Is GM Turning the Corner?
It's been a long time coming, but it looks like General Motors is finally on the verge of turning the corner with it's North American auto business. But before you get excited, keep in mind some of the speed bumps that could slow down GM's recovery.
First of all, in the 4th quarter GM finally got back with in an eyelash of profitability in it's North American auto business. It lost $14 million, which, in a division that has $100 billion in revenue, is essentially breaking even. It's the first quarter in roughly 2 years where GM has not been heavily in the red in North America. The company's rebound is due to lower costs (thanks to UAW concessions and job cuts) while auto sales (thanks to new models) have done all right.
As Chairman and CEO Rick Wagoner told me this morning on Squawk Box, "we're getting there, but we still have more work to do."
Some on Wall Street think GM has a lot of work to do. Banc of America analyst Ron Tadross is not impressed with GM's numbers and reiterates his sell rating. Mainly because he thinks there's little upside for GM's auto business. In a not to clients he wrote, " GM’s Automotive results are anemic at what we still believe is the peak of the company’s product, pricing and cost reduction cycle."
In other words, Tadross, and others we should point out, think GM will see slower sales or reduced profit margins with fewer new vehicles rolling out. Will GM have to fall back to big incentives and rebates if it's new Tahoe doesn't sell as quickly this summer?
That's the type of situation that has some wondering if the can buy into GM finally turning the corner in the U.S.