How Much Value Can Europe Success Add To GM’s Stock Price?
General Motors (NYSE:GM) has had a tough time making profit in its European operations. It has found it difficult to keep transaction prices in Europe high, faced a market experiencing decline in new vehicle sales in three of the last four years and seen its market share decline as it cut down its Chevrolet brand from the continent. Given the size of the European car market- the third biggest behind China and the U.S.- and its potential for higher transaction prices, it can be one of the most profitable markets for the company if it manages to successfully restructure its operations there. The table below models two scenarios for the company in Europe. In one, the company continues on the same path, and in the other it manages to achieve margins similar to those in North America.
As you can see from the table above, achieving profitability levels similar to its North American operations in Europe can add 34% to our price estimate for the company.
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Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for General Motors
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