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Does GM Have Good Potential despite Trump’s Criticism?

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General Motors

In this series so far, we’ve analyzed the recent trend in General Motors’ (GM) earnings, revenues, and profit margins. The company has managed to beat Wall Street analysts’ revenue estimates in the last six quarters with the help of the rising sales of its expensive pickup trucks and SUVs.

Although GM’s profit margin contracted slightly in the fourth quarter, it was still far better than the profit margins of its direct peers (IYK) (IVV), including Ford Motor Company (F) and Fiat Chrysler Automobiles (FCAU).

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President Trump’s criticism

Recently, General Motors faced criticism from President Donald Trump for its November 2018 decision to close its Ohio factory. In a tweet on March 16, President Trump asked the company to open its Ohio plant “because the economy is so good.” In his next tweet, he criticized the company, saying, “G.M. let our Country down,” and he implored the company to “stop complaining and get the job done!”

In 2009, during the financial crisis, General Motors had to take a trip to bankruptcy court before receiving a huge bailout package, which the government estimated to be worth $11.2 billion.

Since then, a lot has changed at GM. The primary focus of the company’s current chair and CEO, Mary Barra, remains its highly profitable business segments. The company also hasn’t shied away from making tough decisions, such as the one to exit some of its key markets (including Europe) in 2017, to protect its profitability in the last few years.

Change in focus

In the last few years, GM has tried to boost its retail sales and cut its fleet sales to daily rental companies to boost its profitability. Note that vehicle sales to retail customers tend to yield higher margins for automakers than fleet sales to daily rental companies.

General Motors’ plan to close its factories in Ohio and elsewhere and cut jobs shows that the company is determined to protect its profitability.

GM has raised its bets on autonomous vehicles, electric vehicles, and future mobility services in the last couple of years, which could help it stay ahead of the competition in the long term.

All of these measures taken by the company suggest that it could still be a good potential buy despite President Trump’s recent criticism.

Let’s move on by looking at GM’s valuation multiples.

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