Shares of General Motors (NYSE: GM) had a rough time in 2011. Through last Friday, the General's shares were down about 45% on the year, far behind GM's onetime blue-chip peers in the Dow Jones Industrial Average (INDEX: ^DJI) -- which, in turn, is up only about 6% on the year so far.

That drop is striking because in many ways, GM is healthier and more profitable than it has been in decades. But while there's a lot to like about the General's current course, executives from CEO Dan Akerson on down have made it clear: Much remains to be done.

GM's biggest goal for 2012 -- and beyond
There's no doubt that every manager at GM has a long to-do list, but it's fair to say that most of those tasks boil down to this: improving margins. GM may be solidly profitable, but at around 6%, its margins are significantly thinner than those of rivals Volkswagen (OTC: VLKAY.PK) and Hyundai (OTC: HYMTF.PK) -- and even Ford (NYSE: F), at least through the first three quarters of 2011.

That shouldn't surprise longtime General Motors watchers: Pre-bankruptcy GM was the poster child for corporate bloat. Wildly inefficient internal processes, ineffective financial controls, labor contracts that didn't reflect the current competitive reality, duplicative and overlapping models, and a production base that hadn't shrunk with GM's long-declining market share all added up to a company that spent far more than it should have and got mediocre products and sales results in return.

A lot of that has changed, of course. Production capacity is where it should be, the current labor agreement is well aligned with GM's goals and situation, and strict internal financial controls have been put in place and tested through several quarters. And all of that is just the beginning: Last August, GM's leaders laid out their long-term plan to bring America's biggest automaker back to its full profit potential.

It's an ambitious plan that will take several years to fully implement: Among other goals, the automaker is planning to cut its total number of global "platforms," or vehicle architectures, from the current 30 to just 14. Given the length of automotive product-development cycles, that alone will take several years to complete. But key parts of the plan are already well under way -- and 2012 should see the auto giant make significant progress.

What to look for as the year gets started
Here are some key developments to watch for as 2012 gets under way:

  • New models. Production models of the new bread-and-butter 2013 Chevy Malibu sedan will be at dealers soon, and its reception will bear close watching. This is an important car, pitched directly at rivals like the Toyota (NYSE: TM) Camry and Honda (NYSE: HMC) Accord, and while early reviews have been positive, its real-world competitiveness will tell us a lot about the state of GM's product development process (and, in turn, a lot about the company's near-term prospects). Another important vehicle that should break cover at the North American International Auto Show in January: the Cadillac ATS, a small luxury sedan that GM hopes will compete well with BMW's (extremely) highly regarded 3-Series. The top of this category is one of the highest bars in the global auto business, and a credible effort here would give a lot of momentum to the General's campaign to revive the Cadillac brand's mojo.
  • More restructuring and layoffs. Back in August, product chief Mary Barra spoke at length about the waste inherent in GM's product-development processes, saying that managers had identified about a billion dollars in annual spending that could be reclaimed in "months, not years." That process may be kicking into high gear: Bloomberg reported last week that GM had engaged a consulting firm to help identify opportunities for cuts and efficiency improvements at the company's Detroit headquarters and other white-collar facilities in North America. Not only will this help control costs, but done sensibly, a pruning effort could help drive positive cultural change deeper into the GM ranks.
  • Action in Europe. It has been clear for a month or more that GM's brass is planning drastic action to "fix" Opel, its troubled European subsidiary. The goal is to lower GM Europe's breakeven point to ensure profitability even during downturns, as the automaker has already done in North America, though exactly what kind of action is likely for Opel has been less clear. But the first hints are starting to arrive: Automotive News Europe reported last week that Opel plans to cut as many as 1,420 engineers -- almost a quarter of its technical staff in Europe -- and will impose a series of streamlined processes akin to those being put in place by Barra in North America.

Will these actions help lift GM's share price? Possibly. But as with Ford, nothing will improve the stock's prospects like an improving global economy. That may or may not happen in 2012 -- but either way, shareholders can expect GM's current leadership to continue its aggressive plan to turn the General into a more profitable global powerhouse. How well will it go? The new models will tell us much. Watch this space.

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