Market predictions are hard. With so many different contributing factors to take into consideration, things don’t always pan out as expected. Case in point: back in 2017, Barron’s predicted that GM stock would see a 35 percent spike following the sale of Opel. In truth, GM shares only climbed only a few percentage points.
Thing is, Barron’s original prediction was pretty well-informed. In February of 2017, Barron’s reporter Jack Hough wrote that following the sale of Opel, GM stock valuation would rise as much as 35 percent in a year.
Announcing the sale of Opel to PSA. Left to right: PSA CEO Carlos Tavares, GM CEO Mary Barra, Opel CEO Karl-Thomas Neumann.
The prediction made sense. After all, GM wasn’t making any money on Opel. For years, GM Europe either broke even or dipped into the red, but profits were never really a strong possibility.
Opel was a sacred cow of sorts for GM, as it had been with the company for roughly 100 years. So, rather than offload it, GM made several attempts to turn it around, hoping to push it back into the black after decades of losses. Even so, a best-case scenario included $1 billion to $2 billion in profit a year, the same amount of money GM makes in the U.S. in a quarter.
Unfortunately, none of the attempts to turn the division around were successful under GM, while PSA recently managed to make $978 in profit on Opel. What’s more, The General couldn’t simply shudder the operation, giving how difficult it is to close plants and lay off employees in Europe. At the time, GM Europe had some 36,000 employees across 23 plants and a central office.
So then, with Opel being such a liability and draining so much cash, it was a worthwhile prediction that GM stock would see a significant spike following its sale. But what really happened?
On February 1st, 2017, just a few weeks before Barron’s made its report, GM stock was valued at $36.84. On March 1st, 2017, a few days before the sale was finalized, the stock was valued at $35.36, while on May 1st of 2017, about two months after the sale, the stock was at $33.93.
As of this writing (8/15/2019), GM stock is trading at $36.23 per share.
| Date | Valuation | % change from Feb 2017 |
|---|---|---|
| 2/1/2017 | 36.84 | - |
| 3/1/2017 | 35.26 | -4.29% |
| 5/1/2017 | 33.93 | -7.90% |
| 8/15/2019 | 36.23 | -1.66% |
Essentially, GM stock has seen a 2.5 percent growth since March of 2017, pretty far from the 35 percent spike originally predicted.
So then, we reiterate our previous point – market predictions are hard. That said, staying well-informed isn’t. Just subscribe to GM Authority for around-the-clock GM news coverage.
Comments
gm’s stock price hit 46.76 on 2017-10-24. so using a base price of $35, that comes out to about 34%.
so yeah, gm’s stock price did jump about 35% within one year.
Steve,
You’re cherry picking numbers to give a false impression. You’re a creator of fake news!
GM stock has been dead money. Profits are too low.
They should never make decisions in function of the “smart analysts” opinions: They are inept, selling Opel wasn’t certainly a good move and furthermore, it showed the GM’s inability to manage their brands whereas Opel would have been imbedded in a electric solution with common platforms. Now, PSA and Mr Tavares looks like saviors!
This was one of the best decisions GM has ever made. Getting rid the those two brands will help them in the future.
Now GM needs to move on to Holden
Quitting the third largest & second most profitable market is never a wise move.
China was seen as the great frontier for years. it was Unfortunately, in the with all the JVs many analysts see little value in GM’s Chinese portfolio due to the dreadfully low profit margins. Itcontributed less than 15% yearly profit and while the numbers can be cherry picked nonetheless its a raw deal.
GM can not survive as an Americas company. Investment in Europe buffers GM in case of a US downturn.
Worst of all, GM and other Western companies transferred all their tech and processes to their JV partners who then in turn transfer it all to the Chinese Auto industry.
The Chinese were able to suck all these companies in with limitless promises while making next to no money.
Now these chickens will be coming home to roost and fiercely/mercilessly compete on the world market against the original providers of this tech.
It’s called getting it up the backside. lol
The real question is how far GM stock would have dropped if the losses were not stemmed?
Selling Opel was a mistake and PSA has proven it. At time of sale Opel was near break even even without the reforms implemented by Taveres including building up a full SUV portfolio.
Opel, as I’ve said many times, was looted by GM with Russelheim never receiving full licensing fees for cars like Regal or platforms – -this money went to a Delaware bank account.
Europe is the world’s second most profitable market even as it matures. GM needed a brand b like Opel for markets like India where Chevy had failed due to lackluster product.
GM should partner with PSA, a stock swap merger, to regain Europe. GM should also copy PSA cost cutting efforts across the entire company.
on the day peugeot bought opel(march 6,2017) peugeot’s shares closed 19.58 euros/share.
today, they closed at 19 euros/share.
so peugeot is worth slightly less with opel than they were w/o opel.
Do you read any auto news?
Stock is down due to PSA’s trouble in China, but Iran, the Brexit situation & German recession worries.
PSA total EU profits are up with 8.7% margins plus nearly 5% for Opel. Opel even with Brexit, is a PSA bright spot.
i’m just following the same simplistic analysis the author has done.
on that basis, gm’s stock has done better after they got rid of opel than psa has done after they bought them. numbers don’t lie.
you just listed a few reasons why psa is going to be under pressure for the next year or more.
so let’s see how psa/opel is doing in another 3, 6, 12 months as the european economy appears to be slowing down.
how is ford’s european divisions doing? from the auto news i’ve read, things are looking kind of grim there aren’t they?
so maybe gm’s departure from europe wasn’t such bad idea huh?
For your premise to hold water one must presume that Europe is a doomed market of lesser value than Latam as opposed to the second most profitable and third largest sales region.
PSA sticks to two platforms and uses the same components right down to steering wheels on every vehicle creating economy of scale and an 8.4% profit.
GM could learn much from PSA. A reverse merger is a putting Taveres in charge of GM would be brilliant plus aid GM profits as well as globsl reach.
Ford uses too many platforms and various components given it’s market share and industrial footprint. Ford continues to loose share due to unpopular products outside UK.
Europe is a more important market than China given Chinese JVs and low profits. GM earning below 400 million last quarter while ceding technology demonstrates this. Europe, especially with the market share of PSA, and would be a far more profitable investment. GM should have never sold Opel and the market never even noticed.
Most of Opel’s problems seemed bad management from GM and that goes from the top down..
Opel products were very good just look at the products that they sent buick.
GM SHOULD of had better managers and the corporate overlords had no vision.
Truth is, GM is the only company that can make a class leading PHEV and not figure out how to standardize it across the lineup like Toyota has done. The Voltec should have been GM’s go to vehicle for all Eco versions of front wheel drive models by now, with under the floor packaging like the Bolt. The base and sport versions can keep the ICE. A base/eco/sport strategy would have worked very well. Over time, the ICE can be ditched from the Eco version by adding a larger battery under the floor and a Frunk to compete with BEV’s. Was this ever discussed with the higher ups ? I know it would have cost a lot of money, but I think this investment would have been worth it.
I think the problem GM had was brand recognition. Opel being an old name and never was stellar in quality and in name recognition. Sure VW is old as are other German brands but they pushed for recognition by stating quality (though may not be true), and many times good looking vehicles.
To have stayed in Europe GM would have to had reinvented themselves. One way would be to drop the Opel name, Chevrolet was tried with certain models but perhaps it was too American. Maybe GMC would have worked but crystal balls are always cloudy.
With Trump, the whole world hates everything American. Sales of American products are dropping all over the world including China of course. If Opel would still be under GM, it would now be a complete disaster.
In the end, the world will win. No one needs American products.