GM Earnings Disappoint

National Legal & Policy Center ^ | February 28, 2011 | Mark Modica

[jazusamo]

General Motors reported less than stellar fourth quarter earnings last week, and announced that bonuses paid to its UAW workers will average $4,300. The earnings report disappointed Wall Street as GM shares fell about 4% on the news.

Some media sources attributed the drop in GM's share price to rising oil prices. Considering that oil prices went down on the day that GM shares fell, this explanation does not hold water. Rather, there are some specific issues relating to the earnings announcement that are causing concern on Wall Street.

Specific items of concern on GM's fourth quarter earnings breakdown include declining market share in China. Year over year GM market share for China fell from 13.2% to 11.4%. Anyone who has been listening to the hype revolving around GM's strength in China might be surprised by these numbers. GM CEO, Dan Akerson, has touted China as a bright spot that GM will continue to focus on. Profitability in the region was actually down due to higher costs.

Another area of concern is stagnant sales for GM's core brand, Chevrolet. Sales for Chevy were flat year over year and new product launch remains weak. Total fourth quarter GM North American market share fell from 19.2% in 2009 to 18.5% in 2010.

One more item worth noting is the fact that much of GM's quarterly earnings were derived from non-operating income. A large portion of this segment is attributed to a gain from the $45 billion tax credit GM was granted after bankruptcy.

Perhaps the best indicator of how well (or not) GM is doing since its taxpayer funded bailout is its stock performance. Since the time of GM's IPO, the S&P 500 is up about 10%. GM share price is currently hovering around its IPO price of $33. Shares are down about 5% from where they actually first opened. That is a negative 15% return compared to the broader market. And this during a time when analyst and media coverage was very favorable!

It seems there are many reasons for potential investors in GM to remain cautious, not the least of which is the continued UAW overhang. The fourth quarter saw GM burn through $2.8 billion as $4 billion was contributed to the UAW pension fund. An additional $2 billion of common stock was contributed as well. It is likely that the UAW will continue to expect a large portion of GM's future profits, IF they exist.

[jazusamo]

He didn't mention the Volt but if it continues to bomb GM is in big trouble.

[kittymyrib]

And BO’s IRS even forgave GM their 2010 taxes, to no avail. The UAW bonus winners probably aren’t paying any taxes either, because they are just so special.

[PGR88]

If you missed the chance to short GM when it was private, it should be an even easier short now that the Gov’t owns it.

[FrankR]

[Mr. K]

GM is also exempt from PAYING TAXES under their govt bailout plan.

And they still are doing poorly?

Looks like no one wants to buy a Government Motors Car.

I REFUSE to even look at one - even a USED one. I am now a Ford guy.

[ClearCase_guy]

I'm picturing a "Downfall" clip, with Hitler looking at a map and dismissively waving his hand, "We can just bail them out. Bernanke says we have money."

And the Nazi officers start looking sideways at each other.

[devistate one four]

Major boycott against gm and chrysler, what do yhey expect

[Navy Patriot]

General Motors reported less than stellar fourth quarter earnings last week

Imagine that, considering every American taxpayer bought a new GM car last year, albeit that most of 'em didn't actually get the car DELIVERED to 'em, they sill bought it.

How could GM not make a whopping profit?

[hadaclueonce]

Volt is the new Vega.

[jazusamo]

LOL!

[Cheetahcat]

Wait they can’t make money with NO OVERHEAD?? Insanity !

[Cheetahcat]

“Volt is the new Vega.”

Or Corvair too damn stupid to see how the Germans built a decent opposed motor.

[stefanbatory]

unexpected??????

[2001convSVT]

The question I want to know is, if GM fails a second time will congress or Obama step in to save them?

[I still care]

Bonuses?

I think the biggest Christmas bonus any member of my family ever had was $100.

Another reason why unions are the new class warfare - the union and government haves (enforced by government) vs the have nots.

As far as the volt goes, my son the mechanic says he would never buy one. He just gets way too many complaints about them. For instance, to replace the batteries is quite expensive.

[DeFault User]

Let’s see, they’ve had the Corvair, the Chevelle, the Chevette, the Citation, the Cavalier, the Cobalt and now the Cruze. Why don’t they give up on the name changes and just announce the model will be the Chevy POS for 2012?

[jazusamo]

The Volt looks like it’s toast to me. I read that they only sold either 319 or 359 in January, can’t remember which.

That was with a $7500 government rebate, think of the prospects when the rebate stops.

[scooby321]

14 Billion dollar tax credit on earnings and can’t use it.

[DManA]

New economy - pay the owners last. Screw the creditors. Power to the workers.

This will turn out well.

[blueunicorn6]

“You don’t get me ‘cause I belong to the union! You don’t get me ‘cause I belong to the union! You don’t get me ‘cause I belong to the union! You don’t get me ‘cause I’m a u-nee-on man!” No...please...feel free to take as much money from me and my family as you like. Lord knows we don’t really need food or heat.