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.
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 firstname.lastname@example.org, 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.
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!
When can we the taxpayers expect our dividends checks for the stock we own?
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.
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.
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.
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The solid report comes a month after the retailer closed all of its Canadian operations.
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