GM Expects To Be Profitable in 2010

Ahead of a new public stock offering, GM announces an expectation of profitability in 2010. Is GM jumping the gun?

So the word out of GM is two-fold, and more than a little bizarre. See if you can logically reconcile these two little nuggets:

1. GM lost 4.3 billion dollars on the last half of 2009.

2. GM thinks it will be profitable in 2010.

Okay, admittedly, most of those losses relate to bankruptcy issues and the shedding of debt issues and suchlike. And I further admit that GM has done a LOT to try and get back to profitability, which is, after all, the goal of every business.

But there's a lot working against GM these days--in fact, I've got three reasons right here that GM will probably not pull it off.

1. Continued economic weakness. Let's be clear here, folks--consumer confidence numbers are still heartbreakingly low. While there has been some improvement in recent months, there are a whole lot of unemployed people out there, and a whole lot more people terrified for their jobs. Not too many people are probably thinking, you know, this is a GREAT time to buy that new truck I've had my eye on! Plus, most people are still working on de-leveraging themselves from massive debt runups of previous years. They're paying off credit cards and home equity loans, not thinking about their next vehicle.

2. Pension issues. GM has a LOT of retirees on the books, and they haven't, that I've seen, done a whole lot to address these issues. GM's got a lot of promises to keep, folks, and that is going to get in the way of profitability. As long as cash is going out the door to people who used to work there, it's going to be a struggle for GM to make that money back.

3. Hugely negative public perception. Admittedly, there aren't any double-blind studies out there, so this point is largely anecdotal. But I have heard a great many people in the "I won't buy from Government Motors" camp. Many are worried about getting parts for older models, and buying new doesn't sound like an option to a still-shellshocked public.

One last point to consider: timing. This news about a return to profitability in 2010 comes not too long after GM's intention to launch a new public stock offering. So it's not exactly a huge stretch to wonder if GM might be talking up its own interests in a bid to drum up interest in the upcoming stock release.

Your mileage may vary, of course, but I'm seeing a whole lot of potholes in GM's commute to profitability.

Your code to embed this article on your website* :

*You are allowed to change only styles on the code of this iframe.


Add your Comment