GMIt was a surprise, in a good way: General Motors (GM) said Thursday that its second-quarter profits had nearly doubled, with revenues soaring on improved margins and strong sales around the world.

There were no gimmicks in these numbers. Plain and simple, these are solid results following on good execution. GM's profit of $2.5 billion, or $1.54 a share, was well ahead of the $1.20 a share expected by Wall Street analysts. Revenues were up 19% to $39.4 billion, an impressive result driven by -- for the first time in years -- profits from all four of GM's global regions.

So why did the stock, already hovering near a post-IPO low, drop even further on the news?

The Problem of Perception

The broader market sell-off had a lot to do with Thursday's drop, but Wall Street has been turning its nose up at GM stock for months now. At around $27 a share, the stock is a long way from the high $30s seen earlier in the year, though the company looks stronger today than it did then.

Still, Wall Street is having trouble shaking its old opinions about GM. While the U.S. government still holds a big chunk of GM shares, the post-bankruptcy GM is a very different beast from the foundering giant that Americans knew and mostly didn't love prior to its 2009 collapse. After decades of financial mismanagement, it may surprise casual observers to learn that today's GM has what it calls a "fortress balance sheet": a cash hoard of more than $33 billion -- and minimal debt.

World-Class Cars, For Real?

Here's another thing many have missed: GM finally has some products that -- no fooling -- can compete with anybody. It's true that GM's product line remains spotty, with class-leading entries sharing showroom space with models that really should have been replaced years ago. GM wasn't able to invest heavily in new products during the run-up to the economic crisis, and that has left it scrambling to catch up to the rivals that could -- most notably, Ford (F) and Hyundai (OTC: HYMTF).

But its best new products are really, really good -- good enough to command premium prices, without the sales incentives that have crushed Detroit's profits for years. The Chevy Cruze compact, a well-executed model with an upscale-feeling interior, shows particularly well against the Asian competition, and GM sold more than 60,000 of them during the quarter. So far in 2011, it's the second-best-selling compact in the U.S., according to Edmunds.

That number was no doubt helped by shortages of popular models from earthquake-ravaged Toyota (TM) and Honda (HMC), but it's still a tremendous result for GM in a category where it has historically fielded also-rans.

Lots of new products will arrive over the next few years as the company invests huge resources in development to make up for lost time. Every few days seems to bring another announcement of an investment in an upcoming model -- two new Cadillac sedans were announced Thursday, along with a new fuel-efficient powertrain for Buick -- though, to be fair, many critical vehicles remain months or years away.

While new products are key to any automaker's success, there's more to GM's turnaround. GM's long-troubled European division showed a profit this quarter for the first time in ages, and the company's efforts in China remain a shining -- and surprising -- success story.

A Surprisingly Cheap Stock

Challenges lie ahead, including an economy that may be turning back down and a coming resurgence from Toyota, which is determined to regain lost sales ground in the U.S. But GM -- today's GM, right now -- is making big bucks despite fierce global competition and an industry sales rate that is still far below pre-2008 levels. That, and the $33 billion GM has in the bank, gives me confidence that this iteration of General Motors should be able to comfortably weather any downturn.

But for all that, this iconic company's market cap is still just a few billion more than its cash hoard. And that leads me to wonder: When will Wall Street catch on to this story?

At the time of publication, Motley Fool contributor John Rosevear owned shares of General Motors and Ford.


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41 Comments

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ieyun313

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August 26 2011 at 2:16 AM Report abuse rate up rate down Reply
savemycountry911

I hate Govt. Motors, the bailout kings. BUY A FORD

August 05 2011 at 8:53 PM Report abuse -1 rate up rate down Reply
1 reply to savemycountry911's comment
tmachine2

Why do you hate GM? What did they do to you? Do you hate them because Fox News and Glenn Beck told you to? Your screen name doesn't fit your rhetoric.

August 06 2011 at 11:49 AM Report abuse +1 rate up rate down Reply
tmachine2

I am happy for GM. They are building world-class cars and trucks with exceptional warranties. American investors need to do the right thing and invest in GM, and American consumers need to buy GM, Ford, and Chrysler products and other American-made goods made by American companies so we can get out of this depression.

August 05 2011 at 1:14 PM Report abuse +1 rate up rate down Reply
americandoo

"TIME FOR BIG INVESTORS TO STEP UP TO THE PLATE LEAD AMERICA BY
INVESTING IN AMERICA" "WHEN YOU INVEST IN AMERICA YOU INVEST IN YOUR CHILDREN'S
FUTURE"

"INVEST IN A LARGE PROJECT THAT WILL MAKE A DIFFERENCE FOR THE FUTURE"
Similar to this idea; In past history when the USA needed a Moral Boost to our
Country we built such things as; The Largest Bridges, Dams, Statue Of Liberty,
Worlds Largest Futuristic Fair, Landed on the Moon etc.

It is overdue for us and time for us to build the Largest & Best Futuristic
CITY IN THE WORLD, using ALL OF OUR CUTTING EDGE TECHNOLOGY­.

Countries CUTTING EDGE TECHNOLOGY and BEYOND ALL OTHERS ! !

Find a location in the USA somewhere that has the space for our "FUTURE CITY
PROJECT"

Where Our Future City will Utilize all of the Newest and Cutting edge combined
technology in the world to build our City using entirely GREEN energy with ZERO
POLLUTION ! ! !

Our City Could Have A NEW VERSION OF THE STATUE OF LIBERTY, Holding
the torch in one hand and our GREEN PLANET EARTH in her other hand, her head
raised high looking Up at the sky.

This would make a GREAT FILM based
on a True Story with the help of A TEAM OF BIG MONEY INVESTORS ! ! !

Use your Imaginatio­n think how; GREAT THIS WOULD BE FOR AMERICA & OUR
ECONOMY ! ! ! !

"DREAM BIG...DO BIG"

Thank You, Respectful­ly, Michael V. Caldwell

August 05 2011 at 12:27 PM Report abuse +1 rate up rate down Reply
renaldo1949

why don't all of you talking about chrysler and gm getting government money also talk about the government money that all the japanese, german and korean car companies got to build plants in us?

August 05 2011 at 11:06 AM Report abuse +1 rate up rate down Reply
1 reply to renaldo1949's comment
tmachine2

S. Korean and Japanese auto companies still owe the American tax payers billions in subsidies, free land, and massive tax breaks. We also can'teven get our cars into their markets.

August 05 2011 at 1:16 PM Report abuse +1 rate up rate down Reply
redgrl

and we're supposed to be surprised at their earnings?? seriously?? when they just raped the American people courtesy of Obama and Geithner?

http://www.foxnews.com/politics/2011/07/21/us-government-ends-chrysler-investment/?test=latestnews#content

August 05 2011 at 9:53 AM Report abuse -1 rate up rate down Reply
1 reply to redgrl's comment
tmachine2

If you keep listening to Fox News, your brain will rot.

August 05 2011 at 1:17 PM Report abuse rate up rate down Reply
2 replies to tmachine2's comment
savemycountry911

Your looney lib brain is already rotton. Do some research instead of listening to lunatic left media.

August 05 2011 at 8:55 PM Report abuse -1 rate up rate down
tmachine2

save,

I am not a liberal. I am a progressive on economic policies and conservative morally. Unlike you, I don't listening to factless Faux News. I read books and get a real balanced view.

August 06 2011 at 11:51 AM Report abuse +1 rate up rate down
stag01987

Love or hate G.M, but posting any profit these days is good news. I'm not a fan of theirs, but I sure hope they get stronger and put the best quality in their engineering to make them more reliable across their product line and make people come back, and ultimately pay back their debt in full.

August 05 2011 at 8:52 AM Report abuse +1 rate up rate down Reply
1 reply to stag01987's comment
tmachine2

I am a fan of theirs because I support American companies who hire American workers. Their products are also the best in class and are knocking the snot out of the competition. However, I do like your quote.

August 05 2011 at 1:19 PM Report abuse rate up rate down Reply
stripedbass7

GM CAUGHT LYING AGAIN ,............... They in fact HAVE NOT PAID BACK THE $49.5 BILLION BAILOUT..... But only the 6.7 Billion Loan . Mr. Whitacre : When will you get it Straight ? 1st Your Company { Government motors } says they apologize for the below standard >junk........... Then you allude to paying back the Bailout BILLIONS. But it appears the truth is Clearer about GMC at Consumer Affairs.

August 04 2011 at 11:46 PM Report abuse -1 rate up rate down Reply
2 replies to stripedbass7's comment
mdmichel8888

GOOD JOB GM...KEEP IT UP! GOOD TO SEE AN AMERICAN COMPANY DOING GOOD....DON'T WORRY ABOUT THE BAILOUT MONEY......GM HAS BAILED YOUR ASS OUT MANY TIMES ....AND YOU NEVER PAID THEM BACK!!!!!!!!!!!!!

August 05 2011 at 1:53 AM Report abuse +1 rate up rate down Reply
1 reply to mdmichel8888's comment
tmachine2

GM has bailed out this country during WWII and in the1950's. They also were the largest U.S. employer for many years and put food on millions of American dinner tables. People need to read their history. It is true with what one GM exec said many years ago. "What's good for GM is good for the country." In a smaller way, that's still true.

August 06 2011 at 11:55 AM Report abuse +1 rate up rate down
tmachine2

Are you still working? Keep bashing American companies who hire Amerian workers and see if you have a job in a year or two.

August 05 2011 at 1:20 PM Report abuse rate up rate down Reply
stripedbass7

Google> GMC DEXCOOL CLASSACTION SUIT 32-35 MILLION CARS & TRUCKS, OVER A 10 YEAR SPAN WERE AFFECTED ! After you read that, will you still want a gmc ?

August 04 2011 at 10:53 PM Report abuse -2 rate up rate down Reply
1 reply to stripedbass7's comment
tmachine2

Old news

August 05 2011 at 1:20 PM Report abuse +1 rate up rate down Reply
stripedbass7

P.S. America : The Max Payout had You been foolish enough to buy a GMC product { afterall, they did burn littleol ladys & plenty of single moms.........................................................................................................} & your Motor Blew up, as GMCees Do well, was A grand total of $ 875.00 Thats after Much redtape. had you Jumped through all the RED Tape & Succesfully submitted Your Claim, THOUSANDS WITH PROPER DOCUMENTATION & PROOF" HAVE NEVER BEEN PAID !

August 04 2011 at 10:48 PM Report abuse -1 rate up rate down Reply