General Motors (GM) has been one of the most renowned vehicle manufacturers throughout the world. Its establishment in the early 1900's saw it as the leader in automobile production in the United States. With a considerable number of subsidiaries and divisions in over 31 countries worldwide, General Motors was the true epitome of success in its heyday. Yet, General Motors' all too prosperous climax set on a seemingly downhill journey that led it to the edges of destruction. Although desperate attempts were made by the upper echelons of management, General Motors ultimately went to the dogs with the government initially turning down suggestions of a bailout. After a much heated debate in congress, a financial plan was put in place to resurrect General Motors from the ashes.
As a long time investor, I was quite happy to see the return of General Motors to the trading list. This rescue came at a cost, since some of the company's long time competitors had slowly but progressively recaptured their previously established market.
Among the key competitors of General Motors are Toyota (TM), which holds a swelling market cap of over $260 billion. Ford (F) proves to be a lesser threat with its $47 billion market cap. General Motors trails Ford with a market cap of just under $39 billion. Interestingly, its current position has not swayed the confidence of long term faithful investors like me. General Motors' stock price traded at just under $25, a 1.16% drop from its previous closing-a drop that has galvanized all fashions of negative opinions from the critic disposition. However, the slump in stock price has acted indiscriminately and main rival Ford has recorded a closing of around $12, a 0.28% drop from its previous closing. It should be noted that General Motors has taken considerable steps towards ensuring that it curb its losses and begin shaving off its debt column as it has decided to take a 7% stake in Peugeot.
I personally view this as a strong message from the General Motors incline. I deem this move as a bold and clear message to stake holders. It purports to reveal its willingness and commitment in reinstating its former glory, a move that will greatly boost the confidence levels in shareholders. The Peugeot acquisition will be quite helpful to both parties as it is estimated that it will save about $2 billion over the course of the next five years. General Motors' German based subsidiary Opel will also be a major benefactor to this deal. Recent reports reveal that its sales have dwindled in an unprecedented fashion. Such an acquisition will definitely trigger the uniform growth of the company which will in turn spark an increase in share value and share price. In order to snuff out the possibilities of rumors revolving around takeovers or any type of mergers, the parties have stated that they will each continue their marketing operations independently.
General Motors' production of fuel efficient cars has set a platform for it to stage its growth in subsequent years. The predominant inclination towards fuel efficiency comes at the wake of a global fuel crisis and increased fuel prices. Despite facing fierce competition from Ford, General Motors has been able to save face as the sale of fuel efficient vehicles has risen to 40% of its total sales compared to 16% in the past. Although General Motors is still trailing behind with a net income of $7.85 billion, playing catch up with Ford will be a seemingly downhill stroll. Along with the expansion to emerging markets in Africa and Asia, General Motors is still the leading international vehicle distributor in the world, a title that bears significance in the stock market.
Earlier this year, a law suit was filed by twenty eight union workers who claimed that General Motors had gone against their agreement with regards to the changing of their work status. The union workers had been laid off, but were later rehired as temporary workers, which put a 40% dent in their salary. They claimed that they were only seeking to have their respective work status changed and get the benefits that were owed to them. The fact that General Motors was able to survive action from the union goes to great lengths to show that it has been able to turn around and become more effective in crisis scenarios. Although the lawsuit may have had an unintended effect on the stock price which led to its slight reduction, General Motors was able to bounce back and resume normal trading. This bold move speaks volumes about its strategy and planning department, so to speak. I believe that this will draw in prospective investors and fortify the confidence levels in current share holders.
As an investor, I would enthusiastically recommend General Motors' stock to any individual looking for a long term investment. Regardless of the fact that it has gone through some bumps during its rebirth, the stock value looks extremely promising. Ford's reach is not as extensive as that of General Motors. If I was a betting man I would pick the latter to be my winning horse. Patience, a virtue common among few, should be exercised when it comes to General Motors as the results are sure to be highly rewarding. With a quarterly revenue growth of about 3%, General Motors investors should rest easy knowing that it is only a couple of paces behind other firms that did not require bailouts from the government or file for bankruptcy.
As for the future of General Motors, only time will tell. Currently, its management is wedged in efforts to unveil a results oriented strategy that will help the company reclaim its lost glory as a world leader in automobile production and distribution. General Motors should not be overlooked by investors.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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