Could GM’s Race for Profits Be Positive for Its Stock?



General Motors stock

During the week ended May 26, 2017, General Motors (GM) stock saw mixed trading and settled with 1.1% weekly gains. GM stock closed the week at $33.07. On a month-to-date basis, GM stock has lost about 4.5%. 

GM’s weak April sales could be the key driver that hurt investors’ sentiments in May. Now, let’s quickly review some recent updates.

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GM’s race for profits

General Motors (GM) has been closing its unprofitable business units around the world to protect its margins. GM finalized a deal on March 5, 2017, to sell its European business units to PSA Group for $2.2 billion.

On May 18, GM announced that it plans to stop selling its Chevrolet brand vehicles in Indian and South African markets by the end of 2017. With this move, the company expects to save about $100 million per year. However, this change in plan could also incur a charge of ~$500 million for GM, which would reflect in its 2Q17 earnings report.

In India, GM has a very low market share of less than 1%. The company still plans to continue manufacturing vehicles at its Talegaon, India, facility for export purposes. However, it plans to sell its Struandale plant in South Africa to Japanese automaker Isuzu Motors.

In the last couple of years, General Motors has been cutting its fleet sales so that it can focus on more profitable retail vehicle sales. This strategy of cutting fleet sales has recently improved the company’s profit margins, as retail sales tend to yield higher margins than fleet sales.

In terms of sales volume, GM is the largest automaker (IYK) in the US ahead of Ford (F), Fiat Chrysler (FCAU), and Toyota (TM).

Key technical level

Last week, General Motors (GM) stock retested a key support level near $32.30 and bounced back from this price level. This week, $32.30 could act as an immediate support level. On the upside, $34.40 could provide immediate resistance. 

GM’s 14-day RSI (relative strength index) is 44.6, reflecting a neutral bias in the underlying momentum.

In the next part, we’ll look at Ford Motor Company’s recent stock price performance and its key technical levels for this week.


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