GM Cruises To $27 With Gains In U.S., China And Brazil

-8.01%
Downside
49.01
Market
45.08
Trefis
GM: General Motors logo
GM
General Motors

A string of good news both domestically and internationally capped off what has been a good May for General Motors (NYSE:GM). The company witnessed strong sales growth in the U.S., China and Brazil in what could be a harbinger of things to come. Moreover, the company announced that its 2013 model of Chevrolet Volt plug-in hybrid will be able to travel 38 miles on a single charge of electricity, an increase of 3 miles from the current version. [1]

We currently have a Trefis price estimate of $27.50 for General Motors’s stock, which is about 25% above the current market price.

See our complete analysis for General Motor’s stock

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China and Brazil Impress

Sales in China jumped 21% to 231,183 cars in the month of May. For the five month period through May, total GM sales in China stood at 1.2 million, an increase of 11.5% on a y-o-y basis. Vehicle sales were boosted by a surge in demand for microvans. SAIC-GM-Wuling, the company’s microvan joint venture in the country, witnessed a 34% jump in the microvan sales. The only weak spot was Cadillac’s performance which saw its sales slip 2.2% to 2205 cars. [2] China is the most important segment and contributes almost 40% to the company’s valuation as per our estimates.

Coming to Brazil, GM passenger vehicle sales in the country jumped almost 38% in the month of May which was enough to beat out Volkswagen, which sold 45,664 cars. Total vehicle sales for GM stood at 45,826 for the month of May. [3]

Good Month for U.S. Automakers

May was a good month for GM as its sales of cars and trucks surged 11% to 245,256 vehicles, the highest in almost three years. It was a good month for the overall auto industry as Ford’s sales jumped 13% while The Chrysler Group LLC saw its sales climb by 30%. [4]

GM is also looking to offer retirees lump sums and annuities in place of monthly payments. [5] General Motors has an underfunded pension fund and will need to contribute a big chunk of its earnings to meet its liabilities. At the end of 2011, GM’s shortfall was $25.4 billion.

Volt Witnesses Improvements

Apart from the improved efficiency, GM has also added a ‘hold’ mode which will allow the users to switch off battery so that they can use gasoline before using the battery pack. GM has so far sold 7057 Volts in the U.S. till May, which is way more than 3368 Prius plug-ins sold by Toyota. However, the number still falls short of company’s expectation of 45,000 sales for 2012.

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Notes:
  1. GM extends range of Chevy Volt’s battery pack by 3 miles, freep.com, June 8, 2012 []
  2. UPDATE: GM China Sales Up 21.3% in May; Rise Bodes Well For Overall 2nd Quarter Sales, wsj.com, June 5, 2012 []
  3. In Brazil, General Motors Car Sales Beat Rival Volkswagen, forbes.com, June 7, 2012 []
  4. Ford and General Motors See Double Digit Sales Growth in May, marketwatch.com, June 6, 2012 []
  5. General Motors seeks to slash $26 bn in pensions, June 2, 2011 []