Why is GM so Cheap?

The fat’s been cut already.

Andrew Willis 25 March, 2022 | 9:36AM
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Andrew Willis: Last week, GM (GM) announced it was buying out all of SoftBank’s ownership in its autonomous vehicle business, Cruise, for around two billion U.S dollars. Can they afford to do that?

Well, as sector strategist David Whiston calls the company today, “New GM” looks a lot different than “Old GM”. They have autonomous vehicles cruising around San Francisco, and soon Dubai. Costs are lower and there’s lots of cash. With plants closing and employee healthcare plans restructuring, GM’s break-even point is way down.

Meanwhile, technological advancements contribute to a lower cost base with vehicle platforms for models like the Chevy Malibu that the head of Consumer Reports says Honda or Toyota could learn from. With excellent earnings potential, the Cruise purchase makes sense, especially when ‘new’ GM also has tens of billions in cash and credit available…

For Morningstar, I’m Andrew Willis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
General Motors Co42.37 USD-0.16Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar.ca. Follow him on Twitter @AndrewWillisCDN.


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