General Motors Co - Stocks

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The automobile industry has expanded exponentially in the past decades and it is arguably one of the largest industrial sectors of the world. Car manufacturers have advanced progressively and come up with innovative designs and fuel-efficient vehicles that help people travel from one place to another. General Motors Company or more popularly known as GM, is an American company which is considered as the largest car manufacturing company in the world.

General Motors is headquartered in Detroit, Michigan, USA, which is also known as the hub of all car brands as Henry Ford also drove the first car he made in Detroit. GM has its global headquarter in Detroit Renaissance Center, where all the aspects of the business are managed that includes design, development, marketing, and distribution of various vehicles and also parts of the vehicles.

General Motors was the largest automobile manufacturer in US and also the largest in the world until 2008, when Japanese automaker ‘Toyota’ overtook it. GM is currently ranked as the fifth biggest automobile maker, according to revenue. Fortune 500 ranked GM at 13 in the list of largest US corporations based on revenue.

General Motors manufactures vehicles in many countries of the world, but most of the production is done in the US. The main divisions or brands of GM includes Chevrolet, Cadillac, Buick, and GMC (General Motors Truck Company). Once General Motors had more than a dozen popular car brands under its umbrella and today its subsidiaries include Opel, Vauxhall, Holden, HSV, Jie Fang, Baojun, and Wuling. GM sold an estimated 10 million vehicles in 2016.

General Motors manages almost 400 facilities in 140 countries and its business is spread on the six continents with 180,000 employees. The company also provides financing services such as vehicle financing. Apart from its 12 brands, GM has done a 20% investment in IMM (Industries Mécaniques Maghrébines), which is a Tunisian car manufacturer, and a 77% stake in GM Korea.

General Motors is one of the few car manufacturing companies that is leading the sustainable driving for the future, and it has the most number of clean-energy patents as compared to any other company. GM is also the only automobile maker to make and sign a ‘Climate Declaration’ to highlight the importance of climate change.

History of General Motors

William C. Durant founded General Motors on September 16, 1908, and it was a culmination of different vehicle companies that were founded in the late 1890s. In 1892, Olds Motor Vehicle Company was formed by R.E. Olds, and the first Oldsmobile was test-driven in 1895.

In 1900 Buick company is founded by David Buick in Detroit, and in 1903, the first Cadillac is made by Henry Leland. In 1908, William Durant brought Buick and Oldsmobile together by forming General Motors Corporation. In 1909, Oakland (later named Pontiac) and Cadillac joined General Motors.

In 1912, the electric self-starter was introduced in Cadillac by GM. In 1918, another major car brand, ‘Chevrolet,’ joins GM. In 1925, GM buys UK automaker Vauxhall and in 1931, the German brand Opel is also acquired. 1n 1950, GM makes a breakthrough and offers automatic transmission in all US models.

General Motors took a 34% stake in Isuzu Motors in 1971, and in 1984 GM acquired Electronic Data Systems and Hughes Aircraft in 1986. Electronic Data Systems was made into a separate business in 1996, and GM gets a 20% stake in Fuji Heavy Industries that also made Subaru vehicles. GM takes full control of Saab in 2000, along with a 20% investment in Fiat.

In 2002, GM invested in Daewoo Motor Company and later, the partnership is called GM Daewoo Auto and Technology. In 2003, Hughes Electronics was sold to a News Corporation. General Motors has done many purposeful joint ventures over the years with more than ten such partnerships in China, which includes FAW-GM in China, Shanghai GM, and SAIC GM Wuling.

The current General Motors Company LLC was formed in 2009, which was part of the restructuring program after the former General Motors Corporation filed for bankruptcy under Chapter 11 reorganization. Many of the famous brands such as Pontiac, Saturn, and Hummer were closed following a reorganization.

In 2010, the new General Motors Company started trading publicly. It made an initial IPO at $33 per share and which was the largest in the stock market history, and the company showed profitability in the following year.

The year 2009 was one of the lowest periods for the auto giant as it managed to sell only 2.08 million cars in the US and was going through large restructuring. However, the company managed to spring back to sell more than 3 million cars by 2015. The number increased considerably, and in 2017 almost 9 million vehicles were sold all over the world.

In 2018, GM researched and worked on developing ‘self-driving’ technology. In March 2018, the company announced to produce its Cruise AV at its Orion Township plant in Michigan. However, the roof modules for the self-driving vehicles will be assembled in the Brownstown plant. GM posted revenue of $12.8 billion after EBIT (Earnings before interest and taxes) adjustment. The strong success was due to solid performance in the US, along with GM international.

However, the stock value fell from October 2017 onwards, and $45 per share came to $35 by the end of March 2018.

Current Business and Investment of General Motors

General Motors is a global giant when it comes to the production and sale of automobiles. The company enjoyed unprecedented success for nearly a century. General Motors is involved in designing, development, and sale of a wide range of vehicles that includes sedans, trucks, and sports utility vehicles (SUV). GM also develops numerous automobile parts and provides vehicle financing through General Motors Financial Company Inc.

General Motors does operations in four segments that are GM North America, GM International, GM Europe, GM South America, GM Financial, and Cruise. The automobiles are sold in various brands that include Chevrolet, Buick, Cadillac, GMC, Holden, Jiefang, Baojun, and Wuling. General Motors also manages Maven, which is a car-sharing service. General Motors remained the largest automobile manufacturer for 70 years from 1937 to 2007.

General Motors has many profitable partnerships and joint ventures in China, South Africa, and Russia. The company manufacturer variety of cars and trucks in more than 35 countries worldwide. GM has nearly 12,450 dealerships in more than 125 countries that sell the automobiles made by GM.

Risk and Potential in General Motors Environment

General Motors is a global automobile maker that excels in designing, manufacturing, marketing, and distributing a wide range of vehicles. General Motors makes and sells luxury and comfortable sedans, hatchbacks, SUVs, and trucks. SWOT analysis is a popular strategic tool that enables big organizations to measure their performance and financial health. The SWOT analysis of General Motors is given by

• Strengths

General Motors has a wide portfolio of reputable and dependable car brands that are sold all over the world. GM has been a benchmark and global leader when it comes to the production and distribution of automobiles. The company has a global presence with almost 400 facilities and 12,450 car dealerships. GM enjoys a big market share in the US and also has done valuable joint ventures in China, which has a big population and presents a tremendous opportunity for growth. Every year GM spends billions of Dollars on Research and Development that allows it to deliver new and innovative services and features in cars such as fuel efficiency, self-driving, eco-friendly cars, and improved safety features.

• Weaknesses

General Motors faces intense competition from rival brands both in the US and international markets. Until 2007, GM was the largest automobile maker among dozens of various car brands, but now it has slipped to the fourth or fifth position when it comes to both production and sales of vehicles. GM also had to recall a number of vehicles due to defective parts. In December 2019, the company recalled nearly 900,000 vehicles due to braking issues and the risk of fire. In previous years also GM had to recall millions of vehicles, which as a result negatively affected the image of the company.

• Opportunities

General Motors could invest and deliver its cars in emerging economies and do more meaningful joint ventures. GM could further develop its eco-friendly cars and be a leader as the future of the automobile industry is sustainable, electric, hybrid, and driverless vehicles. The trend of trucks and SUVs is increasing, and GM has an ideal opportunity to market its tough and durable trucks and SUVs.

• Threats

General Motors has to face challenges in progressing due to changing government policies and regulations. The company also has to comply with vehicle safety and environmental laws. GM faces a very tough competition from rival automakers that includes Toyota, Volkswagen, Tesla, Ford, Chrysler, Honda, BMW, Nissan, and Hyundai. As GM operates on a global scale, the currency rate fluctuations also impact the sales and revenue of the company.

Stock Analysis of General Motors

General Motors is listed and actively trades on the New York Stock Exchange (NYSE) with the ticker symbol ‘GM.’ The company is listed under the ‘Consumer Durables’ Sector, and the industry is ‘Motor Vehicles.’ General Motors is also a member of other indices such as the S&P-100 Index, and the S&P-500 Index.

The all-time high share price of General Motors was $46.48 on October 24, 2017, and the average price in the last 52 weeks is $30.90.

The ongoing Coronavirus pandemic has badly impacted the production, sales and revenue generation of General Motors. In July 2020, GM announced an almost $760 million net profit loss in the second quarter. However, the loss was less than the prediction by analysts due to the rise in sales of GM trucks. General Motors expected to ride high at the start of 2020 due to profitable truck business, ride-sharing application, Cruise (Driverless vehicles), and crossover vehicles, but the Covid-19 outbreak changed the complete scenario.

General Motors is trying to compete with fellow domestic rival brands Tesla, but GM’s current revenue is at $38 billion, while Tesla is at $295 billion and given the fact that GM sales were five times more than Tesla in recent financial quarters. GM has seen steady growth earnings. But there is $1.76 per share loss in the second quarter.

The Coronavirus situation forced the closing of factories, and every other business and people were asked to stay at home and practice social distancing. The closing of factories resulted in GM’s deliveries slip to 34% to 492,489, and retail sales also fell 24%. GM, along with its Chinese joint ventures, sold 713,600 vehicles and recorded a 5.3% decline as compared to last year.

General Motors is banking on its Electrical Vehicle (EV) program, which analysts predict can be worth $100 billion that will be nearly 2.5 times its current value. GM intends to close down the production of 6 sedans and double its investment in electric cars and self-driving cars. In the coming months, there is both potential and risk as the full economic impact of Coronavirus pandemic is still not known, and the overall global economic outlook is not looking promising amid the Covid-19 outbreak. The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.