Cyclical stock: General Motors
What’s America? General Motors, for sure, is a large part of it. Or at least used to be.
Most of us are quite close and familiar to such brands as Chevrolet, Buick or Oldsmobile. How about the holding company, do many of us actually know how General Motors had risen to the top, fell harshly and got back on top again?
The company was started in 1908 and was set to become a holding company for Buick, an already well-established brand in the US. Having Buick under one’s wing used to be a really big deal in the beginning of the past century.
However, at that time, a great man Henry Ford was already on his path of building an auto manufacturing monopoly which for General Motors was quite a pain in the neck.
Still, the company had thought out its strategies and tactics from the very beginning and they were mostly based on acquisitions to achieve rapid growth and expansion. One of the early acquisitions just happened to be Oldsmobile, a growing brand in the industry.
Not long after, the company had acquired some of these even more notable brands such as Elmore, Cadillac and Oakland, which would later become Pontiac. Some other companies who had been predecessors of GMC were also later purchased by the holding company.
There had been some mischievous actions taken by the founder, William Durant which would soon get him off the board and fired by the company. So, Durant, being quite a visionary had started another company with some other folks and named it the Chevrolet Motor Company.
The founder had become so successful with his new company that he, with the help of some borrowing, was able to get back his decent amount of share in General Motors. At that point, GM had already been moved to Detroit, the birthplace of the American automotive industry.
The company was jumping through good and bad years but eventually, with the monthly payments, better design and innovation, it had overthrown Ford‘s sales by a large number. GM had become the largest player in the entire country in the early sixties.
To have even more domination over the American market, the company had gotten into building trucks, tractors and even aircraft engines. It had also become quite a player in the financial industry as a large portion of car loans were being issued by the company itself.
The corporation was doing incredibly well in the next few decades. But then the nineties came and General Motors had started feeling the struggle of being an auto manufacturer more than ever before.
The company was in debt, also, it had the same financial issues as the other automotive businesses. That was followed by an incredible crash in the early 2000s which had made the corporation suffer even more.
8 years went by and the 2008 global economic crisis had begun, General Motors was thrown to the ground as hard as the investment banks.
Having massive debt and having very little to no sales, the company had nothing else to do but to declare bankruptcy. To rebuild this automotive empire, the board had to decide either to let the company die or go to only one corporation, more authoritative than itself – the US government.
After a number of congress hearings, testimonials, public hate, General Motors had finally got its life-jacket from the government, which was as large as 50 billion dollars. That life-jacket had made the US government practically the main shareholder in the company.
Even after getting that 50 billion-dollar rope from the government, General Motors was still not set for success. As a result of poor operations, the United States government had to add to add around 20 billion dollars more to the company.
The company had started emerging once again and eventually had filed for the IPO, which happened to be one of the largest public offerings in history. The company had raised so much money that from a bankrupt and dying titan, once again it had become the largest automaker on the planet. And all that only in 2 years.
When the government started funding the automaker, it had soon started selling its assets which included some of the more highly valued brands to Europe and decided to, pretty much, get off this continent.
Although the corporation does not have too much activity in Europe, its divisions reach as far as the Middle East, Asia and Africa, including multiple blocks in China and India, South Korea, *Istans, South Africa and Egypt.
During the next few years, the company had made some decent technological advancements, it had gotten into electric cars building Chevrolet Volt which had some success but it was quickly overthrown by Nissan and Tesla.
However, GM had quickly realized that it was only following the competition and decided to just get into deals with electric vehicle manufacturers.
So it started doing just that and one of the first contracts happened to be the one with Nikola Motors, quite a controversial company which claims to be making hydrogen fuel-cell powered and fully electric transportation.
This deal was very recent and it is not really clear for the public if it even went through.
However, it is probably highly inadvisable for GM to get in bed with Nikola because as of October, 2020 the hydrogen electric truck manufacturer is getting humongous number of lawsuits from the shareholders and it is not safe to say that Nikola would thrive or even survive in the near future.
General Motors should start developing more advanced technologies for the electric vehicle market because even as of today, the company is just following footsteps of the successful EV manufacturers.
It is safe to say that Ford is already headed in a wrong direction, some black hole can soon appear in front of the company as it has more than 170 billion dollars in debt with a quite large interest.
And is also missing out on the electric motors and their market by a very large market share. The future is electric and one who claims that it’s not, is a fool.
Of course, muscle cars are always going to be cool and fun, people love the sound of a Camaro or an Oldsmobile but their time has come. The times could not be more unpleasant for the big oil and companies like GM and Ford.
If they don’t have the right technology and resources for EV‘s yet, they should pour the last pennies they have into research and development. At least the public opinion would most like change dramatically and more investors would be standing up to invest.
That’s exactly what inspires people and lets them look forward to something. People enjoy new concepts of the future so they invest. Tesla is one of the greatest examples to back up this claim of ours.
Once the public notices that there is a way of disruption, it just cheers. General Motors could really leverage that and make their current situation to be an advantage. After all, the company already has electric cars but they are just not “fully loaded“, like, for example, Teslas are.
Investors would very likely be jumping on this stock if the corporation was doing a lot of development and research, and, of course, doing it all publicly.
It would be very unfortunate if such great company lost its market share after such great adventure that already lasted for more than 100 years.
Having such brilliant engineers the company could revolutionize the whole industry if only it hadn’t still been producing gasoline vehicles.
General Motors had been embedding itself in the American culture from its very beginning and making people’s lives easier, better, more comfortable. However, if it doesn’t follow the innovation of other car manufacturers today, it is clear that the corporation might be completely forgotten a hundred years after. Keep up, GM!
Now about the financials and the stock. The initial public offering took place in 2010 (second time) and was one of the largest in the US history, so the company had been trading publicly for around 10 years (officially).
The stock was not doing really well in these years, to say the least. In the past 10 years it hasn’t grown a single percent but rather dropped more than 10%. Well, that is the growth as of today, October 5th, 2020.
Of course, most of the time the stock had been up but the highest it ever got was around +20% in 2017. Nothing much happened after that except for going down. However, as mentioned earlier, if the company shows lots of effort in developing mostly electric vehicles, the future can be really bright both for its shareholders, investors and the company itself.
To conclude, it needs to be said that General Motors is and had always been and American icon, holding companies like Chevrolet, GMC, Buick, Oldsmobile and being their father.
Whatever massive or small issues, flaws and mistakes the corporation had in the past, it had always risen from the ground and remained the giant as everyone knows it. To prevent itself from these nasty situations and events happening in the future, GM absolutely needs to make all, or the majority of these Motors that they are famous for, electric.
The company clearly knows that it has to put all its efforts into EV‘s but most of GM factories have been built for manufacturing gasoline and diesel engines. So what is needed is enormous amounts of quality research, implementation of new tools, the best engineers they can find and also, public relations.
If GM plays this game well, even Tesla could start worrying even more about how to build the next big thing (metaphor). The company just needs to get people’s hearts back, those hearts and their generations which had been loyal to GM for decades.
General Motors has terrific leadership on its board, including executives from Lockheed Martin, HP, Walmart or Novartis. Bright minds thrown in a room together had been able to build the future for centuries.
Automotive industry still has lightyears to go forward, there is much improvement to be made in terms of the battery density for EV’s, fuel-cells for hydrogen vehicles, design, aerodynamics and much more.
Many people out there are waiting for some great news from General Motors to invest for the long-term. The future is here.