Why I think GM has a future

Monday, February 5th, 2007 @ 1:26 pm | Automotive, Finance

Well unlike Ford and Chrysler, GM seems to be making progress. Their designs are improving to the point where several of their cars are competing for sector dominance. They are not as reliant on trucks and SUVs as the other 2 domestic makers and are minimizing exposure to the shrinking market. Unlike Ford, GM is actually researching their own hybrid technology instead of buying Toyota’s. Hybrid technology, maybe not in it’s current implementation, is here to stay and not developing that core competency is a mistake. Unlike Chrysler, Gm is a global company that is doing very good in China and latin American, and is making huge improvements in Europe.

For years, GM was fueling growth through acquisitions despite constantly losing market share to the imports. It is going away from this model and has begun divesting itself to raise cash. Now I know they are doing it out of desperation but selling off losing businesses is a good move. The move to sell GMAC is desperate, but given the exposure of GMAC through ResCap to housing mortgages it looks to be a good move. The sale of Allison transmission and Suburu allows them to focus their resources on North America and leverage their other divisions. Cash is also good to have a GM. The one thing I really really dislike at GM is the reliance on Delphi. A strike a Delphi would wipe GM out due to its heavy reliance on the former GM division. If GM can prove to Wall Street that it can stop the losses in market share and make those sales profitably, then this stock will break through 40 so fast. I think a deal at Delphi and concessions at the UAW would do that. I think short term the stock is going to rise into earnings and that’s when I don’t know what I should do. There is really nothing to indicate that things will turn around now, monthly sales indicate a positive shift in mix but that’s about it. There is a lot that can really sink it.

Thiago Avila