GM recently made a number of optimistic comments about its future. These centered on its success in emerging markets such as China and its belief that it can keep 18% of the American market. There is plenty of proof that GM is doing well in Asia. There is almost no proof and there should be a great deal of skepticism about whether it can do well in its home market.
GM management said that its global second quarter sales were down 15% but are recovering.
The No.1 American car company pointed out that it is outperforming its global rivals in China. Management reported that sales in what has quickly become the world’s largest car market were up 38% in the first half. GM does face competition in China from local car companies and huge firms including VW and Toyota (TM), so there in very little assurance that it will be able to continue its current level of growth.
GM has staked its future on the fact that about two-thirds of its sales are now outside the US. It still has to face the issue that it may not be able to recover without a significant success in the American market.
GM claims that it can hold 18% of the US vehicle market. It would have to accomplish that after cutting brands including Pontiac and Saturn. That means that Chevrolet and Buick will have to improve sales much faster than other name plates, both foreign and domestic. There is little reason to believe that the large Japanese car companies and increasing competition from Korea will allow GM to be successful after so many years of failure in America.
Bank of America Merrill Lynch Research Analyst John Murphy recently predicted that GM would only be able to hold 15% of the US market. It is a market that will only produce 10 million new vehicle sales this year. GM is not likely to be able to get by on selling 1.5 million cars and light trucks.
GM can boast about its prowess overseas. The company won’t make it without a surge in American sales.
Douglas A. McIntrye
Top Gaining Stocks
Top Losing Stocks