If the automotive industry crisis is still fresh in your mind, you may think someone would be taking you for a ride if they were to recommend investing in the tarnished auto industry. After all, investors lost not only their money, but also their faith in the stock market. On June 8, 2009, General Motors filed for Chapter 11 reorganization. Then, through the largest IPO in U.S. History, General Motors Corporation was reborn as General Motors Company (GM, Financial) on Nov. 18, 2010.
By 2011, GM became the world's largest automobile manufacturer in terms of vehicle unit sales.Perhaps it is time to take a risk in second chances.
About the New GM
GM employs around 200,000 people, conducting business in over 150 countries. Its vehicles are produced in 31 countries. The following brands and divisions are sold and serviced through GM: Cadillac, Buick, Chevrolet, GMC, Vauzhall, Opel and Holden. SAIC-GM-Wuling Automobile and Shanghai GM are two of GM’s joint ventures in China. Also deserving mention is OnStar, its subsidiary that provides information services, vehicle safety and security.
GM is again experiencing profitability, even posting a record annual profit in 2011. But many investors are wary. Long ago are the days when GM was the largest and possibly most important corporation in the world. Times have changed. Consumer focus has changed. But GM has changed as well.
This quote from Dan Akerson, chairman and CEO of GM, explains the company’s outlook. “In our first full year as a public company, we grew the top and bottom lines, advanced our global market share and made strategic investments in our brands around the world. We will build on these results as we bring more new cars, crossovers and trucks to market, and make GM a far more efficient global team. This includes reducing our break-even level in Europe and South America and driving higher revenues around the world.”
Setting Global Records
It is possible that GM has indeed learned from its mistakes. In February of this year, GM announced that its net income for common shareholders jumped from $4.7 billion in 2010 to $7.6 billion in 2011. Its revenue jumped from $135.6 billion in 2010 to $150.3 billion in 2011. The company is also setting sales records in China. Along with its joint ventures, they sold over 240,000 vehicles in the country just in February of this year, setting a new monthly sales record. This was a 30% increase from February of 2011. Not only was February stellar, but combined with January, 487,208 cars and trucks were sold in China. This was an increase of over 7% from 2011.
General Motors has approximately 35,000 employees in China. Of all automakers in China, GM — along with its joint ventures — offers the most diverse vehicle lineup. In 2011 alone, China’s GM vehicle sales totaled more than $2.5 million. For seven consecutive years, GM has led global automakers in sales.
Competition
When considering GM’s global impact, it is important to compare it to companies like Europe’s Volkswagen Group (recently trading around €122) which also had record sales in 2011. Volkswagen set new records not only for vehicle sales, but also for earnings and sales revenue. For the first time in history, more than 8 million vehicles were sold. Combine the record sales with high quality vehicles (Porsche, Audi, Bentley, Bugatti), employee satisfaction, and solid finances, Volkswagen is certainly a contender in the global automotive market.
GM has recognized the need to remain profitable in Europe, by recently purchasing 7% of PSA Peugeot Citroen. Peugeot is the second largest automaker in Europe (Volkswagen being number one, based out of France. This purchase will allow GM to learn about its product development, platform sharing and purchasing. There is potential for GM to see over $2 billion worth of potential synergies from Peugeot. However, its first joint product is not expected to launch until 2016. For this reason, investors should be patient if expecting much of a profit from this partnership.
Seeing Green in the Future
One thing that hurt GM leading up to their financial crisis was its apparent lack of appreciation for energy-efficient vehicles. Corporate greed and rising fuel prices started to tarnish the names of American automakers at a time when consumers were looking for cheaper, more efficient options. GM now understands the need to build fuel-efficient vehicles that fit its customers’ needs. Twelve of its vehicles offer at least 30 mpg for highway driving. The company is also investing in advanced biofuel developers. It also offers two-mode hybrid vehicles as well as eAssist light electrification technology. Showing respect for the environment GM offers the Chevrolet Volt and Opel Ampera: two extended range electric vehicles in the fleet.
OnStar: Untouchable Competition
You have probably seen or heard the commercials for OnStar. A driver gets into an accident and the angelic voice of an OnStar representative is heard shortly after the crash, asking if the driver needs assistance. Or someone simply needs directions to the nearest movie theater and OnStar acts as a sort of butler service. For approximately $20 per month, OnStar seems to have won the hearts and wallets of GM car owners.
Recognizing the fondness for GM’s OnStar, other automakers are trying to catch up. Ford’s (F, Financial) Sync has some glitches and is a world apart from OnStar. They also recently reduced the price for the Sync OnStar FMV was introduced. FMV stands for “For My Vehicle” and works with non-GM vehicles.
Hyundai’s BlueLink is also trying to compete with OnStar. It is their first telematics system, making its debut in the 2012 Hyundai Sonata. I expect to see some growing pains with this one, giving GM the upper hand for quite a while.
The Bottom Line
At $26 per share, GM may be more expensive than Ford ($13 per share) but its strong performance and seemingly successful reorganization may just be worth paying double. The outlook looks promising and the price is expected to rise. If you are considering adding GM to your portfolio, buy before the price hits $30.
By 2011, GM became the world's largest automobile manufacturer in terms of vehicle unit sales.Perhaps it is time to take a risk in second chances.
About the New GM
GM employs around 200,000 people, conducting business in over 150 countries. Its vehicles are produced in 31 countries. The following brands and divisions are sold and serviced through GM: Cadillac, Buick, Chevrolet, GMC, Vauzhall, Opel and Holden. SAIC-GM-Wuling Automobile and Shanghai GM are two of GM’s joint ventures in China. Also deserving mention is OnStar, its subsidiary that provides information services, vehicle safety and security.
GM is again experiencing profitability, even posting a record annual profit in 2011. But many investors are wary. Long ago are the days when GM was the largest and possibly most important corporation in the world. Times have changed. Consumer focus has changed. But GM has changed as well.
This quote from Dan Akerson, chairman and CEO of GM, explains the company’s outlook. “In our first full year as a public company, we grew the top and bottom lines, advanced our global market share and made strategic investments in our brands around the world. We will build on these results as we bring more new cars, crossovers and trucks to market, and make GM a far more efficient global team. This includes reducing our break-even level in Europe and South America and driving higher revenues around the world.”
Setting Global Records
It is possible that GM has indeed learned from its mistakes. In February of this year, GM announced that its net income for common shareholders jumped from $4.7 billion in 2010 to $7.6 billion in 2011. Its revenue jumped from $135.6 billion in 2010 to $150.3 billion in 2011. The company is also setting sales records in China. Along with its joint ventures, they sold over 240,000 vehicles in the country just in February of this year, setting a new monthly sales record. This was a 30% increase from February of 2011. Not only was February stellar, but combined with January, 487,208 cars and trucks were sold in China. This was an increase of over 7% from 2011.
General Motors has approximately 35,000 employees in China. Of all automakers in China, GM — along with its joint ventures — offers the most diverse vehicle lineup. In 2011 alone, China’s GM vehicle sales totaled more than $2.5 million. For seven consecutive years, GM has led global automakers in sales.
Competition
When considering GM’s global impact, it is important to compare it to companies like Europe’s Volkswagen Group (recently trading around €122) which also had record sales in 2011. Volkswagen set new records not only for vehicle sales, but also for earnings and sales revenue. For the first time in history, more than 8 million vehicles were sold. Combine the record sales with high quality vehicles (Porsche, Audi, Bentley, Bugatti), employee satisfaction, and solid finances, Volkswagen is certainly a contender in the global automotive market.
GM has recognized the need to remain profitable in Europe, by recently purchasing 7% of PSA Peugeot Citroen. Peugeot is the second largest automaker in Europe (Volkswagen being number one, based out of France. This purchase will allow GM to learn about its product development, platform sharing and purchasing. There is potential for GM to see over $2 billion worth of potential synergies from Peugeot. However, its first joint product is not expected to launch until 2016. For this reason, investors should be patient if expecting much of a profit from this partnership.
Seeing Green in the Future
One thing that hurt GM leading up to their financial crisis was its apparent lack of appreciation for energy-efficient vehicles. Corporate greed and rising fuel prices started to tarnish the names of American automakers at a time when consumers were looking for cheaper, more efficient options. GM now understands the need to build fuel-efficient vehicles that fit its customers’ needs. Twelve of its vehicles offer at least 30 mpg for highway driving. The company is also investing in advanced biofuel developers. It also offers two-mode hybrid vehicles as well as eAssist light electrification technology. Showing respect for the environment GM offers the Chevrolet Volt and Opel Ampera: two extended range electric vehicles in the fleet.
OnStar: Untouchable Competition
You have probably seen or heard the commercials for OnStar. A driver gets into an accident and the angelic voice of an OnStar representative is heard shortly after the crash, asking if the driver needs assistance. Or someone simply needs directions to the nearest movie theater and OnStar acts as a sort of butler service. For approximately $20 per month, OnStar seems to have won the hearts and wallets of GM car owners.
Recognizing the fondness for GM’s OnStar, other automakers are trying to catch up. Ford’s (F, Financial) Sync has some glitches and is a world apart from OnStar. They also recently reduced the price for the Sync OnStar FMV was introduced. FMV stands for “For My Vehicle” and works with non-GM vehicles.
Hyundai’s BlueLink is also trying to compete with OnStar. It is their first telematics system, making its debut in the 2012 Hyundai Sonata. I expect to see some growing pains with this one, giving GM the upper hand for quite a while.
The Bottom Line
At $26 per share, GM may be more expensive than Ford ($13 per share) but its strong performance and seemingly successful reorganization may just be worth paying double. The outlook looks promising and the price is expected to rise. If you are considering adding GM to your portfolio, buy before the price hits $30.
