General Motors posts higher than expected earnings

People don't seem to understand what it takes to turn around the Titanic to keep it from hitting an iceberg...bad analogy. Turning around the Exxon Valdez...wait, wrong again...

GM posted a before special charges, before tax gain of $.93/share in comparison to analyst estimates of $.49/share. That is a serious difference. I've been bullish on General Motors since the stock has been at $16/share. Rick Waggoneer, Fritz Henderson, Bob Lutz, and the other parts of the executive team there are the people best capable to turn around this slumbering giant. What's more, they are doing it.


Recently, the Buick LaCrosse and Buick Lucerne were named in the list of top cars in terms of quality. That's right, quality. Bob Lutz said approximately one year ago that there is a perceived quality gap between General Motors and the Japanese, and the Americans are putting quality cars out there, but it will take a couple of years for the public to take notice. Well, anyone who reads their balance sheet can see the downward trend in warranty costs. Further, GM has provided a 10-year 50,000 mile warranty on the powertrain. This is the way to bolster quality, would they do it if they thought the repairs would cost them a fortune? Absolutely not.

The changes that Lutz has made in the design team are paying off and the cars on the road, including but not limited to the Pontiac G6, Chevy Impala, Pontiac Solstice, Buick Lucerne and Buick Lacrosse have breathed new life into old forgotten brands. The new Saturn designs have compelled people into the showrooms through sheer emotion. This is the makings of a true turnaround.

Further, the number one growing market is China. The General Motors-Shanghai Automotive venture is the market leader. GM is making profits there as the market continues to grow. General Motors is further well positioned in India. It has been investing in India for over ten years and stands to have a strong position as that market begins to boom.

The General is back, and as I have been saying for long time, American carmakers have to combine cost cutting and production scheduling through flexible manufacturing, cut their large pension and health care liabilities by any means necessary, and invest that savings into design, and engine and powertrain research. The world sits on a pivotal technological shift in our uses of energy and natural resources, and the automotive industry is at the beginning of a technological renaissance in the automobile as we know it. Those who think Detroit is not going to be a major part of that renaissance, don't know anything about the people at the top of these carmakers.

Now if only the Chrysler stock could drift far enough that some car guys and some private equity could take that company over...