GM plans to have an annual EV capacity of 1 million units in North America by 2025.
The company is working on optimizing its software strategy and fine-tuning plans for new vehicles to improve quality and customer experience.
Cruise, GM's self-driving vehicle subsidiary, has recalled all 950 of its autonomous vehicles for a software update after an incident involving a pedestrian.
Is GM stock a good buy?
Is General Motors, GM, ( GM ) a good buy right now? That's the million-dollar question, isn't it? The Seeking Alpha Quant Rating Team says it's a Hold.
Below I have provided a further breakdown of the Profitability and Momentum factors since they are the two that stand out.
GM Momentum Grade D+
Seeking Alpha
I have to say, the quant team actually seems very kind to me giving GM a score of D+. I'm more in the F camp. See charts below.
GM Current Chart
Finviz
The stock has been in a steady downtrend for the majority of the year, as the SA Quant factor grade states. In fact, the dreaded death cross, when the 50 Day SMA crosses below the 200 Day SMA, was fulfilled in September. This is more often than not a sign of more downside to come. As a matter of fact, that downside did come. The stock is now trading at the same price is was a decade ago. See chart below
GM Long-Term Chart
Finviz
I posit many may be thinking, hey, GM is down big, it must be a buying opportunity due to the fact it's taken such a big hit as of late. Nevertheless, if you look at the long-term chart, you can see that the recent upside run over the last couple of years was an aberration. On the whole, GM's stock is simply back to trading where it has been for most of the past decade. Now, the reason for the huge run up in the stock was the great electric vehicle bonanza to come. GM's CEO Mary Bara pledged in an earlier interview that GM will:
"... make all of its vehicles diesel- and gasoline-free by 2035, and plans to produce 1 million EVs by 2025." According to Barra, "ramping up EV production means jumping straight to the 'end game.' We weren't going to do a half step."
Well, it seems as though things haven't turned as CEO Barra expected. The EV revolution has begun to stall. What's more, GM's foray into the autonomous self driving car business with Cruise has been a complete disaster. (More on these major issues later.) These two major issues for GM, along with the recent UAW strike and settlement are the reasons why I believe the next shoe to drop will be, unfortunately.
GM's one bright spot? The car maker's profitability. The SA Quant team currently has GM's profitability factor graded at an A+ . See below.
GM Profitability Grade A+
Seeking Alpha
Based on the current macroeconomic landscape and the highly elevated geopolitical tensions, on top of all the idiosyncratic issues GM has, I would rate GM a Strong Sell. Although GM did just beat on the top and bottom lines on their latest earnings. Let's take a look.
"Because we are in a highly competitive cyclical industry, we have been laser-focused on four fundamentals to strengthen our position; they are delivering vehicles that customers love and are willing to pay for, a competitive cost structure, marketing efficiency and incentive discipline, and matching production to demand."
This all sounds well and good, yet, as usual, I do have a few qualms with her statement when comparing it to the detailed targets. Let's first dig into the GM's EV production targets, shall we?
GM EV production analysis
During the latest conference call Barra stated that GM's commitment to an "all-EV" future is as strong as ever. Barra stated:
"Our commitment to an all-EV future is as strong as ever, and we continue to plan to have annual EV capacity of 1 million units in North America as we exit 2025 . This will allow us to participate in the EV market upside, but we are also scaling in a way that's consistent with the operating discipline I mentioned."
The issue I have with this statement is two-fold. First, GM is producing about 100,000 EVs as of today. So an exponential ten-fold increase in production by 2025 seems quite aggressive. I'm starting to be reminded of Ford ( F ) CEO Jim Farley's bold EV assertions earlier this year, which have all been retracted, by the way.
Finally, the tide has begun to turn regarding the demand for EVs. It seems as though all the " early adopters " have already bought an EV. Now car companies are trying to sell EVs to the general public which doesn't seem to be too excited about buying a new EV. I am one of them. I feel my concerns are substantially in line with most people in this cohort. First, it's a totally new paradigm. I have concerns about range, where to charge, how does the weather effect the battery, and how much does it cost to fix one if it breaks down. Tesla ( TSLA ), the leading EV car maker in the US, is having that issue right now with repairs. Tesla doesn't have dealerships throughout the US where you can take your car to be repaired.
So, I see EV demand waning in the coming years just as all the Detroit Big three along with all the smaller players are ramping up production, Rivian ( RIVN ) for example. This is not an ideal investment scenario. Not to mention the fact we may be heading into a recession at some point next year. So I see GM's foray into EVs as heading straight into a brick wall, like one of the crash test dummies, and failing miserably. Barra has actually pulled guidance going forward for this reason, I suspect. The sad part is, I haven't even gotten to the bad news: The Cruise autonomous self-driving cart segment announced it was halting all operations nationwide.
GM Self-Driving cars - The Cruise
Back when earnings came out, Barra was singing the praises of the Cruise, GM's self-driving car. She stated on the latest conference call:
"So, now let's turn to Cruise. Since the early days of our company, GM has been defining the future of transportation. And today, that's more true than ever with Cruise. In February, we celebrated Cruise becoming the first company to eclipse 1 million driverless miles. Fast forward to today and they have logged more than 5 million miles, and they continue to expand.
Just last week, we announced that GM and Cruise are working with Honda to bring driverless rides to Tokyo in early 2026. We'll do that with our Origin, the world's first-ever vehicle purpose-built for autonomous driving on public roads. As Cruise continues to push the boundaries of what AV technology can deliver to society, safety is always at the forefront, and this is something they are continuously improving."
Oh what a difference a month makes. Sadly, the Cruise apparently had an unfortunate incident with a pedestrian, according to a recent report , which led to the following:
"A few weeks later, the California Department of Motor Vehicles suspended Cruise's permits to operate its vehicles in California, citing a lack of cooperation in the investigation of the crash. Cruise claimed that it had promptly reported the incident, as required by regulations, and had cooperated fully with investigations by the state DMV and by the National Highway Traffic Safety Administration. About two days later, Cruise announced it was halting all operations nationwide while it investigated the incident what happened and the company's own response to it."
This was an extremely sad accident. Could this be the beginning of the end for GM's and all self driving car aspirations? It will, at the very least, set the timetable back substantially, I surmise. Now, let's delve into the the recent UAW strike agreement.
"General Motors and the United Auto Workers (UAW) struck a tentative deal on Monday, ending the union's unprecedented six-week campaign of coordinated strikes that won record pay increases for workers at the Detroit Three automakers.
"We wholeheartedly believe our strike squeezed every last dime out of General Motors," UAW President Shawn Fain said in a video address. "They underestimated us. They underestimated you."
Major concessions
Pay for veteran workers at Detroit Three to rise by 33%
UAW won right to strike future plant closures
Contract will boost GM labor, pension costs $7 bln -sources
Shawn Fain stated they "squeezed every last dime out of GM." That doesn't sound very good to me. What's more, a GM plant just voted down the tentative agreement with UAW . So it's not even a lock that the deal will be consummated. It probably will, but you never know. GM may have to make a few more concessions before its all said and done. The one bright spot for General Motors is the internal combustion engine or, ICE, segment. Which, interestingly, happens to be the one they are planning on discontinuing.
It's all about "ICE ICE Baby"
Most of you are probably too young to remember Vanilla Ice's song Ice Ice Baby, but I couldn't help evoking the phrase! The fact of the matter is, it's all about ICE vehicles for GM at present. The ICE segment is where GM has been excelling for years. On the recent conference call, Barra stated:
"For example, GM has now led the industry in full-size pickup sales for three consecutive years, and we have led full-size SUVs for nearly 50 years.
GM
"Our overall incentives have gone from consistently above the industry average to consistently below. And we are on track to exit 2024 with fixed costs that are $2 billion lower net of increased depreciation and amortization than 2022. And we're launching several new SUVs this year and next year that will be more profitable than the models they replace. "
GM
"Over the last several years, we have bolstered our position in high-margin segments, including full-size pickups, full-size SUVs, and large luxury SUVs."
So GM is crushing the ICE competition, the cost structure is coming down substantially, and this is the only profitable segment. Sounds like a segment I'd want to expand rather than discontinue, but that's just me. Now let me wrap this piece up.
The Wrap Up
I see no reason to start a new position in General Motors at the juncture. The macroeconomic and geopolitical state of affairs are negative and the stock is in a major downtrend. Moreover, the one bright spot, profitability, looks like it's going to be hit pretty hard going forward. If you are long and have a significant unrealized loss in the stock, I would consider speaking with your financial advisor and seeing if you could use the loss as part of a tax loss harvesting strategy. In situations like these, where the stock just fulfilled the death cross and has continued to make lower highs and lower lows (a falling knife), I would wait for some good news to come out and the stock to show some signs of life prior to starting a new position. It's better to miss out on the first 10% upside in order to not be subject to the next 20% downside.
The risk is not worth the reward regarding GM presently, even at this extremely cheap valuation. As they say, sometimes stocks are cheap for a good reason. That is the case with General Motors, in my opinion. Those are my thoughts on the matter. I look forward to reading yours.
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