they have to do) as everyone knows GM and Chrysler are truly domestic WHAT IS THE PROBLEM? Only problem I see is that now the Toyota owners are really upset about this news. Too bad, you anti-American eletist status seeking, eco geek, wacko kook Toyota endorsing morons.
Feb 16, 2012 3:27PM
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GM is exempt from paying taxes on profits for 10 years per the agreement with the feds.  Is it any wonder they are posting high numbers??  And they still owe billions to taxpayers, what the hell??????????
Feb 16, 2012 12:05PM
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It's pretty easy to make a profit when you screw bondholders and stockholders out of $50 billion in obligations for the prior GM.  Bondholders got 140 shares of stock for $70,000 in bonds; that's $500 a share. The US taxpayers lend Government Motors $50 billion and receive stock worth less about half of that investment.  So GM made $8 billion on $100 billion in revenue or 8% after screwing bondholders, stockholders and taxpayers out of $100 billion investment. Gee, socialism's fun when you steal other peoples money illegally using the power of the US Government.
Feb 16, 2012 3:15PM
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It is truly amazing how many people that post on here do not have a clue as to what is really going on. It is no wonder our country is crashing!
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