General Motors CoGM

Morningstar Rating

Stock Research and Analysis

by David Whiston, CFA, CPA, CFE

We think GM's car models are of the best quality and design in decades. The company is already a leader in truck models, so a competitive lineup in all segments, combined with a much smaller cost base, leads us to think that GM will be printing money Read more

Bulls Say

GM's break-even point is drastically lower than it was under the old GM. The company's earnings should grow rapidly as U.S. vehicle sales bounce back from the 2009 low.

The VEBA saves GM billions of dollars in cash every year, and the new UAW contract gives GM labor cost stability through at least September 2015.

Models such as Buick's LaCrosse and Verano, the Cadillac ATS, and the Chevrolet Cruze have been very successful. GM can charge thousands of dollars more per vehicle in certain segments. Higher prices with fewer incentive dollars allow GM to get more margin per vehicle, which helps mitigate the severe decline in light-vehicle sales.

Vehicles like the Cadillac ATS and Chevrolet's Malibu, Cruze, and Sonic show that GM can make a vehicle to compete directly with the models produced by Japanese and European automakers. GM already is a top player in critical emerging markets such as Brazil and China. It sells nearly 70% of its vehicles outside North America. Read more

Bears Say

The cadence of a recovery in global vehicle demand is very uncertain, especially in Europe.

Auto stocks are often sold off severely because of macroeconomic concerns--even if the bottom-up story looks attractive.

The U.S. auto market is becoming more crowded each year. Hyundai and Volkswagen are likely to take more share over time from existing players such as GM.

Some American consumers will never buy another GM vehicle because of their anger over the firm's receiving taxpayer loans.

GM's offerings in the key U.S. full-size sedan and pickup markets are old, although new models will arrive in 2013. Read more

Management

GM's capital allocation history is short but already mixed. Return on invested capital has been below the weighted average cost of capital in the firm's first three full years of operation, but we expect an economic profit during our forecast period. Read more

Profile

General Motors Company emerged from the bankruptcy of General Motors Corporation (old GM) in July 2009. GM has 11 brands and operates under five segments: GM North America, Read more