GM Driving Toward Profits Again
Thursday, March 15th, 2007
By Mitchell Clark, B.Comm. for Profit Confidential
Here’s something completely different — General Motors (GM) made a profit. Not only did the company make an accounting profit, but it also actually made an operating profit as well, signaling that a turnaround is well underway.
According to the company, its sales grew to a record $207 billion in 2006, up from $195 billion in 2005. The company generated net income, excluding special items, of $2.2 billion, compared with a net loss of $3.2 billion.
Last year, I wrote quite a bit about GM. Regardless if you like the company’s products or not, whatever happens to GM does indeed affect the general economy. I’ve always liked GM products. As a customer, I try to balance all the aspects of ownership, including reliability, practicality, value for the dollar, and design. I’m a long- term owner of vehicles and I like to tinker with them in my spare time.
After 60,000 miles of light-duty use, the transmission on my GMC Sierra failed. I lost reverse, first, and third gear. I’ve babied my truck ever since I bought it and, needless to say, I wasn’t happy.
Fortunately, my neighbor’s nephew is a transmission specialist and he rebuilt mine at a reasonable price. I’m really lucky. This fellow is a great mechanic and is honest. He actually has customers drive in from other states to service their vehicles at his shop. He said transmission failures are quite common in light-duty GM trucks. Heavier-duty trucks, such as the three-fourth and one ton versions, don’t seem to experience much in the way of problems.
Still, I love my GM truck. Where I live, I need a truck and especially four-wheel drive. Rear-wheel drive, body-on-frame design — you just can’t beat that combination for long-term use.
With the exception of the transmission and an ABS brake sensor, I’ve had a trouble-free ownership with my GM truck. I like simplicity and practicality in a vehicle. Too many electronics means too many things can go wrong — just ask any BMW or Audi owner.
The good news is that Detroit is going back to what it does best — building great vehicles with some muscle, all for a reasonable price. Chrysler started the renaissance with its 300, Magnum, and Charger vehicles. Rear-wheel drive is back and drivers are benefiting.
I think GM purposefully lost $6.6 billion all in one year in order to put all that bad news into one fiscal period. Now there’s only an upside ahead for the company. As long as the company focuses its efforts on product design and reliability, GM should enjoy solid business success in the future.
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Mitchell is a Senior Editor at Lombardi Financial specializing in small-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, such as Penny Stock Reporter, Micro-Cap Stocks, and Monster Profits. Mitchell, who has been with Lombardi Financial for thirteen years, won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was as a stock broker for a large investment bank. While Mitchell is not working he enjoys fly fishing, motorcycling and tending to his hobby farm.
