General MotorsLast year was one for the record books at General Motors (GM): 2011 was the most profitable year in the company's 103-year history.

Just a couple of years after the company's collapse into bankruptcy, GM's full-year income of $7.6 billion was remarkable. GM North America and GM International Operations (which includes China and Australia) posted solid profits after a year of increased sales that enabled GM to surpass Toyota (TM) to reclaim the title of global auto sales leader.

Also enhancing GM's bottom line was the company's improved pricing power. The company's much-improved recent products, like its acclaimed Chevy Cruze compact, can be sold at higher prices with fewer "cash back" incentives, leading to higher profits per sale.

Thanks in large part to the $50 billion government-assisted restructuring it received, and good management afterward, GM's U.S. operation is in good shape.

So now that GM is profitable, will it pay back Washington? Well, that depends on Europe.

Overseas Troubles Overshadow Strength at Home

In Europe, GM's subsidiary Adam Opel AG is beset by exactly the kinds of problems that troubled GM at home before the bailout. Too many factories, over-generous union contracts, and an infrastructure that is just too big and expensive have all contributed to more than a decade of losses.

GM had hoped to break even in Europe in 2011, and was doing well earlier in the year, but economic problems on the Continent have created a drag on new-car sales that pushed Opel back into the red. GM has dithered over Opel for years, but with the arrival of CEO Dan Akerson, who joined GM in 2009 and took charge after the bankruptcy, big changes are coming.

Akerson replaced the leaders of GM Europe late last year and put several of his most-trusted lieutenants on Opel's board, including his right-hand man, Vice Chairman Steve Girsky. Girsky's assignment was to come up with a plan to fix Opel once and for all -- to fix its structure so that it could make profits even during lousy economic times, like now.

Executives said on Thursday that that plan would be announced in a few weeks. But everyone involved -- management, the unions, and the local governments in Europe -- all agree that big changes are necessary.

If successful, GM will be able to remove a huge thorn from its side and be set up for even bigger profits as economies improve around the world.

About That Bailout IOU

Technically speaking, GM already has "paid back" the bailout -- some of it in cash, the rest with GM stock. The problem is this: If the government sold its stock at current prices, it wouldn't quite recoup what it lent to GM during the economic crisis.

That's what commentators mean when they say that GM hasn't yet "paid back" taxpayers. In fact, the company has done exactly what it promised. But the stock price hasn't cooperated -- and that reflects badly on GM, particularly in comparison with rival Ford (F), which chose to borrow money privately instead of taking a government bailout.

Akerson, a former Navy officer, has said that he sees the task of steering GM back to glory as his patriotic duty. There's no question that he'd like to see the government make money on its investment in General Motors. His best bet for making that happen is to take actions that will raise the share price. Getting GM's U.S. operation straightened out was a good start. Now it's on to Europe.

Motley Fool contributor John Rosevear owns shares of General Motors and Ford. The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of Ford and General Motors, as well as creating a synthetic long position in Ford.



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202 Comments

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chucklc8

All the "facts" in the story are wrong. GM recieved a loan in the amount of 8.1 billion not 50 billion as reported in the story. GM's full-year income of $7.6 billion also wrong. GM's full-year income was 150.28 billion.
John Rosevear should be ashamed of himself for not even fact checking before writing a story.

September 09 2012 at 12:24 PM Report abuse rate up rate down Reply
Steven H

It's been revealed that GM hasn't paid their bailouts back at all, and that their record sale was another accounting trick. They used TARP money to show a profit, and also an $18B sweetheart tax credit. This is a total sham of a company. All this even AFTER GM screwed millions of employees, retirees, and stock holders. Smoke and mirrors in typical bureaucratic style. Government Motors Corporation will continue to get subsidized by us and still go belly up again (within a decade.)

April 17 2012 at 6:32 PM Report abuse +1 rate up rate down Reply
Jetncat

Enough is enough!!! Mitt Romney hit the nail on the head when he said we are not Europe and it will destroy the entire system when public sector takes more than what is being paid into the system by the private sector... Soon the entire house of cards will collapse. Will you be ready for it when there is nothing left to take?

February 23 2012 at 10:11 AM Report abuse +1 rate up rate down Reply
Gregg

I get more money unemployed than I did when I was working so I'm going to make a career out of not working. I also get food stamps and welfare. I want to thank President Obama for making all this happen. Thx Barry.

February 22 2012 at 11:16 PM Report abuse +1 rate up rate down Reply
David Ferraez

When a company, State, or Country pays people not to work........or pays them more to work less, a crash is inevitable.............bankruptcy is inevitable. Gm faced that, some of our states face that, (NJ)..........we pay people for life to work 4 years, (congress, senate, etc).. health care for life, benefits for life and many times family members, or even 20 year retirement packages, .........there is not enough income to sustain this. Gm never graciously agreed to the union demands.......they were criminally threatened, forced to accept unsustainable agreements to avoid bankruptcy years ago............Gm management also made unsustainable decisions to pay executive retirees for life as well. They were guilty as well....... Both were unstainable. I am in small business. We don't get paid when we don't work. We don't get paid when we retire. It is unstainable for a small company to pay employees when they no longer work and are productive. When our States and big business finally accept this inevitable truth....... then productivity will increase, people will save money for retirement, etc.

February 22 2012 at 2:02 PM Report abuse +1 rate up rate down Reply
David Ferraez

When a company, State, or Country pays people not to work........or pays them more to work less, a crash is inevitable.............bankruptcy is inevitable. Gm faced that, some of our states face that, (NJ)..........we pay people for life to work 4 years, (congress, senate, etc).. health care for life, benefits for life and many times family members, or even 20 year retirement packages, .........there is not enough income to sustain this. Gm never graciously agreed to the union demands.......they were criminally threatened, forced to accept unsustainable agreements to avoid bankruptcy years ago............Gm management also made unsustainable decisions to pay executive retirees for life as well. They were guilty as well....... Both were unstainable. I am in small business. We don't get paid when we don't work. We don't get paid when we retire. It is unstainable for a small company to pay employees when they no longer work and are productive. When our States and big business finally accept this inevitable truth....... then productivity will increase, people will save money for retirement, etc.

February 22 2012 at 2:02 PM Report abuse rate up rate down Reply
1 reply to David Ferraez's comment
sfamilyent

Not relevant to the article.

February 23 2012 at 8:23 AM Report abuse -1 rate up rate down Reply
whoissurprised

Obama ROBBED the US TAXPAYERS.

February 22 2012 at 12:42 PM Report abuse +1 rate up rate down Reply
whoissurprised

The U S Taxpayers will NEVER NEVER NEVER get PAID BACK by GM. .......OBAMA ROBBED THE US TAXPAYERS.

February 22 2012 at 12:40 PM Report abuse +1 rate up rate down Reply
mthachny

Will GM also repay the many shareholders--old retirees--of its stocks that became worthless from bankruptcy, with the tacit help of President Obama?

February 22 2012 at 10:31 AM Report abuse +2 rate up rate down Reply
mthachny

Will GM also repay the many shareholders--old retirees--of its stocks that became worthless from bankruptcy, with the tacit help of President Obama?

February 22 2012 at 10:04 AM Report abuse -1 rate up rate down Reply
1 reply to mthachny's comment
chuck

i can't believe there are so many republican kool ade drinkers,you don't look for facts you just repeat right wing blogggers...

October 18 2012 at 5:09 PM Report abuse rate up rate down Reply