Jury Still Out on GM

Posted by: David Welch on October 30, 2007

There are signs that some investors think General Motors is turning things around. The company has gotten to break even this year. GM has a few hit cars, like the Cadillac CTS and Buick Enclave. A concession-laden union contract has promted another analyst to recommend GM’s stock. This week, UBS analyst Rob Hinchliffe put a “buy” rating on the stock, saying it could go as high as $48 a share from today’s price of just over $38 a share. His reason: The new labor contract is revolutionary. And indeed the deal with the union is supposed to erase about three-fourths of the $30 an hour labor cost penalty versus Toyota. With Hinchliffe’s vote of approval, seven Wall Street analysts are recommending the stock, which another seven aren’t yet ready to take the plunge on GM.

Why the 50-50 vote? It’s simple. GM may have cut a deal with the union to slash costs, but this company needs to ring the register. And on that score, it still has some real challenges. The first is the fact that oil is selling at around $92 a barrel. Not good for suv and pickup truck sales, which are still GM’s money makers. Car buyers still don’t flock to GM dealers for passenger cars. The housing mess still will wreak further mayhem on consumers. And today, reports show that consumer confidence in the job market is sinking. All of those factors will make it tough for GM to truly turn things around at home. GM may be saving enough money to weather the current consumer malaise, but for Wall Street the jury is still out.

Reader Comments

frank a

October 30, 2007 1:23 PM

The key for GM NA will be the sales of the new Malibu and the CTS. I also think their Dual-mode Hybrid trucks will sell very well.I have to give Rick Wagoner his due, a year ago the alleged experts were saying GM would declare bankruptcy. He has made GM a true global player with more sales outside the US than within, especially in emerging markets.

theo

October 30, 2007 4:59 PM

i dont think the "jury will be out" once the expense saved in the new UAW shows up on the bottom line - i find it almost amazing investors do not see the obvios coming - take the savings multiply by the number of vechicals GM produces ... and very simply you see an absurdly obvious, and huge profit - obviously this will not all go to the bottom line ... but, much of it will

DENNIS M MURPHY

October 30, 2007 5:03 PM

DONOT LIKE NEW FORMAT OF MAG.

getalifeagain

October 31, 2007 12:09 AM

GM can't make any more mistakes. They are already tackling the faddish CUV market and have plans to redo their entire car inventory, where the money will come back in the future.

corvette

October 31, 2007 10:52 AM

These analysts rarely mention the brand and dealer problem, too many of both by a long margin. These two problems will outweigh anything they try to fix. ex -dealer

Noz

November 3, 2007 12:43 PM

Give Rick Wagoner his due? For what? Having lost half the market share here in the US with the pushing of high-margin fuel-hog truck offerings and providing wimpy car lines for the rental fleets? That is some kind of strange marketing strategy.

And yes, too many dealers and then, of necessity, 'brands' of badge-engineered mediocre cars. And now the Sub & Tahoe (& GM clones) and the Opra-winning G6 are on the Not Recommended list of CR-- the Aura XR, Avalanche, and Saturn-Sky are judged unreliable.

I'd say the reps of Rick W. and his pal Rbt. L. are more than a bit tarnished.

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Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

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