Automotive industry

Summary This report discusses General Motors Corporation, one of the largest auto manufacturers globally, manufacturing cars and trucks in 34 countries and its subsidiaries. This assignment is an analysis of General Motors Corporation’s financial stability. It is hoped that these findings illustrate the strengths and weaknesses of the company’s common stock as a potential investment opportunity. GM currently focuses on four brands as well as strategic joint ventures with other automotive brands worldwide.

GM operates under the core competencies of technology, leadership, large scale operations, and product & research development (www. gm. com). Despite the large scale operations of the company, GM has multiple areas of concern that need to be addressed in order to sustain long term value for both stakeholders and shareholders. Preliminary results of this analysis indicate that GM suffered enormous financial losses as a result of poor product quality, lack of consumer appeal, lag in alternative fuel technologies, inefficient plant production, and a saturation of similar car models amongst their brands.

Due to these factors, consumer perception has plagued the company‘s sales, resulting in a steady decrease in market share across all platforms (www. gm. com). Assignment #5 Financial Research Report - GM Company Overview General Motors Company develops, produces, and markets cars, trucks, and parts worldwide. GM also provides automotive financing services through General Motors Financial Company, Inc. (GM Financial). The company was formerly known as NGMCO, Inc. and changed its name to General Motors Company in July 2009. General Motors Company is based in Detroit, Michigan (finance.

yahoo. com). In efforts to reinvent its global presence, General Motors decided to focus on its "core brands" - Chevrolet, Cadillac, GMC, and Buick. Pontiac became a "specialty" brand that sells niche vehicles. Saturn, Saab, and Hummer were either closed or sold. To stay competitive in the highly competitive automotive industry, GM managers tried to identify which factors helped to determine consumer vehicle preferences in each of its automotive segments. These factors include: price, quality, available options, style, safety, reliability, fuel economy and functionality (finance.

yahoo. com). December 31, 2010 GM’s worldwide market share grew but not significantly. Vehicle sales volumes in at year end were consistent with a gradual U. S. vehicle sales recovery from the negative economic effects of the U. S. recession first experienced by Old GM in the second half of 2008. December 31, 2009 combined GM and Old GM worldwide market share imploded. In 2009 the U. S. continued to be negatively affected by the economic factors experienced in 2008 as U. S. automotive industry sales declined drastically when compared to those of December 31, 2008 (finance.yahoo. com).

December 31, 2008 the Old GM’s worldwide market share was dire. In 2008 worldwide market share was severely affected by the recession in Old GM’s largest market, the U. S. , and the recession in Western Europe. Tightening of the credit markets, increases in the unemployment rate, declining consumer confidence as a result of declining household incomes and escalating public speculation related to Old GM’s potential bankruptcy contributed to significantly lower vehicle sales in the U. S. These economic factors had a negative effect on the U.

S. automotive industry and the principal factors that determine consumers’ vehicle buying decisions. As a result, consumers delayed purchasing or leasing new vehicles which caused a decline in U. S. vehicle sales (finance. yahoo. com). GM’s automotive operations meet the demands of its customers through four automotive segments: GM North America (GMNA), GM Europe (GME), GM International Operations (GMIO) and GM South America (GMSA). GM’s total worldwide vehicle sales were 8. 4 million in December 2010.

Total combined GM and Old GM worldwide vehicle sales in December 2009 were 7. 5 million. Old GM’s total worldwide vehicle sales were 8. 4 million December 2008. Substantially all of the cars, trucks and parts are marketed through retail dealers in North America, and through distributors and dealers outside of North America, the substantial majority of which are independently owned (secfilings. nasdaq. com). According to the latest available data per 2/19/2011 the company had around 209,000 employees and market capitalization of 54.

76 billion U. S. dollars. Its quarterly revenues growth was 27. 20% year on year, resulting in the 131. 04 billion U. S. dollars of revenue for the last trailing twelve months. Gross operating margin was 10. 35% and net operating margin was 1. 66%, both data for trailing 12 months. Company's net income in the last four quarters was 638 Million dollars, giving us earnings per share (EPS) of -0. 02. Current price earnings ratio (P/E) is N/A, and price sales ratio is 0. 42, all figures for trailing twelve months.

Expected price earnings growth ratio (PEG) for the following five years is 1. 17. The new General Motors Company was formed by the United States Treasury (UST) in 2009, and prior to July 10, 2009, the business was operated by Old GM. On June 1, 2009, Old GM and three of its domestic direct and indirect subsidiaries filed voluntary petitions for relief under Chapter 11 (the Chapter 11 Proceedings) of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York (Bankruptcy Court).

On July 10, 2009, through certain of subsidiaries, acquired substantially all of the assets and assumed certain liabilities of Old GM in connection with the 363 Sale closing. Through its purchase of substantially all of the assets and assumption of certain liabilities of Old GM in connection with the 363 Sale, General Motors launched a new company with a strong balance sheet, a competitive cost structure, and a strong cash position, which some believe will enable GM to compete more effectively with U. S.

and foreign-based competitors in the U. S. and to continue its strong presence in growing global markets (finance. yahoo. com) In particular, the new GM acquired assets that included Old GM’s strongest operations, and believe the company now has a competitive operating cost structure, partly as a result of recent agreements with the International Union, United Automobile, Aerospace and Agriculture Implement Workers of America (UAW) and Canadian Auto Workers Union (CAW). GM’s new vision is to design, build and sell the world’s best vehicles.

Executive leadership and employees are now committed to: | • | | Building its market share, revenue, earnings and cash flow; | | • | | Improving the quality of GM cars and trucks, while increasing customer satisfaction and overall perception of its products; and | | • | | Continuing to take a leadership role in the development of advanced energy saving technologies, including advanced combustion engines, biofuels, fuel cells, hybrid vehicles, extended-range-electric vehicles, and advanced battery development.

| In November and December 2010 GM facilitated a public offering of 550 million shares of our common stock and 100 million shares of our Series B Preferred Stock and listed their common stock on the New York Stock Exchange and the Toronto Stock Exchange and listed GM Series B Preferred Stock on the New York Stock Exchange. GM received net proceeds of $4. 9 billion from the offering of the Series B Preferred Stock (investing. businessweek. com).

As of February 15, 2011 the company had a total of 1. 6 billion issued and outstanding shares of common stock and a total of 318 million shares of common stock for which warrants were initially exercisable by two warrant holders of record. As of February 15, 2011 there were 185 holders of record of GM’s common stock. Since the formation of the new GM, the company has not paid any dividends on its common stock. There are no current plans to pay any dividends on its common stock.

So long as any share of our Series A or Series B Preferred Stock remains outstanding, no dividend or distribution may be declared or paid on GM common stock unless all accrued and unpaid dividends have been paid on its Series A and Series B Preferred Stock, subject to exceptions, such as dividends on its common stock payable solely in shares of its common stock. GM’s secured revolving credit facility contains certain restrictions on its ability to pay dividends on common stock, subject to exceptions, such as dividends payable solely in shares of company common stock.

GM reports, so long as any share of its Series A Preferred Stock remains outstanding, no dividend or distribution may be declared or paid on its Series B Preferred Stock unless all accrued and unpaid dividends have been paid on its Series A Preferred Stock, subject to exceptions, such as dividends on Series B Preferred Stock payable solely in shares of its common stock (sec. gov). Payment of dividends in the future, if any, will be determined by GM Board of Directors and will be paid out of funds legally available for that purpose.

GM’s payment of dividends in the future will depend on business conditions, financial conditions, earnings, liquidity and capital requirements, the covenants in its new secured revolving credit facility, and other factors (sec. gov). There are a number of significant risks and uncertainties in connection with GM’s operations, which are Sales volume, Public perception , Competitors (new & improved products), Increase in cost, disruption of supply, and shortage of raw materials , Ability to achieve long-term profitability , Technological advances, Government restrictions (laws & other restrictions)

In closing, most analysts agree that General Motors stock is in a bullish triangle formation. This market remains in the confines of a longer-term Downtrend with tight money management stops. Based on these findings, General Motors common stock is not considered to be a wise business investment now or in the immediate future. References Berk, J. , & DeMarzo, P. (2010). Corporate Finance: The Core: 2010 custom edition. (2nd Ed. ). Boston: Pearson Education. General motors. (2011, May 03). Retrieved from http://finance. yahoo. com General motors. (2011, May 03). Retrieved from http;//secfilings. nasdaq. com

General motors. (2011, May 03. ). Retrieved from http://investing. businessweek. com General motors. (2011, May 03). Retrieved from http://sec. gov/Archives/edgar/data/1467858/000119312511051462/0001193125-11-051462-index. htm 2010| 2009| 2008| 2007| | Period End Date| 12/31/2010| 12/31/2009| 12/31/2008| 12/31/2007| | Period Length| 12 Months| 12 Months| 12 Months| 12 Months| | Stmt Source| 10-K| PROSPECTUS| PROSPECTUS| PROSPECTUS| | Stmt Source Date| 03/01/2011| 08/18/2010| 08/18/2010| 08/18/2010| | Stmt Update Type| Updated| Updated| Updated| Updated| | | | | | | | Revenue| 135,423. 0| 104,116. 0| 147,732. 0| 177,594.

0| | Other Revenue, Total| 169. 0| 473. 0| 1,247. 0| 2,390. 0| | Total Revenue| 135,592. 0| 104,589. 0| 148,979. 0| 179,984. 0| | | | | | | | Cost of Revenue, Total| 118,944. 0| 112,195. 0| 149,257. 0| 165,573. 0| | Gross Profit| 16,479. 0| -8,079. 0| -1,525. 0| 12,021. 0| | | | | | | | Selling/General/Administrative Expenses, Total| 11,446. 0| 12,359. 0| 19,050. 0| 15,959. 0| | Research & Development| 0. 0| 0. 0| 0. 0| 0. 0| | Depreciation/Amortization| 125. 0| 190. 0| 749. 0| 1,259. 0| | Interest Expense (Income), Net Operating| 0. 0| 0. 0| 0. 0| 0. 0| | Unusual Expense (Income)| -196. 0| -126,878. 0| 567. 0| 552.

0| | Other Operating Expenses, Total| -7. 0| 751. 0| 409. 0| 545. 0| | Operating Income| 5,280. 0| 105,943. 0| -21,187. 0| -4,309. 0| | | | | | | | Interest Income (Expense), Net Non-Operating| 0. 0| 0. 0| 0. 0| 0. 0| | Gain (Loss) on Sale of Assets| 0. 0| 0. 0| 0. 0| 0. 0| | Other, Net| 0. 0| 0. 0| 0. 0| 0. 0| | Income Before Tax| 5,737. 0| 102,493. 0| -29,471. 0| -6,346. 0| | | | | | | | Income Tax - Total| 672. 0| -2,166. 0| 1,766. 0| 36,863. 0| | Income After Tax| 5,065. 0| 104,659. 0| -31,237. 0| -43,209. 0| | | | | | | | Minority Interest| -331. 0| -396. 0| 108. 0| -406. 0| | Equity In Affiliates| 1,438.

0| 558. 0| 186. 0| 524. 0| | U. S. GAAP Adjustment| 0. 0| 0. 0| 0. 0| 0. 0| | Net Income Before Extra. Items| 6,172. 0| 104,821. 0| -30,943. 0| -43,091. 0| | | | | | | | Total Extraordinary Items| 0. 0| 0. 0| 0. 0| 4,549. 0| | Discontinued Operations| 0. 0| 0. 0| 0. 0| 4,549. 0| | | Net Income| 6,172. 0| 104,821. 0| -30,943. 0| -38,542. 0| | | | | | | | | | | | | | Total Adjustments to Net Income| -1,504. 0| -131. 0| 0. 0| 0. 0| | Preferred Dividends| -1,504. 0| -131. 0| 0. 0| 0. 0| | General Partners' Distributions| 0. 0| 0. 0| 0. 0| 0. 0| | | | | | | | | Basic Weighted Average Shares| 1,500. 0| 924. 5| 579.

0| 566. 0| | Basic EPS Excluding Extraordinary Items| 3. 11| 113. 24| -53. 44| -76. 13| | Basic EPS Including Extraordinary Items| 3. 11| 113. 24| -53. 44| -68. 1| | | | | | | | Diluted Weighted Average Shares| 1,624. 0| 924. 5| 579. 0| 566. 0| | Diluted EPS Excluding Extrordinary Items| 2. 87| 113. 24| -53. 44| -76. 13| | Diluted EPS Including Extraordinary Items| 2. 87| 113. 24| -53. 44| -68. 1| | | | | | | | Dividends per Share - Common Stock Primary Issue| 0. 0| 0. 0| 0. 5| 1. 0| | Gross Dividends - Common Stock| 0. 0| 0. 0| 0. 0| 0. 0| | Interest Expense, Supplemental| 1,098. 0| 6,151. 0| 2,659. 0| 3,399.

0| | Depreciation, Supplemental| 4,363. 0| 9,756. 0| 18,641. 0| 9,439. 0| | | | | | | | Normalized EBITDA| 12,007. 0| -9,522. 0| -1,762. 0| 6,161. 0| | Normalized EBIT| 5,084. 0| -20,906. 0| -20,486. 0| -3,352. 0| | Normalized Income Before Tax| 5,541. 0| -24,385. 0| -28,904. 0| -5,794. 0| | Normalized Income After Taxes| 4,891. 96| 22,188. 3| -30,868. 45| -42,850. 2| | Normalized Income Available to Common| 4,494. 96| 22,219. 3| -30,574. 45| -42,732. 2| | | | | | | | Basic Normalized EPS| 3. 0| 24. 03| -52. 81| -75. 5| | Diluted Normalized EPS| 2. 77| 24. 03| -52. 81| -75. 5| | Amortization of Intangibles| 2,560. 0| 1,628. 0| 83. 0| 74. 0| |