General Motors (
) is currently the world's second largest automobile original
equipment manufacturer based on vehicle sales volume. GM sells
cars, trucks and crossover vehicles, and offers vehicle leases and
loans through GM Financial. Its business is diversified across
products and geographic markets, with operations and sales in over
120 countries. In China, GM operates primarily through its three
joint ventures. General Motors competes with players like Toyota (
), Honda (
), Ford (
(ETR:DAI), Volkswagen (ETR:VOW) and Hyundai (SEO:005380).
We recently launched coverage of the company with a
Trefis Price estimate of $45 for GM's stock
, which is about 25% above the current market price of $36.
The company's brands include Cadillac, GMC, Buick and Chevrolet
globally; Opel and Vauxhall in Europe; and Daewoo, FAW, Holden,
Isuzu, Jiefang, Baojun and Wuling in other international
markets. We've broken down our analysis of GM into eight major
business segments as shown below.
GM Cars U.S.
2. GM Trucks U.S.
3. GM Canada & Mexico
4. GM Europe
5. GM China
6. GM International
7. Vehicle Leases
8. GM Other Income
GM faced immense problems during the automobile crisis that
followed the global crisis but has managed to restructure its
business and come out stronger. The new GM commenced operations on
July 10, 2009 after it completed the acquisition of substantially
all of the assets and assumed certain liabilities of the old GM
through a 363 Sale under the Bankruptcy Code. In the second half of
2010, it achieved profitability.
GM's U.S. total vehicle sales business is the most valuable
business for GM. The vehicle sales business in U.S. is closely
followed by its vehicle sales business in China, where GM
operates through three joint ventures and is the second most
valuable region for GM. After GM sold its majority stake in Ally
financial, GM's vehicle lease business contributed only 5% to
GM's total valuation, but we expect GM's vehicle leasing business
to grow and become increasingly more valuable following the
acquisition of AmeriCredit.
GM's Brand Rationalization Strategy
GM is now focusing its resources upon four core
brands: Cadillac, GMC, Buick and Chevrolet. As a
result, GM completed the sale of Saab in February 2010, the sale of
Saab Automobile GB (Saab GB) in May 2010 and has ceased production
of the Pontiac, Saturn, and HUMMER brands as it continues to wind
down the related dealerships.
GM's Focus on the Chinese Market
GM's Chinese operations were established in 1997 and are
primarily composed of three joint ventures: SGM, SGMW and FAW-GM.
GM views the Chinese market, the fastest growing global market by
volume of vehicles sold, as important to its global growth
strategy and is employing a multi-brand strategy, led by the
Buick brand that is strong in China. In the coming years, GM
plans to leverage its global footprint to increase the number of
license plates under the Chevrolet brand in China. In China, to
limit the number of vehicles on the roads, a certain number of
license plates are issued each year and this creates a cap on how
many vehicles are sold in aggregate in China. This also
intensifies competition among manufacturers.
GM's Opel/Vauxhall Restructuring Plan in Europe
GM plans to continue to invest in capital, engineering and
innovative fuel-efficient power train technologies including an
extended-range electric vehicle and battery electric vehicles. The
plans also include aggressive capacity reductions including
headcount reductions. The restructuring plan will lower GM's
vehicle manufacturing costs, through manufacturing rationalization,
headcount reduction, labor cost concessions from the remaining
workforce and selling, general and administrative efficiency
By the beginning of 2012, GM plans to have 80% of all
Opel/Vauxhall cars on the roads be models that are less than three
years old and hopes this will refresh the brand and improve its
You can see the complete
$45 Trefis Price estimate for GM's stock here.