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It has long been clear that General Motors (GM) CEO Dan Akerson and his lieutenants would have to get creative to win back customers.

Decades of shoddy cars had driven away many longtime GM loyalists. And just as GM's cars were finally starting to get better, GM's 2009 bankruptcy -- and its controversial government bailout -- turned even more buyers away.

But now GM's North American chief, Mark Reuss, has a plan to make people happy to return to its showrooms. And believe it or not, that plan involves getting a lot of help from -- of all places -- Walt Disney (DIS).

Recapturing the Magic

Reuss wants Chevrolet customers to love the company and the Chevy brand in the same way that loyal Disney fans return again and again to Disney World.

To do that, Reuss has put more than 20,000 GM employees and dealers through special customer service training run by Disney, according to a Bloomberg report.

Reuss has pushed GM's dealers to make their showrooms more attractive and welcoming, and told dealers and employees to think of their customers as "guests" -- the same term Disney uses for the people who visit its amusement parks.

Dealers have been skeptical of the training, but many have found it helpful. A number of dealers have already implemented changes suggested by the Disney trainers, some of which are tiny details like making sure every staff members wears a nametag.

It sounds crazy for GM to worry about nametags while it loses market share around the world to ruthless competitors like Toyota (TM) and Volkswagen (VLKAY.PK). It raises the question: Is sending its dealers to the Mouse House really the best way to reward taxpayers for GM's bailout?

The Method Behind the Mouse-ness

Reuss isn't a dumb guy -- far from it. More than most people at GM, he knows deep down that his company, like any automaker, will live and die by the quality of its products.

This is important. An automaker that makes good cars and trucks can sell them without big discounts. It makes more money, and has more money to spend on developing the next generation of products, to ensure that those cars and trucks are good, too. That's the formula for success in the auto business. Just ask Ford (F), which has followed it to big profits in the last few years -- without any help from Uncle Sam or Disney.

Reuss knows that GM needs to follow in Ford's footsteps. In fact, that's already happening with a slew of new cars and trucks on the way (13 new Chevys are due in 2013 alone).

Those new products should go a long way toward giving GM what it needs to compete -- not just with Ford, but with the import brands that have been eating its lunch for years. But great new cars don't help if nobody shows up to test-drive them.

That's where the Disney thing comes in.

GM's customer retention -- the rate at which its current customers come back to buy new GM products -- is around 52%. That's about average for an automaker. But Toyota's is 58%. Clearly there's room for GM to improve.

Reuss figures that every percentage point of improvement is worth $700 million in revenue to GM. Acquiring new customers is the job of GM's marketing department. But getting them to come back, over and over -- that's Disney's specialty.

GM would like it to be their specialty, too. And that's why they've opened their doors and minds to the experts from the Happiest Place on Earth.

At the time of publication, Motley Fool contributor John Rosevear owned shares of General Motors and Ford. Follow him on Twitter at @jrosevear. The Motley Fool owns shares of Ford. Motley Fool newsletter services recommend Ford, General Motors, and Walt Disney.

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Gallery: Gas Saving Tips: Practical to Extreme

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• Year-to-date sales of the electric Nissan (NSANY) Leaf are down over 30%.
• Ford (F) had sold just 177 of its electric Focus through August.
• At the same time, production of Tesla Motors' (TSLA) hot-looking -- and expensive -- Model S sedan is sold out for months to come.
• Meanwhile, the Chevy Volt is selling a bit better lately -- but that's a mixed blessing for General Motors (GM).

How to Lose Money on a $39,995 Sale

Why are improving sales for the Volt a mixed blessing? It turns out that those sales are expensive ones: Reuters recently reported that GM is losing a bundle on each Volt it sells -- despite the little plug-in hybrid's steep $39,995 base price.

While GM took issue with Reuters' math, it's clear that the innovative car isn't a moneymaker for General Motors. With sales of just a few thousand in the best of months, it'll be many years before the car manages to repay its development costs, estimated at over $1 billion.

Now, that's not necessarily a bad thing, at least in GM's view. Like other automakers, GM is looking ahead toward the next decade, when fuel-economy rules will be much stricter. From the General's perspective, the Volt represents an early investment in the kind of technology that GM -- and other automakers around the world -- will need to perfect before those rules go into effect.

There's some validity to that argument. But that hasn't stopped GM's critics from complaining that electric-car technology is turning into an expensive boondoggle.

Will Electric Cars Ever Take Off?

A Washington Post editorial this week took the Volt to task, as part of a larger argument against the U.S. government's subsidies of electric car technology. The Department of Energy said in 2011 that there could be 1 million electric cars on U.S. roads by 2015, but as the Post points out, that's looking pretty unlikely right now.

'Success' for Electric Cars Is Relative

So far, Tesla is the big success story in the electric-car game -- but that success is relative. Tesla has more than 10,000 orders in hand for the Model S, a luxury sedan with the best range in the electric-car business.

That's huge for the Silicon Valley automaker. But it's just a drop in the bucket in terms of the overall automotive market: Tesla may sell 20,000 cars next year -- and it'll be considered a big success if it does -- but that's fewer than half the number of F-series pickups that Ford sells every single month.

That's a long way from the million a year that the government anticipated, and it's a long way from making any sort of difference on the environment.

A Dire Trend

And that's the real problem with electric cars: So far, not too many consumers are lining up to buy them. Eco-conscious drivers still prefer hybrids like Toyota's (TM) popular Prius, which can be refueled at any gas station -- and that doesn't seem likely to change soon.

That means electric cars might be doomed -- no matter how much the Department of Energy wants to see them happen.

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

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In a new report, the Treasury Department says it expects to lose more than $25 billion on its bailout of the auto industry during the financial crisis.

That's a big number, more than a quarter of the total cost of the bailout. But General Motors (GM) had record profits last year -- and GM's former CEO said that the company had "paid back" the Feds, as did Chrysler.

How can this add up? And what has to happen for taxpayers to get their money back?

Paid in Full ... but Not in Cash

The federal government spent about $85 billion bailing out the auto industry during the economic crisis -- about $25 billion under President George W. Bush during his last days in office, the rest under President Obama.

Not all of that went to GM -- about $12 billion went to save Chrysler, and some went to Ally Financial, formerly GM's financing arm, and some other players -- but GM got the lion's share, just under $50 billion.

Technically, under the terms of the bailout, GM has in fact paid back its obligation to taxpayers. Its payments were a mix of cash and GM stock, which is exactly what was called for in the agreement.

In fact, the automaker did everything it could to pay off its loan early: It made the last cash payment, $5.8 billion worth, in April 2010. That was years ahead of schedule.

So why does the Treasury say that it's still out over $25 billion?

Several reasons, but here's a big one: GM's stock price hasn't played along.

Get the Jumper Cables

GM's "payment" to the Feds included stock. A lot of stock. The government has sold some, but it still owns 500 million shares of General Motors.

GM's stock rose to almost $39 after its return to the public markets in late 2010, but it's been all downhill since. Right now, GM is stuck around $20 to $21 a share, a range it has been in for a while.

Here's the problem: For the Feds to break even on the bailout, the shares of GM still owned by the Treasury have to get up to around $53 a share.

That's not happening -- at least, not any time soon. That's not exactly GM's fault: Believe it or not, CEO Dan Akerson and his team are -- for the most part -- doing a solid job of getting GM's house in order.

Eventually, GM's stock price should reflect the progress they're making. But even though Akerson is doing pretty well, and even though GM's profits in 2011 were at an all-time high, there are several factors holding back GM's stock:

• Europe is a mess. Like rival Ford (F), GM is losing big bucks in Europe: $361 million in the second quarter alone, thanks to ongoing economic troubles that have clobbered car sales. A turnaround is coming, but it could take a few years. Meanwhile, losses could continue, and investors hate that.
• GM's losing ground at home. GM's share of its most important and profitable market -- the USA -- has fallen in recent months, a fact that might have contributed to the recent ouster of its global marketing chief. Upcoming new cars and trucks should help, but they're a year or two off. Meanwhile, discounts are up, sales are down, profits aren't what they could be, and Wall Street remains concerned.
• The Fed might dump its investment. 500 million shares is a lot of stock. If the government decides to bail on its investment after the election, the price will drop further as all of those shares hit the market. That possibility makes investors nervous.

GM has other problems that worry investors, but what they all have in common is that they're likely to be resolved in time -- but it could take a few years. Eventually, GM's share price should rise quite a bit -- in fact, for a long-term investor, GM stock might be a pretty good buy right now.

But taxpayers -- or at least, the Treasury Department -- may decide not to wait for that likely-but-not-certain rise. And the way things look now, that means a big loss is likely.

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In its second quarter, General Motors (GM) beat analysts' estimates with a profit of $1.5 billion, as losses in its much-troubled European division were less than many experts had predicted.

That wasn't necessarily good news, though. It's a billion dollars less than GM earned in the second quarter of last year. That's a huge drop, and it reflects the big headwinds now facing the world's largest car company.

Europe's Not Getting Better Anytime Soon

GM's profit was better than expected because its European division, which includes money-losing German subsidiary Opel, reported a loss of $361 million. While that's a big drop from the $102 million that GM made in Europe a year ago, it's much less painful than the more than $500 billion that many analysts expected it to have lost after rival Ford (F) reported a shocking $404 million loss in Europe last week.

But that doesn't mean GM's long-troubled European operation is on the mend -- not yet, anyway. GM's dealers in the region have too many cars and trucks in their inventories. GM's European factories will likely have to reduce production through the rest of 2012 so that dealers can sell off existing stock. That means even lower income for the company in the second half of the year. Meanwhile, GM's costs remain high because it has too many European factories and not enough orders to keep them all busy.

GM is working on the problem. It replaced its Europe chief with a turnaround specialist, and hired two key executives from Volkswagen (VLKAY) to fill important senior-level roles. Meanwhile, GM officials are negotiating with union leaders in Germany, planning to close one or more factories and cut costs in a number of other ways.

CEO Dan Akerson said on Thursday that he expects a deal with the unions to be announced sometime this fall. That will be a welcome development, though any actual savings from the agreement could still be several years off.

Concerns Mount at Home

GM's problems go far beyond Europe, though. While its Asian operation remains healthy and profitable despite a slowdown in China, GM's slipping market share in its most important market -- the United States -- is starting to become a concern.

GM's market share fell to 18.1% in the first half of 2012, down from almost 20% just a year ago. But that's not the only problem. GM is spending more on incentives -- those "cash back" or low-cost financing deals that dealers love to advertise -- to keep its sales numbers going.

The real problem is that many of GM's products are dated: They're no longer competitive with the best cars and trucks on the market. GM wasn't able to invest in product development during its spiral into bankruptcy, so it lost a lot of ground to rivals like Ford and Toyota (TM).

Because a new car or truck can take three years or longer to develop, GM has had few new products since its bankruptcy -- while Ford, which had borrowed heavily before the economic crisis and was able to keep up its spending, has rolled out a series of hit products like the Explorer and Focus.

GM has a bunch of new vehicles coming, including all-new pickups and SUVs that are due early next year. That should help GM make up some of its lost ground without heavy spending on incentives. But meanwhile, the pressure to improve sales is immense; it may be part of what drove Akerson to fire his marketing chief, Joel Ewanick, earlier this week.

Taxpayers Can Still Break Even

GM's profits in its North America division will likely be lower in the third quarter, it said. That's partly because it shifted some spending to summer from spring -- in part, to buy more ads around the Olympics. That's not a big source of concern, but if profits dip more than expected, GM's stock price will likely suffer further.

Despite the concerns, post-bankruptcy GM is still fundamentally healthy. Its debts are low, it has more than $30 billion in the bank, and it has now booked 10 consecutive quarters of profits. But its low stock price means that the federal government is unlikely to sell its stake anytime soon, and that remains a source of frustration for GM's leaders and for many Americans.

Gallery: Nine Great American Companies That Will Never Recover

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The second quarter brought good news and bad news for American auto icon Ford (F).

The good? Just like last quarter, Ford's sales and profits in its most important market -- the U.S.A. -- continued to be strong enough for the company to weather just about any challenge.

The bad news? Ford's overall profits were down 57% in the second quarter, because the challenges overseas are mounting.

The Plan That Saved Ford Domestically Is Still Unfolding Overseas

Six years ago, when Ford was facing collapse, CEO Alan Mulally laid out the "One Ford" plan that would end up saving the company.

Mulally's vision was deceptively simple: Ford would invest aggressively in great new products, work hard to keep its costs as low as possible, and sell a smaller, more polished lineup of cars and trucks in markets around the world.

That has worked out great, especially in the U.S. Vehicles like the compact Focus, the Explorer, and Ford's much-lauded line of pickups have proven hugely successful here -- so successful that Ford added shifts in the factories that make each of those vehicles during the second quarter. The Explorer and Focus assembly lines are now running around the clock.

The Focus may turn out to be Detroit's best-ever small car, and it's selling well all over the world. It was just launched a couple of months ago in China, and it's already selling at a rate not far from its sales pace here at home. It's also a top seller in Russia, where a Ford factory in St. Petersburg makes the Focus for the local market, and it's a hit in Europe, where Ford fights with rival Volkswagen (VLKAY) for the top of the compact-car sales charts.

Still, the success of the Focus and Ford's other cars in Europe hasn't been enough to save the company from heavy losses in the region. So now it's time for Ford to put the lessons of its "One Ford" plan to work overseas.

Running at 63% of Capacity

A deep recession and other problems drove auto sales down about 10% in the first half of 2012, to their lowest levels in a decade. All of the automakers doing business there have suffered, and Ford is no exception. Ford lost $404 million in Europe during the second quarter, a big drop from a profit of $176 million a year ago.

The problems go far beyond an economic downturn: In a nutshell, Europe has too many car factories.

In order to break even, an auto factory has to be run at at least 80% of its maximum capacity. Ford's are running at only about 63%, according to estimates put together by analysts at Morgan Stanley.

As Mulally said to reporters on Wednesday morning, the most important aspect of the "One Ford" plan is Ford's determination to "match production to demand." In other words, Ford won't hesitate to close factories if that's what it takes to make Europe profitable again -- and word is, Ford's factories in the U.K. and Belgium are at risk.

Keeping Doors Open While Closing Factories

Factory closings aren't always simple in Europe. As General Motors (GM) has discovered while trying to stem its own losses in Europe, powerful unions and labor-friendly governments can make the process of closing a factory a long (think several years) and contentious one.

But it's clear that Ford is going to have to make major changes in Europe -- and it has some dramatic ones already in mind.

CFO Bob Shanks told reporters on Wednesday that Ford plans a "holistic response" in Europe, and suggested that analysts look to what Ford has done in the U.S. in recent years. That response will likely include cost cuts, product-line changes, and a change in marketing strategy -- as well as factory closings.

Given Ford's track record of success in recent years, those changes should be just what the company needs.

At the time of publication, Motley Fool contributor John Rosevear owned shares of Ford and General Motors. The Motley Fool owns shares of 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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Watch: Stay Cool While Optimizing Gas Mileage

• Your habits might vary from their "average" assumptions: If you do a lot of highway driving, even the Cruze Eco's small fuel savings might make sense for you.
• Many have found that hybrid cars are cheaper to insure -- people who buy hybrids might be more careful drivers, on average.
• And there are other benefits that are harder to put a price on: Maybe you fill up your car four or five times a month now, and you'd appreciate the lower hassle of a car that only needs to be filled up every other week.
• And some folks just like knowing that they have the most fuel-efficient ride on the block.

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Auto loans are easier to get now than they have been in years. That's the conclusion of a new report from credit research firm Experian, which said Tuesday that during the first quarter U.S. lenders gave car buyers some of the best terms since the financial crisis.

Why such generosity? Because more lenders are competing for your business, Experian says.

If you're shopping for a car -- especially if your credit is less than perfect -- you already know why this is good news.

With more lenders competing for your business, the terms of your loan -- things like the interest rate you'll be paying, and the amount of time you have to repay -- are likely to be better than they would have been a year or two ago. For some people, that takes the pressure off trying to keep that old jalopy running for another year.

And what's good for car shoppers has been good for the automakers, too: Toyota's (TM) sales were up about 12% for the year through April, and Ford (F) has seen its sales rise about 5%, as U.S. auto sales have picked up in recent months.
This is another sign that things are getting better -- or at least, getting back to "normal" -- in the U.S. economy. But is that really a good thing?

Will All This Lending Lead to Trouble?

Some may ask if all this competition to lend is a good thing. After all, banks like Citigroup (C) and Bank of America (BAC) got in trouble not so long ago for making too many bad loans -- trouble that took the economy down with it.

It's natural to wonder whether more relaxed lending standards in the auto industry could lead to a repeat performance. But analysts say that's not likely.

They point out that auto loans are safer for the banks than the mortgage and credit card loans that contributed to the financial crisis. "Subprime" car loans -- loans to people with credit scores below 680 on Experian's scale -- typically have lower default rates than the subprime mortgages that got so many banks into trouble back in 2008.

Why? It's because people need their cars to get to work. Since it's relatively easy for a lender to repossess a car, cash-strapped borrowers are much more attentive to their auto loans and tend to make their car payments a high priority.

Before You Sign on the Dotted Line...

As tempting as good rates on a car loan may be, buyers still must consider the bottom line. The fact is that cars are not getting any cheaper.

Gallery: The 10 Cars That Lost the Most Value

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Have you ever jumped the gun at a stoplight -- rolling into the intersection before the red light turns green? You might get away with it. Then again, you also risk getting a ticket.

Something similar can happen to car shoppers, too. Only the risk isn't getting caught in a moving violation -- it's getting entangled in a money violation.

It's called "yo-yo financing," and it's what happens to car buyers (particularly ones with so-so credit histories) who take possession of an automobile before their financing arrangements are complete. If their financing falls through, dealers can pressure the buyer into a revised deal with extra costs or fees -- or move to repossess the car.

The consequences of this dubious dealer practice are no fun: Either you pay more to keep the new car you thought you'd already bought -- or you lose it. It's an embarrassing, and potentially expensive, problem.

How Dealers Catch You in the Trap

The "yo-yo" is a byproduct of a dealer practice called spot delivery, in which a shopper is sent home in a new car on the same day without having to wait for formal financing approval.

Philip Reed, of industry-watcher Edmunds.com, recently noted that dealers like spot deliveries because they quickly turn shoppers into buyers. It's an effective sales tactic, and often a harmless one.

But, Reed says, consumer protection advocates have long tried to regulate the practice because it leaves buyers, particularly those with less-than-perfect credit, vulnerable to abuses.

What kinds of abuses? Typically, something like this happens: You're at a dealer and you decide to buy a car. You sign some paperwork and maybe leave a down payment, and then drive the car home the same day. You think you're done: Happy new car!

But then, a few days later, the dealer calls with sad news: Your financing application was turned down. If you want to keep the car, you'll need to arrange other financing at a higher rate. You might even need to increase your down payment. If you don't, the dealer might tell you they'll repossess the car -- or maybe even report it stolen.

State laws vary: In some states, you can simply give the car back and get a refund. But in others, you might be liable for the complete balance due on the sale -- which leaves you open to the yo-yo problem.

Dealers say that this situation is a byproduct of the fact that many cars are sold at night and on weekends, when financing offices are closed, and not usually a scam. But dealers see an awful lot of financing applications. They should know before you leave the dealership whether yours is likely to be approved.

Simple Steps to Keep from Getting Snared

It's not hard to protect yourself from a yo-yo financing mess -- if you know what to do in advance. Reed's Edmunds.com colleague Carroll Lachnit says that the keys to staying clear of the yo-yo trap are simple:

• Get financing before you shop. With pre-approved financing, you know what you'll be paying every month, and what the fees will be. It takes the whole financing question right out of the dealer's hands. This is especially important if your credit report has a few dings -- if you're in "subprime" financing territory, you're particularly vulnerable to the "yo-yo" problem. Your bank or credit union will be happy to help you arrange a car loan, so make this your first stop. Even if the dealer offers you better terms later on, you'll still have a financing plan to fall back on.
• Always read the contract. "Car buyers should always get every element of their deal in writing," Lachnit says. Then, read carefully: Buyers should be especially wary, she notes, of any conditions in the contract that might allow the dealer to rewrite the deal or add extra charges after the sale.

Either way, the easy way out is to arrange your own financing before you shop. That way, you know what you can afford, and you know your loan options in advance. Ultimately, this will keep you free and clear of the yo-yo financing trap.

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Thanks 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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