What's Really Changed at the New GM?
A lot, actually. This automaker has tremendous upside as it fights industry headwinds and transforms itself into a global presence.
What makes a great car company? At the big-picture level, we think the answer is simple: Great products made in the most cost-effective manner possible. So we are taking a deeper dive into General Motors Company (GM), or New GM, to see what's really changed since it emerged from the bankruptcy of General Motors Corporation (Old GM). We find that in some ways GM still has work to do, but in other areas, such as labor costs, the new GM is a radically different company that is superior to Old GM.
The stock still seems extremely cheap to us on a discounted cash flow basis and at a P/E multiple of less than 5 times 2013 consensus, but not as cheap when looking at enterprise value, including GM's huge pension underfunding of $32.7 billion. Although Europe, legacy costs, and government ownership are likely to keep GM's P/E multiple depressed this year, we continue to believe the stock offers compelling value for the long-term investor.
David Whiston does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.