GM: The Long-Term Investment Case

Early hopes of quick returns from General Motors’ (GM) November IPO have been dashed, other than for those who already sold at the right time. The post-bankruptcy shares debuted in November at $33, peaked at $39.48 on January 6, and are at $31.58 as of the July 8 closing. So are the shares, with an extraordinary low P/E ratio of 5.58, a bargain at a sub-IPO price? My view is that the shares represent strong long-term value, but with considerable risk that they won’t go much above current levels for a while.

Reconstitution of management team is still early

GM’s management team drove the company off a cliff in the late 2000s. Just how early the company is in transforming its leadership can be seen by comparison to perennial competitor Ford Motor (F). When Alan Mulally came to Ford in 2006 after a 36-year career in aerospace, skepticism that someone from outside the auto industry could run a car company abounded. Five years later, Mulally is entrenched at the automotive giant he turned around, with Mark Fields, a career Ford executive tapped as executive vice president and president for the Americas just before Mulally arrived, now long established in a key turnaround role.

Though also from outside the auto industry, GM chairman/CEO Dan Akerson has had many stops in his career, . . . .

Full text of article carried exclusively on Seeking Alpha.

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