GM turns a profit: Why isn't that good news?

The Detroit automaker turned its first profit since 2004, but saw shares slump almost immediately. Why isn't the market encouraged that GM's back in the black?

The recovering American automaker posted an "impressive" $4.7 billion profit for 2010, but GM's stock price still took a hit.
(Image credit: Getty)

On Thursday, GM reported its first annual profit in six years — earning $4.7 billion on $136 billion in sales — exceeding expectations and continuing its impressive rebound from government-assisted bankruptcy. Great news, right? Investors didn't see it that way: GM's stock plummeted 4.5 percent, to just pennies per share above its IPO price in November. Why didn't Wall Street applaud GM's comeback? (Watch a GM press conference)

This was the easy part: GM's $4.7 billion profit is certainly a "welcome departure from its recent track record," says Joann Muller at Forbes. But after its debt-cleansing 2009 trip through bankruptcy court, and a government bailout, "anything else would have been a disaster." It will take more time to convince investors that GM won't slip back into its old, money-burning ways.

"GM Is still putting its house back together"

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Blame Libya, not GM: The problem isn't really GM, says Chrissie Thompson at the Detroit Free Press. "Blame turmoil in the Middle East that has pushed oil prices to a 2 1/2-year high." GM told investors that it has been preparing for higher fuel, energy, and parts prices, but the prospect of $4-a-gallon gas is a damper on all automakers. And GM, in particular, still relies on the higher profit margins of its gas-guzzler models.

"GM braces for pricier gas; Despite 2010 profit, investors worry"

GM is still grappling with its ghosts: Wouldn't soaring gas prices "provide the perfect incentive to go out and buy a Volt"? says Jim Jelter in MarketWatch. Maybe one day, but for now, GM's electric car is still "unproven and pricy," and two years of starving research and development has put GM behind in designing new fuel-efficient cars. Sound familiar? Wall Street's thumbs-down was surely "a major downer" in Detroit, but GM "still has a way to go to break free from its past."

"GM grappling with some familiar demons"

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