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Why is GM Stock so Cheap?

The market still doesn’t notice this new auto business.

Andrew Willis 9 September, 2022 | 4:48AM
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Andrew Willis: Long gone are the days of having to overproduce automobiles to cover high labour costs, only to have to dump them into rental fleets and hurt residual values. And you can look to GM (GM) for much of what the new automaker business looks like.

GM now operates in a demand-pull model, says sector strategist David Whiston, where the company only produces once there’s demand for vehicles, and is structured to do no worse than break even at the bottom of an economic cycle. The result is higher profits than under old GM - despite a relatively lower U.S. share of the market.

Earlier this year, ‘new GM’ decided to hold onto its excess capital – shortly before buying up its own stake from Softbank. That signalled optimism in the new model, but we also just like management buying stock while it's so far below our fair value estimate.

From Morningstar, I’m Andrew Willis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
General Motors Co34.71 USD-0.94Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar.ca. He previously produced content for Fidelity Investments and finance events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @AndrewWillisCDN.

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