Not too many major American corporations inspire as much eye-rolling and ridicule as once-mighty General Motors does these days. It's not hard to understand why, given the company's long history of miss-steps and decline, not to mention its very public rescue by the Feds.

But it might be time to take the General seriously: The company earned $2 billion in the third quarter, it announced on Wednesday, on revenues of $34 billion. That's $1.20 per about-to-be-public share and it puts the company on track to have its first profitable year since 2004.

Sure, it's possible to say -- as I did a couple of quarters ago -- that given GM's government-funded restructuring, it'd be hard for them not to make a profit. But I think there's more to GM's story at this point than taxpayer dollars and smoke and mirrors.

Where GM is now
While GM's sales growth hasn't kept pace with rival Ford's (NYSE: F), its overall numbers are certainly decent: GM's North American division earned $2.125 billion before interest and taxes on sales of about 661,000 vehicles in the quarter. That sales number is down a bit from the Cash-for-Clunkers-juiced year-ago numbers, but the earnings look great next to the $651 million loss posted for North America in the third quarter of last year.

There's a story there, and it's a story that will sound familiar to Ford-watchers: Simply put, GM is making more money per sale, thanks to better vehicles, a better economy, and a greatly improved cost structure.

Certain book-peddling former auto czars might like us to believe that these things happened overnight, but the truth is that GM has been heading in this direction for years. Production improvements, more ambitious product programs, and efforts to lower the company's long-uncompetitive fixed-cost structure via landmark labor deals were visible long before the bankruptcy. There's an argument to be made that it was the costs of those efforts that left the company so vulnerable once the economy turned abruptly south, and it's an argument with some merit. While GM certainly made its share of missteps even in recent years, genuine -- if not readily visible -- progress toward a turnaround has been under way for several years.

That's what the eye-rollers miss, and that's why I think GM's recovery is worth taking seriously.

There's still a lot to be done

That's not to say that GM has recovered. There are still some big areas of concern:

• Product development. GM needs to pour resources into its product-development efforts to catch up to key global rivals like Toyota (NYSE: TM) and Honda (NYSE: HMC) -- not to mention Ford, which was able to spend more during the economic crisis and has a fresher lineup today as a result. GM has some very good new products, but it needs more -- and replacements for some important models are still several years away. GM needs a long string of top-notch entries to realize its potential, and while signs right now are promising, the jury's still out on whether the company can deliver consistently.
• China is not a cure-all. GM breaks its results out by region -- North America, Europe, and "International Operations", which is largely (but not entirely) China. International Operations sold over a million vehicles in the third quarter, 50% more than what it sold in North America -- but its pre-tax earnings were only $646 million. That's about a third of North America's. What's the discrepancy? GM has 3 separate joint ventures in China. It has the contractual right to count all of the sales as its own -- but a big chunk of the profits go elsewhere. Long story short, China's very important to GM -- but a sale in Shanghai doesn't help the bottom line like a sale in Sausalito. The company still has to compete at home -- and in Europe, where losses continue to mount.
• That underfunded pension fund. GM's pension funds were well-funded a few years ago, but the stock market crash wiped out a lot of the funds' holdings' value. As of a few months ago, the funds were underfunded by a scary $27 billion. The company recently promised a $6 billion contribution to the funds, but much more could be due starting in 2014, depending on (among other things) the performance of GM's stock. It's not an urgent concern, but it's something potential investors need to watch closely.

Should you be one of those potential investors? Fool Rich Smith recently made what might be called the cynic's case for buying GM: The government needs the IPO to be a whopping success, so it has given GM and underwriters JPMorgan Chase (NYSE: JPM) and Morgan Stanley (NYSE: MS) every advantage, including a low price (and including a provision where GM gets to write off its pre-bankruptcy losses, meaning the company will send the IRS exactly $0 on its next $45 billion or so of profits.)

I actually think there's some merit to that line of thinking, as well as to the suggestion that the proposed IPO price range might be lowballing GM's true value. But the success of the stock will ultimately be driven by the success of the business. On that front, signs are encouraging, but it's hardly a slam-dunk.

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