All About Japan Autos

What doesn’t kill you makes you stronger. Just ask GM.

“General Motors said Thursday that it earned $1.3 billion in the second quarter, citing sustained progress in rebuilding operations after emerging from its government-sponsored bankruptcy last year,” reports the New York Times.

How did GM go from bankruptcy to billion-dollar profits? The Wall Street Journal says GM “is capitalizing on a leaner cost-structure created through last year’s U.S. government-orchestrated bankruptcy in which the company has fewer brands, employees and factories and a fraction of the debt it once held.”

The profit is a nice turnaround for the once-beleaguered company. The Washington Post points out that from July 2009, when GM exited bankruptcy protection, to December 31, 2009, the company lost $4.3 billion. “Before the first-quarter [2010] results, GM hadn’t reported a profit since the second quarter of 2007.”

The news is good for GM, which wants to show strength ahead of a stock offering. “The results will play a central role in bolstering GM’s case that the auto maker is a good bet for Wall Street as it prepares to start selling its stock to the public. GM is close to registering for an initial public offering,” writes the Wall Street Journal.

While the profits show GM is gaining ground and building products consumers like, the picture becomes a little less rosy when you examine the sales data. Edmunds points out, “Today most GM vehicles sell for an average of 15.7 percent off sticker price; the industry average is 13.7 percent.” Also, “GM’s incentives have climbed an average of nearly $400 per vehicle since first quarter of this year while the industry average rose only $66 per vehicle sold. This time last year, GM incentives averaged $776 higher than industry average; currently GM averages $1,018 higher.” So, while GM is moving cars, it’s doing it at a higher-than-average cost to the company, which could cut into long-term profits.

For consumers, however, the fact that GM cars sell with bigger discounts than the rest of the industry means that it’s worth checking out GM brands if you want a good deal. See our Best Chevrolet Deals page to see the current offers available from GM’s largest-volume brand.

If you’re in the market for a new car, check out the U.S. News rankings of this year’s best cars as well as this month’s best car deals.