Consider this. Since late December 2005, GM’s (GM) stock has doubled to about $38. With all of the excitement about the sale of Chrysler, Daimler’s (DCX) stock is up 80%. Ford (F) and Toyota (TM) are up about 20% over that period.
GM’s share of the US car market is actually worse than it was 18 months ago, but several other things have happened.
The largest US car company saw the industry disaster coming and acted earlier than Ford or Chrysler. It began its cutting and took out $9 billion in annual costs. GM’s revenue in North America may never grow again, but it has taken so much out that, with successful UAW negotiations this Fall, it could end up with better net income than it has had since 2004.
GM also got lucky. After spinning off Delphi, its huge parts company, labor costs put it into bankruptcy. GM had signed a deal guaranteeing certain labor costs, and the UAW looked to the car company to honor those. Delphi used the threat of a court-ordered set of cutbacks to get the union to offer reasonable work terms. GM got off the hook for some substantial liabilities. And, a strike at Delphi which could have shut GM down was averted
GM was also early into China. It now, with joint venture partners, has the No.1 market share in the country. Wall St. looks to that market and India as growth engines for all the big car companies, and GM has put itself into a lead.
A lot of investors wanted the GM management fired in early 2006. Kerkorian and Ghosn came calling and GM’s board wouldn’t buying that they could fix the operation. Some of the bond rating agencies even said that there was a substantial chance that GM would have to file for Chapter 11.
GM. Up 100% in a year-and-a-half. Improbable on a good day.
Douglas A. McIntyre can be reached at douglasamcintyre@24/7wallst.com. He does not own securities in companies that he writes about.
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