Maybe there is something to this Detroit-revival story: General Motors (NYSE: GM) announced on Thursday that it earned $4.7 billion in 2010, its first full-year profit since 2004. Excluding one-time charges related to a preferred share buyback, that's $0.52 cents a share, solidly above the $0.44 consensus analyst expectation reported by Bloomberg.

That was the General's best annual performance since the heights of the SUV boom back in 1999, and a huge improvement over the $4.3 billion post-bankruptcy loss GM generated last year. (For the full year in 2009, before, during, and after bankruptcy, GM lost more than $23 billion, but that's not really a fair comparison.)

Good stuff? Absolutely. But hardly a surprise.

The surprise that really wasn't
It shouldn't be that much of a surprise that the General was able to pull out a nice number for 2010, its first full year following the company's mad dash through bankruptcy court. After all, that visit with the bankruptcy judge helped the company shed a huge load of debt and bad assets, dramatically accelerating the long-overdue structural gains the company had finally started to implement a few years before.

And while auto sales in the U.S. have yet to reach anywhere near the lofty levels seen in the years before the financial crisis, they were up solidly in 2010, and GM was able to hold its own in what is still its most lucrative market, North America. Put that together with GM's commanding position in the still-booming Chinese market, light-years ahead of global rivals like Honda (NYSE: HMC) and Toyota (NYSE: TM), and good results seem like a slam dunk.

Still, some good news
But while the headline numbers weren't a shock, I did find a few pleasant surprises buried in GM's results. Consider:

  • Europe wasn't awful. As with rival Ford (NYSE: F), GM's European operation has been a major trouble spot, thanks to still-high fixed costs and lagging sales; it was expected to lose $3 billion in 2010. But GM held pre-tax losses to $1.76 billion for the year despite a drop in sales, and management is now predicting that Europe will break even in 2011.
  • It's fixed the accounting problems. GM CFO Chris Liddell raised eyebrows a while back when he said that GM's internal financial controls were "not adequate," a concern reiterated in the company's IPO prospectus last year. It was an open secret in Detroit that GM's internal financial reporting had been a mess for years, and as I said last summer, I sensed that Liddell had fixes in place, but wanted some year-over-year numbers to compare before declaring that everything was OK. Apparently, the numbers are good to go now; GM said on Thursday that "the material weakness "no longer exists as of December 31, 2010.
  • Cash is up, debt is down. As of year's end, GM had $5 billion in debt and $6 billion in preferred stock obligations outstanding, versus $28 billion in cash and $6 billion in available credit -- a good position for a company that will be plowing big bucks into product development over the next couple of years.
  • Making progress on the pension plan. As of a year ago, GM's U.S. pension plan was underfunded by $16 billion -- a situation that could oblige the company to make big contributions starting in 2014. That number has since fallen to $12 billion, which should soothe shareholders a bit, though it will bear careful watching over the next year.

A good year but a subdued quarter, and a mixed outlook
GM's year-end totals were solid, but like Ford, its fourth-quarter results were something of a letdown. GM didn't miss estimates like Ford did, but its $510 million profit for the period looks at first glance like a big letdown from the $2 billion it posted in the third quarter.

But again, like Ford, there were good reasons for the General's more subdued fourth-quarter result. Liddell said on Thursday that the company's spending on marketing and engineering was about $1 billion more than in the third quarter, as it launched key new products (the Chevy Volt and Cruze) and aggressively ramped up product-development spending.

And going forward? Liddell said that the company expected "volume increases," meaning higher sales as the economy continues to recover, but that "vehicle mix and pricing will be negative." In other words, rising gas prices mean more sales of lower-margin small cars and fewer high-margin SUVs. Those margins could get further squeezed by rising commodity costs and competitive pressures if demand doesn't pick up significantly. And of course, much will depend on the speed and success of GM's product-development efforts, in the U.S. and abroad.

But for all that, GM really does (finally!) look like a company well down the road to recovery.

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