General MotorsThanks to strong new products, hard work around the world, and the American taxpayer, General Motors (GM) continued its profitable ways in the first quarter.

The world's largest automaker reported a profit of $1 billion on the strength of its operations in the U.S. and China, even as other overseas losses weighed.

Excluding some one-time items, GM's profit of $0.93 a share handily beat Wall Street's predictions, which called for an $0.85 per-share gain.

After a record year in 2011, is the General finally on track?

Good Profits in Its Home Market

The answer is that GM is doing pretty well, but it's still -- despite the huge advantages it received from its taxpayer-funded bailout -- a work in progress. This isn't the company's fault: GM's current management team, led by no-nonsense CEO Dan Akerson, a former naval officer, is doing a very good job.

But the bailout and bankruptcy didn't come close to solving all of GM's old problems, and GM's current leaders still have much to do.

The good news for them is that GM's products have improved rapidly, and it's making more money for every car and truck it sells. That was evident in the company's North American region, where sales (in the U.S.) were down a bit, but -- like rival Ford (F) -- profits were up. GM's newest models, like the hot-selling Chevy Sonic subcompact, are big improvements over the vehicles they replaced. That means GM can ask -- and get -- more money for them, which helps GM turn a greater profit.

That will help GM's bottom line even more over the next year or so, as a slew of new GM products starts to arrive at dealers. Two new Cadillacs, including the stylish ATS sedan, a completely overhauled Chevy Impala, and all-new pickups (due early next year) should help drive further increases in GM's profits -- and with luck, its sales -- in its home market.

Bigger Challenges Overseas

GM's profitability at home is a good thing, because GM's overseas operations aren't all going so well. While GM's cars and trucks continue to sell well in China, where the company is the market leader, its profits in the country are split with its Chinese joint-venture partners, as required by Chinese law. That said, the region contributes roughly $500 million to GM's bottom line every quarter, so it's quite important -- and GM's sales in places like Russia and India are also growing.

Europe is also important to GM, but it's a different story there, where tough economic conditions have led to big declines in new-car sales. Losses in Europe took a $256 million bite out of GM's profits for the quarter, as the company is having trouble cutting costs in the region. GM is working hard to make Europe profitable, but a successful restructuring may still be a year or more away.



Meanwhile, the company's finances continue to look sound. Debt is low, profits continue to be solid, and GM has over $30 billion in cash, which it's holding as insurance against an economic rainy day.

Why doesn't GM use that money to pay back taxpayers for the cost of its bailout? It's possible that it will, eventually -- but it has to wait for the government to sell its stock first. Technically, GM has done everything it was asked to do to pay back the government, but the problem is that part of the payback was in GM stock. The stock is trading around $23 a share as I write this, but it needs to go up to a little more than $50 for the government to break even. That's not likely to happen soon, even though GM is doing pretty well.

President Obama is unlikely to tell the Treasury to sell the stock at a loss during election season. That means any sale of the stock, and thus any further action GM might take to pay back taxpayers, will have to wait a while longer. Meanwhile, GM's managers look to be doing all they can to finish the job of cleaning up the company's act -- and generating the strong profits that will add value to its stock in time.

At the time of publication, Motley Fool contributor John Rosevear owned shares of General Motors and Ford. Motley Fool newsletter services have recommended buying shares of Ford and General Motors and have recommended creating a synthetic long position in Ford.



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11 Comments

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kamalbhatt26

Its a great news for US
http://www.srsresidency.com/

May 07 2012 at 3:29 AM Report abuse rate up rate down Reply
mdmichel8888

SOLIDARITY FOREVER!!!!!!!!!!!

May 07 2012 at 12:11 AM Report abuse rate up rate down Reply
mdmichel8888

GM has bailed this country out numerous times........youpeople need to learn your history........the United States still owes GM billions and billions of dollars!!!!!!!!!!

May 07 2012 at 12:10 AM Report abuse rate up rate down Reply
capenv

Marine 1942. It's your choice not to buy a GM product. If you are a Marine that served in 1942 you should be sensitive to purchasing American products and not send your hard earned dollars to Japan by buying a Honda, Nissan or Toyota. Buy a Ford, they didn't take any of Obama's money. Just don't buy a Jap car. My father was a Marine in the South Pacific and suffered at the hands of the Japs. He used to say that the Japanese couldn't beat us militarily but will beat us economically because of America's lax trade laws and American's willing to support for foreign made products over domestic. We all need to be more patriotic and support American workers and their families.

May 05 2012 at 12:35 PM Report abuse +1 rate up rate down Reply
capenv

Oil futures dropped over $4.00 a barrel yesterday to $98.00 / barrel yet ther isn't any news coverage. When oil was spiking a few months ago the news media was all over it fanning the flames by hyping the coverage. Remember the prediction of $6.00/gal gas this summer? Where is the news media's coverage when oil prices are falling? An example of the news media creating news and panic.

May 05 2012 at 12:25 PM Report abuse +1 rate up rate down Reply
comp_mary

American tax payers bailed GM out and they repay us by bringing the jobs to China, Russia and India??? What's wrong with this picture? GM may be making a profit now, but it's no secret that China's quality of products has damanded many recalls. And why are we doing business with Russia, a country who is ready to attack us at the least provocation?

May 04 2012 at 3:21 PM Report abuse +1 rate up rate down Reply
marine1942

Government Motors did not pay us back. They issued stock. Stock that even the writer admits are not worth much.
And, do you really think GM will pay frderal taxes ?
I shall never buy any of their products

May 04 2012 at 9:22 AM Report abuse +2 rate up rate down Reply
ha6ai

Nice, so when does the U.S. taxpayer get repaid the scores of Billions of dollars owed us because of Obama's gift of GM to the Unions?

Since the blogger writing this owns GM stock, its a good bet his stock is worth less than when he bought it (unless he's just a lucky day trader).

Its a disaster for the taxpayers that Obama bailed out his Union supporters and we may never get our money back.

May 04 2012 at 2:08 AM Report abuse +2 rate up rate down Reply
1 reply to ha6ai's comment
Richard Goebel

Do you even PAY any taxes? I doubt, quit whining and get a job, loser.

May 04 2012 at 7:41 AM Report abuse -2 rate up rate down Reply
granaryst

I don't plan on ever buying a GM product. We should have a law that the taxpayers should get to vote on a bailout if there is to be one in the future. No matter how big, a company that can't manage it's affairs needs to go bankupt. We shouldn't be proping them up.

May 03 2012 at 7:28 PM Report abuse rate up rate down Reply
1 reply to granaryst's comment
capenv

And the loss of 2 million American jobs would have been a better option. I wonder what our economy would be like today if GM and Chrysler failed. I'm a republican that supported Obama's decision to bail out GM and Chryselr. You're an idiot.

May 05 2012 at 12:40 PM Report abuse rate up rate down Reply