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Why GM Struggled in 2011

John Rosevear
December 19, 2011

As the year comes to a close, it's helpful to look back at what happened to the stocks you follow. With a highly visible company like General Motors (NYSE: GM  ) , which is mentioned in the business news nearly every day, it's easy to get caught up in a short-term view of events -- but the longer-term perspective is what really matters when judging an investment.

Plain and simple, 2011 was a year of consolidation for the General. With his management team finally stable after a long period of churn and turmoil, GM CEO Dan Akerson was able to start implementing his long-term vision for America's largest automaker. But it will be several years before his vision becomes a reality, and the rough performance of GM's shares reflected that, as economic conditions continued to pose a challenge for the company.

General Motors' key statistics
The fundamentals weren't bad, especially given GM's recent history and challenging economic headwinds around the world, but there's considerable room for improvement:

Year-to-Date Stock Return (45.6%)
Market Cap $30.30 billion
Revenue, Trailing 12 Months $147.70 billion
Quarterly Revenue Growth (year over year) 7.80%
Earnings (EBITDA), Trailing 12 Months $11.94 billion
Quarterly Earnings Growth (year over year) (2.50%)
CAPS Rating **

Sources: S&P Capital IQ and Motley Fool CAPS. YTD return from market open on Jan. 3 through market close on Dec. 16.

Ouch. Revenues are up, but earnings are down as margins have come under pressure -- and the stock price got positively hammered, despite $4.57 in earnings per share over the last 12 months. So what happened?

Why the stock got clobbered
GM's new managers have actually executed quite well for the most part -- better than some of us expected -- but the company faced a number of headwinds in 2011:

  • Global headwinds. The white-hot Chinese auto market cooled considerably in 2011, though GM -- the market leader, via several joint ventures -- still managed to pull out decent sales growth. More importantly, the General's long-troubled European operation hit a crisis point as the European economy sagged, losing money in the most recent quarter and prompting a high-level review likely to lead to drastic action (a major restructuring, at least) early next year.
  • Pension liability. Despite GM's low debt, $30-billion-plus cash hoard, and respectable profits, many institutional investors have shied away from the stock out of concerns for GM's pension liabilities, which could -- some have speculated -- eat up much of that cash hoard over the next couple of years. CFO Dan Ammann recently said the company now estimates its liability at $8.7 billion and has promised to present more detail on the state of those obligations when GM's year-end results are revealed early in 2012.
  • Product line still a mixed bag. Rival Ford (<