GM profits

On the outside chance you haven’t already heard, General Motors today announced than in 2011 the company earned a profit of $7.6 billion, up 62% from 2010. Its hourly workers will be getting profit-sharing bonus checks of up to $7000 each, the largest ever.

In current-dollar terms this is GM’s highest profit in history despite last year’s relatively slow-growth economy. Even adjusted for inflation, GM earned only about 19% less than in its previous record year of 1997 at the height of an economic boom. Moreover, GM has now had eight consecutive profitable quarters (even last quarter, dragged down by losses in Europe, was in positive territory). That’s not bad for a company that had been on the verge of collapse before the Obama administration stepped in to rescue it.

It might be worth recalling that back in 2009 Mitt Romney wrote an article about that rescue titled “From Bad to Worse” in which he said of the rescue plan, “It would be as ineffective as it is un-American.” He confidently predicted that GM would continue to lose money, requiring a constant taxpayer subsidy into the indefinite future. (In reality, it’s been the other way around; GM has been paying money into the Treasury.) His conclusion: “What is proposed is even worse than bankruptcy — it would make GM the living dead.”

Now, of course, Romney is saying that the rescue was just what he recommended all along.

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GM profits — 2 Comments

  1. How is it that the national media in general lets politicians from either side make such false claims – as Romney is doing in claiming his op-ed piece supported what eventually happened?
    Also, I was watching Erin Burnett’s (sp?) show in CNN this week and she twisted GM’s record profit as not-so-good news. She tried to claim that per-share amounts are not where they need to be for taxpayers to get their money back and in general tried to spin the news as not so great.
    And another right winger said the other day that GM’s turnaround was ONLY due to the efforts of its employees and the quality of the cars – and had nothing to do with the bailout.
    Once again, the right wingers have reached a point where they have no problem making statements that have no basis in fact.

  2. It’s true that the recent share price is only about half what it would have to be for the federal government to recover its entire investment in GM through an immediate stock sale. But as you indicate, that’s a misleading way to look at it. For one thing, it would be silly to sell at the current price rather than wait for the stock to increase in value.

    For another, keeping GM alive has meant keeping U.S. factories going and thousands and thousands of Americans employed in good jobs — and paying taxes rather than drawing unemployment checks. It has also helped vendors who sell to GM and kept their employees working, and it’s helped the companies that sell goods and services to those employees and kept yet more people working.

    Finally, real-world investors often expect making a profit to take a few years.

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