GM Stock Shed 5.8 Percent Last Week, Here’s Why13
The value of GM stock fell 5.8 percent during the week of September 3rd, 2018 on rumors that the automaker’s sales declined 13 percent in August.
General Motors shares opened on Tuesday, September 4th (the day after the long Labor Day weekend) on the New York Stock Exchange (NYSE) at $36 per share and closed on Friday, September 7th at $33.91 per share.
Starting in April, General Motors decided to report sales figures on a quarterly basis, ending the decades-long practice of sharing sales results every month. Due to the new practice, GM refused to confirm or deny the rumored August sales results, which were originally reported by Bloomberg News on information from two sources. The automaker did, however, confirm that it reduced discounts during the month and saw Average Transaction Prices (ATPs) increase by $915 on an annual basis.
GM is expected to release sales figures for the third quarter of 2018 in the the first few days of October. The sales results will include figures for July, August and September – but the figures will not be broken out by month.
Consequently, it would appear that GM’s experiment of switching to quarterly sales reporting sales has backfired, at least for the time being.
Alleged Declining Silverado Sales
One of the biggest things worrying investors is an alleged 23 percent drop in Silverado sales in August. The figure was leaked on Tuesday by sources speaking to Bloomberg News on the basis of anonymity.
However, the validity of the numbers was called into question by several GM Authority readers in the comments section, who claim to have seen the data.
The 5.8 percent drop during the week of September 3rd is the latest in a long-running erosion of GM stock prices. The automaker started the year trading at a rather decent $41.24, but the current $33.91 share price represents a not-insignificant 17.7 percent decline.
The single biggest blow to GM’s stock price in the history of the “new GM” came following Q2 earnings, where the automaker revealed that higher commodity prices will sap roughly $1 billion USD in profit from its 2018 fiscal year.
We’re sure that the ongoing NAFTA negotiations aren’t helping the stock’s value, as uncertainty associated with new deal persists. President Trump has threatened to levy tariffs on vehicles made in Canada if the U.S.’ northern neighbor doesn’t agree to the terms of the new deal reached with Mexico.
General Motors currently has three active manufacturing plants in Canada: CAMI Assembly, Oshawa Car Assembly, and St. Catharines Propulsion. Together, these facilities produce the Cadillac XTS, Chevrolet Equinox, Chevrolet Impala, Chevrolet Silverado, and GMC Sierra, as well as six-speed automatic transmissions and V6/V8 gasoline engines.
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what about trump’s threat of tariffs for vehicles made in canada? i’m sure that didn’t help.
They will just make them.in the U.S. “Threat of tariffs” would apply to ALL automakers like Honda and Toyota who make vehicles in Canada for U.S. export. Same with Mexico. You don’t see the Japanese whining about potential tariffs…Even the Mexicans and Germans admitted they were wrong and now agree with President Trump.
GM makes too many excuses and unfortunately aligned themselves (some of the execs) with the wrong political party.
who knew taking changing an entire supply chain for a complex product like an automobile was so easy.
if that is the case, it should be even easier for someone selling chinese made ties and hats to make them in america.
This reduction in price is not due to the tariffs. This is due to GM’s decision to not report monthly and follow Tesla’s decision to report quarterly
SEC is investigating Tesla on multiple fronts, luckily this is not GM’s issue.
However, investors do not like “opaqueness” and quarterly sales reporting when everyone else is reporting monthly is not going to lead to a gain in investor confidence, in fact it leads to an overall reduction in confidence
It didn’t help that GM decided to bet on 2 main markets, China and the US, and now both are simultaneously facing headwinds. For the US it is anticipated slowing sales after 4 very good years, while for China it is a mix of trade war with a slowing down in growth within there market and that growth has been hot for over 20 years. So a slow down should have been anticipated and planned for by GM Management with respect to the China Market
The stock would have higher valuation if there were either a new Europe leg or if GM had not sold off Opel. Investors (Hedge Funds) consider this when making decisions on valuations. Overall profitability is important but continual market share losses, decreased geographical footprint, declining sales, and the risk that GM will make the Ford mistake and withdraw from passenger car production in the US, will continue to drag down GM Stock valuation until these issues are able to be turned around
I am sorry to say GM needs to reduce its prices across the board on its product line and accept reduced margins on its cars, SUV’s and Trucks in order to remain relevant and capture sales. Current focus on “Margins” will lead to a lack of investor confidence for the reasons i mentioned earlier.
I see both of your points. The uncertainty associated with NAFTA is definitely an issue on the investment front, though I don’t know how big it may be.
But yes, I agree with you, Joseph – GM has painted itself into two markets, which is extremely limiting. Sure, they’re the biggest markets in the world by volume… and the U.S. is the biggest by profit, while profit from China is extremely weak compared to the sales volume generated there. GM must return to Europe with Chevy and Cadillac seriously.
On the other hand, GM got out of Europe to at least curb the Opel-related losses in order to invest that capital into making more EVs and autonomous R&D efforts. Still, I think abandoning various global markets is a short-sighted decision that puts the firm at a competitive disadvantage. Getting rid of Opel would have been fine if GM were to have re-introduced Chevy into Europe… but there’s no sign of that taking place.
My guess is they will return to Europe with autonomous technology and ride-sharing services.
In fact, the whole strategy of GM has been to shed off excess manufacturing capacity, which would make sense when the market shifts from owning a car to using mobility services (including taxi services by self-driving cars).
Agreed. They could also return with EVs – which might give them a leg-up in the space, if only temporarily.
I don’t think the market shift from owning to mobility services will happen any time soon, so not sure that shedding manufacturing capacity is a good idea… I guess we’ll see.
Very intelligent and informed response. Not a political hack. Thank God. We could all do with less politics in this world and focus on practical results and facts.
GM needs to wake up to a new world and start delivering. No more whining because the competition isn’t complaining about tariffs (unless they have serious business problems and are looking for excuses). Build in the U.S. as much as possible for the American market, use higher profits to focus on LONG TERM PLANNING.
It’s not just those models that GM produces in Canada that put GM sales at risk if there’s a tariff war.
If the Canadian government were to reciprocate with a 25% tariff on US produced vehicles, then all those other vehicles that GM builds in the US and exports to Canada are at risk.
There has been free trade in the auto industry between Canada and the US since the 1965 Auto Pact — long before NAFTA. It allowed automakers to consolidate production and build their models more efficiently. Most Canadian produced vehicles are exported to the US — but the rest of the GM line up in Canada is imported — and mostly from the US.
Similarly, there is free trade in the parts industry — even for vehicles assembled in Canada, there are lots of US components.
Depending on things like exchange rates between the countries, the market and models built, down times for model changes, etc., sometimes the trade is in Canada’s favor, sometimes in the US’ favor.
I don’t think the Silverado / Sierra numbers are going to get any better, given the wide spread disappointment in the 2019 models.
GM moved to canada to take advantage of the govt backed health care. GM moved to mexico to take advantage of it free trade agreements with other countries that allows GM to sells those car without import duty in some countries.
No they didn’t. You should actually take some time to read some history before making yourself look stupid.
GM Canada started in 1908 — long before universal healthcare.
are you saying this was no advantage to GM ??