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May 17, 2021

Would you ever invest in GM as a public company again?

There was once a time when General Motors was the blue chip of blue chip stocks.

But then – and not sure if you guys heard – the auto maker started not doing so well. It began putting too much emphasis on the SUV, too much focus on making money from financing and was eventually forced into bankruptcy last year.

Though after years now of disastrous PR, plummeting sales and the company’s taking the brunt of the blame for this latest recession, could GM actually be trusted as a public company once again?

Out of Detroit today, the embattled auto corporation announced it had earned $865 million in its first quarter this year, the first profit for GM since 2007.

According to the New York Times, the company earned $1.7 billion before interest and taxes (a complete turnaround from its $3.4 billion loss in the business’ fourth quarter last year) and now boasts a positive cash flow of $1 billion.

“We’re pleased with our first quarter performance,” Christopher P. Liddell, GM’s CFO, said in a statement, in no way fooling anybody into believing he could’ve predicted such a miraculous rebound. “We’re also steadily growing in emerging markets, keeping our costs under control, generating positive cash flow and maintaining a strong balance sheet.

“These are all important steps as we lay the foundation for a successful GM.”

Now, of course, GM isn’t totally out of the woods yet. Despite its $1.7 billion first quarter gains, the auto maker still lost $500 million in its European operations. And there is that matter of the hotly disputed GM ad, the one featuring CEO Ed Whitacre bragging how his bailed-out company had paid back its loan “in full, with interest, five years ahead of the original schedule.”

(In reality, GM had only repaid the balance of its $8.2 billion loans from the U.S./Canadian governments, and the American federal government still owns 61 per cent of the company. This caused many media members, including myself, to wonder if General Motors was misleading consumers into believing it had made good on all of its borrowing.)

Yet, in any case, there is much room for optimism within GM’s headquarters. Aside from its profitable quarter, analysts figure the auto maker could again go public with a stock offering as soon as the fourth quarter of this year – a move that would allow U.S. taxpayers to recover the billions of dollars they loaned to the once-troubled corporation.

GM is also reported to be considering a re-entry into the auto financing business, which would greatly expand the “pool of consumers who can qualify for attractive loans,” says the New York Times.

So maybe, just maybe, GM can be trusted again.

The question is: would you ever give them your faith? Would you invest in General Motors again following its recent collapse?

By Jason Buckland, MSN Money



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

James HaversJames Havers

James is the senior editor of MSN Money living in Toronto. He has worked for the Nikkei Shimbun (Tokyo), canoe.ca, AOL.ca, Canadian Business and other publications. Havers turned to journalism after teaching overseas.

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...