Since GM’s infamous bankruptcy in 2008, their sales are finally improving. They announced their annual profit of $6.17 billion for 2010 and it was the most outstanding amount since 1997. However their shares on the stock market decreased. The drop of their stock price was probably due to the overreaction of the rising oil prices and the events in Libya, because there was no change in GM’s performance that would worry investors at that time.In the fourth quarter, the North America truck production increased by 22% from last year. This became a concern for GM because the rising oil prices will affect the sales of trucks. Akerson, the CEO of GM also explained that the fourth quarter results was lower than earlier quarters because they have been spending money on marketing and engineering, and the results for first quarter will be higher. Akerson also said that GM is prepared for the expensive energy with their energy efficient vehicles.
Connections
GM reported their net income for the fourth quarter of $1.41 billion, which would be the first item of their cash flow statement. Also, the net income of this quarter is 31 cents per share, but it would have been 52 cents per share if they excluded a charge from the purchase of preferred shares from the U.S. Treaty. This transaction would be listed under the investing section of the cash flow statement, and would decrease the amount of cash since they are purchasing shares. Also, the increase of trucks for their inventory will obviously lower their cash flow. They may run into troubles with their cash if their inventory does not get sold, causing the company to lack cash.
Reflection
Since General Motors' bankruptcy in 2008, I would say that GM has been recovering slowly. They announced that their annual profit for 2010 has been the highest since 1997, but this amount excludes a purchase of shares ($127.1 billion). GM has explained that the first quarter coming up will be better than the fourth quarter of 2010, but I would not put much hope on that. They said that they are prepared for the rising energy prices, but they do not explain in this article how they are prepared except for their energy-efficient vehicles. However, even though energy prices are increasing, this does not mean that people will go out and buy more energy-efficient vehicles. Most of the people that already has a car would not go out and buy another vehicle if energy are so expensive. People that do not have a car yet may reconsider the plan of actually buying one. Also, the inventory of trucks they have may actually cause troubles in their cash flow in the near future.
