General Motors (NYSE: GM) could face doom because it is the only major American automaker without a serious international alliance.
Italy’s fiat owns GM’s rival Fiat-Chrysler (NYSE: FCAU); for example, and FCAU is merging with the French PSA Group (Peugeot and Citroen). Meanwhile, Ford (NYSE: F) has a growing partnership with the world’s largest automaker; Volkswagen AG (DE: VOW).
General Motors, in contrast, is pulling back from its international relationships. For instance, GM sold Opel and Vauxhall to PSA in 2017.
Consequently, General Motors is an America-centered company in an increasingly global auto industry. That could put GM at a disadvantage in the race to put electric vehicles in your driveway.
Ford; for example, has access to Volkswagen’s electric vehicle technology. Volkswagen; the leader in electrics, is on track to produce three million electric vehicles in 2025, CleanTechnica claims.
Is General Motors Dying?
However, GM is trying to adapt to the situation with drastic restructuring. General Motors cut its workforce by 14,000 people and closed seven factories in 2019, CNBC reports.
Furthermore, General Motors plans to eliminate 814 workers at its Hamtramck, Michigan, assembly plant, USA Today reports. The jobs are being cut so GM can restructure the plant to produce electric vehicles.
Parts of General Motors’ business are growing; however. GM Defense is one of three finalists for a $155 million contract to build 2,065 Infantry Squad Vehicles for the U.S. Army, The Detroit Free Press reports. The Infantry Squad Vehicle is an armored SUV that will haul soldiers around on the battlefield.
Is General Motors Growing?
GM Defense will modify and armor a Chevrolet Colorado ZR2 midsize pickup truck to create the Infantry Squad Vehicle.
GM Defense is competing with Oshkosh Defense and Flyer Defense, Science Applications International, and Polaris Government and Defense for the Infantry Squad Vehicle contract. Future plans at GM Defense include creating electric vehicles for the military.
Beyond defense, General Motors plans to invest $1 billion to build new versions of the Chevrolet Colorado and GMC Canyon midsize pickups in Wentzville, Missouri. The Detroit Free Press reports GM plans to spend $500 million for supplier tooling and machinery to support the Wentzville plant.
Pickup trucks are vital to GM’s future because America’s two best-selling vehicles are the Ford F-Series and Ram pickups. Ford sold 661,574 F-Series and Fiat-Chrysler sold 461,115 Ram pickups between January and September 2019, Car and Driver estimates
Furthermore, the third bestselling vehicle in America was GM’s Chevrolet Silverado Pickup during that period. General Motors sold 412,259 Silverados between January and September 2019.
General Motors needs to upgrade its pickup trucks to survive and make money in today’s auto market. In particular, GM needs to find new ways to market its pickups to average Americans.
Is General Motors Making Money?
General Motors (NYSE: GM) is making money. In fact, GM reported a $4.312 billion quarterly gross profit on 30 September 2019. Notably, that quarterly profit was down from $4.589 billion on 30 September 2019.
In contrast, General Motors reported quarterly revenues of $35,473 billion on 30 September 2019. Those revenues fell from $36.06 billion on 30 September 2019 and $35.791 billion on 30 September 2018.
Additionally, GM reported an operating income of $2.304 billion and an income after tax of $2.311 billion on 30 September 2019.
Is General Motors a Cash-Rich Company?
General Motors is a cash-rich company that reported an operating cash flow of $6.553 billion on 30 September 2019. GM’s quarterly operating income rose from $5.076 billion on June 30, 2019.
Plus, General Motors reported a $2.718 billion ending quarterly cash flow in September that rose from -$600 million in June. However, General Motors reported a negative financing cash flow of -$2.133 billion on 30 September 2019.
Thus, General Motors generates a lot of cash. Therefore, General Motors has one of the automaker attributes, I love it generates large amounts of cash.
Automakers generate lots of cash because people need to send in a cash payment each month to keep their car from being repossessed. Thus, General Motors has a continuous cash flow which is why Warren Buffett likes it.
Berkshire Hathaway (NYSE: BRK.B) owned 5.1% of GM; 72,269,696 shares, on 10 October 2019, CNBC reports. Buffett owns GM shares because General Motors generates cash from its business.
Another reason, Buffett loves GM is that it has float or cash left over at the end of the quarter. Accordingly, General Motors reported $26.776 billion in cash and short-term investments on 30 September 2019. That number was up from $24.121 billion on 30 June 2019.
Is General Motors a Growing Company?
General Motors’ revenue and profits are growing but its growth rate is falling. Stockrow estimates that General Motors’ revenue growth rate shrank for the first three quarters of 2019.
In detail, GM reported negative revenue growth rates of -3.38%, -1.9%, and -0.89% for those quarters. Therefore, GM is making more money but its business is shrinking.
However, General Motors has some interesting growth opportunities including pickups, electrics, and military vehicles. In addition, GM has a self-driving vehicle program called Cruise.
Cruise raised $7.25 billion from investors that include Softbank (OTCMKTS: SFTBY) and Honda Motors (NYSE: HMC), Wired reports. However, Cruise has delayed its plans for an autonomous taxi service. Thus, Cruise is behind Ford and Alphabet (NASDAQ: GOOGL) Waymo which are conducting real-world autonomous vehicle tests now.
Therefore, GM has some serious growth opportunities that could sustain it into the future. Yet, General Motors appears to be behind its principal competitors.
Is General Motors a Value Investment?
I think General Motors is a value investment because it has a cheap stock, lots of cash, and a lot of value.
For instance, GM had total assets of $150.964 billion on 30 September 2019. Conversely, General Motors’ total assets were down from $152.431 billion on 30 June 2019.
In contrast, Mr. Market paid $35.84 for General Motors (NYSE: GM) on 6 January 2020. However, General Motors is expensive when compared to Ford, for which Mr. Market was paying $9.16 a share on 6 January 2020.
GM is a Good Dividend Stock
GM is both a value investment and a good dividend stock. For instance, General Motors paid a 38₵ quarterly dividend on 5 December 2019.
In total, Dividend.com reports a GM share offered a dividend yield of 4.07%, an annualized payout of $1.52, and a payout ratio of 31.19% on 6 January 2020. However, General Motors has experienced no recent dividend growth.
I consider General Motors (NYSE: GM) is a good cheap dividend, income, and value stock. Conversely, General Motors is a risky stock because its North-American focus limits its growth potential. Thus, I think risk-averse people need to avoid General Motors.