The impressive third-quarter showing from General Motors shouldn’t wow prospective investors too much. Sure, the automaker’s $2 billion profit beat Ford’s. It even eked out a slightly better pre-tax margin than its rival. But GM’s last set of earnings before next week’s initial public offering aren’t as flattering as they look.
The company stuffed its dealers with 10 percent more inventory than it did at the end of June. There’s nothing inherently wrong with that. Car sellers have kept fewer vehicles on lots over the past couple of years. Demand was lacking, as was financing. But in GM’s case, many dealers also held stocks down in case the Motown manufacturer cut them loose in its restructuring. Rebuilding those levels now makes sense as the 2011 season approaches and sales pick up.
Another opinion on GM’s announcement, pre IPO, that they had a $2bn profit.
To paraphrase: it doesn’t mean much if anything.
Of course, my friend disagrees…
“GM posts a $2 billion profit… tell me again how the stimulus doesn’t work?”
Whether or not the stimulus works cannot be ascertained by the $2bn profit announcement. Anyone who knows anything about how the stimulus actually worked (aside from the fact that their hero in the White House handed out lots of cash) understands that the true issue is what the company is worth, what the IPO will bring in, and how quickly the government will get its loaned money back from the company.
But then again, that isn’t buzzword worthy. It’s much more fun to stick your thumbs in your ears, wiggle your fingers, and go “See? My guy did good!” It’s also easy to do when you don’t understand things.
I wonder if the “stupidity” of this article will “stump her brain” too.