The value of GM stock fell during the September 21st, 2020 to September 25th, 2020 timeframe. Shares closed the week at $29.00 per share, which represents a decrease of $2.50 per share, or nearly 8 percent, compared to last week’s closing value of $31.50.
Movement & Ranges
By comparison, shares of GM’s cross-town rival, the Ford Motor Company, fell $0.72 per share, or nearly 10 percent, during the September 21st, 2020 to September 25th, 2020 timeframe. According to a Business Insider report, Bank of America said U.S. stocks had suffered their third-largest outflow of funds, with investors pulling $25.8 billion out of equities in the past week. It’s also worth noting the fact that reports have indicated restrictions in many U.S. areas are being lifted despite a surge in multiple states, including Idaho and Utah.
Beyond that, the momentum generated two weeks ago seems to have fizzled out. At the time, GM stock saw a significant jump in value following the announcement of its new, strategic partnership with electric truck startup Nikola. However, Nikola Motor Company shares fell following claims that company founder, Trevor Milton, overstated the startup’s tech capabilities. Then, Nikola shares slid even further after a report published by Hindenberg Research accused the electric truck startup of being an “intricate fraud.”
“We are fully confident in the value we will create by working together,” a GM spokesperson said following the release of the report. “We stand by the statements we made in announcing the relationship.”
Mr. Milton has since stepped down as the Securities and Exchange Commission and U.S. Department of Justice begins their investigations. Currently, Nikola stock is valued at $19.46 per share, after reaching $50.05 on September 8th and falling to $32.13 on September 11th.
GM Stock Factors
Currently, it seems some investors are banking on the expectation of a significant boost to stock prices following a spin-off for GM electric vehicle business. Notably, General Motors is working hard to introduce 20 new EV models by 2023. It’s also worth pointing out that the same can also be said for Ford, and such a trend would undoubtedly benefit another competitor as well, Tesla. More recently, the announcement of the GM-Honda alliance may also be of great significance to investors.
The optimistic projections followed GM’s plan to roll out an electrified portfolio, which includes an electric van, a Chevrolet EV pickup truck, the GMC Hummer EV – which was revealed in a teaser video – as well as the Cadillac Lyriq, which was revealed in August and should have a starting price of under $60,000.
Additionally, The General is moving forward with plans to produce the up-and-coming Chevrolet Bolt EUV at the GM Lake Orion plant near Detroit. The new model is a slightly larger version of the Chevrolet Bolt EV, which is also produced there. As such, the Orion facility will be focused entirely on all-electric vehicle production, with the new Bolt EUV and refreshed Bolt EV going into production next year, including the discontinuation of the Chevrolet Sonic.
Other lingering factors include the release of GM’s Q2 2020 earnings report in July, which showed a loss of $800 million on $16.8 billion revenue dollars. While the results aren’t great, they could have been much worse due to setbacks caused by COVID-19 complications. In fact, forecasts estimated a loss of as much as $2.6 billion. Relative to the multi-billion-dollar loss, the $800 million dollar setback doesn’t seem as detrimental. Moreover, CEO Marry Barra has stated that the global crisis won’t interfere with the company’s plans to revamp infrastructures in preparation of upcoming battery-powered products, and that she expects full economic recovery by early 2021. Another positive indicator is the premature ending to GM employee salary deferrals.
Investors should also note some more recent news, including GM CFO Dhivya Suryadevara’s recent resignation to join a financial startup company called Stripe and GM’s future EV product plans for the Chinese market. This past week, GM issued a stop sale order on six models such as the 2020 Corvette as well as a Technical Service Bulletin to address faulty valve spring in many V8 engines. Meanwhile, a fire broke out at the American Axle plant in Ohio, which is a significant component supplier for General Motors.
Another consideration is the upcoming presidential election, which will lead to further market disruptions.
GM During COVID-19
The coronavirus pandemic initially forced GM to idle production across North America, South America and China as a result of the virus, putting the firm in a very unfavorable position. During such a scenario, any automaker – GM included – sees revenues fall sharply while rapidly burning through cash, resulting in a loss-making turn of events. Since the beginning of the pandemic, GM production in China has resumed, as did production across North America on May 18th.
GM has taken major steps to get through the COVID-19 pandemic, with the actions primarily revolving around fortifying its balance sheet. These moves entail reducing and/or deferring expenses, while shoring up cash and other forms of liquidity.
On the flipside, GM is facing pressure from the state of Ohio, which may require GM to reimburse the $60M it received in state tax breaks or increase its investments in the region. Notably, GM no longer operates a vehicle assembly plant in the state, but it is currently building a $2.3 billion lithium-ion battery plant in partnership with LG Chem in the Lordstown area. It also operates a parts distribution center in Cincinnati and is building a new $175 million engine components plant in Brookville, Ohio.
The General also had to cope with a small number of coronavirus cases at some of its facilities, including 22 confirmed cases at the Arlington Plant in Texas. Despite a high rate of worker absenteeism, GM has decided to keep the third shift at the Wentzville Assembly plant by relocating employees, after previously announcing that it would be cut. Meanwhile, workers at the GM Silao plant in Mexico have complained that the company is allegedly covering up a virus outbreak.
GM Before COVID-19
It’s worth noting that GM share values were experiencing ongoing ups and downs since mid-2018, long before coronavirus complications, though shares never dipped to the levels observed in the first quarter of 2020.
For the most part, GM stock was in limbo throughout 2019, seeing a jump in value as a result of overwhelmingly positive Q2 2019 earnings, wherein the automaker outperformed expectations. Prior to the COVID-19 pandemic, several factors negatively impacted GM stock price during 2019, including:
- A UAW labor strike that lasted 40 days, resulting in no vehicles being built in the United States during that timeframe. Production was also idled in other countries as a result of supply chain-related issues caused by the UAW strike
- Warning signs of an economic slowdown
- Escalations with a trade war with China
Over the last few years, GM has taken many steps to increase the value of its stock, including exiting markets where it can’t find ways to turn a profit (such as Europe, South Africa and India), closing plants in various parts of the world, divesting loss-making divisions (such as Opel-Vauxhall), making adjustments to its business model in order to prioritize profitability over chasing market-share goals, focusing on its Cadillac luxury brand to increase its share of high-profit automobiles, investing heavily into new-age mobility ventures such as electric vehicles and autonomous driving tech, while discontinuing some sedans (Cruze, Volt, Impala, Regal, LaCrosse, XTS, CT6) and closing various plants to focus on more profitable crossovers, SUVs and pickup trucks, such as the all-new 2021 Cadillac Escalade that was unveiled on February 4th.
Seeking to further minimize activities in unprofitable markets, General Motors also announced its intention to phase out the Holden brand in Australia and New Zealand, in addition to pulling the Chevrolet brand out of Thailand while selling the GM Rayong Manufacturing Complex to Great Wall Motors. In addition, GM recently announced its decision to shut down its Maven car-sharing service.
Despite these actions, the value of GM stock has historically struggled to surpass the $40 mark, spending most of its time in the $33-$38 per share range (prior to the COVID-19 pandemic). The chain of events is problematic given that the “new GM” had its Initial Public Offering (IPO) at $33 per share in November 2010, causing frustration upon many investors.
We remain interested in seeing how GM stock performs through the rest of 2020, especially following the COVID-19 crisis and upcoming 2020 presidential election.
Additionally, the refresh of many 2021 models will be delayed, including the Cadillac XT4, Chevrolet Traverse, Chevrolet Equinox, GMC Terrain, and Chevrolet Bolt EV. In fact, the overall roll-out plan for most GM products has been pushed back, which also includes the launch of the Cadillac CT4-V Blackwing and CT5-V Blackwing models. However, the GMC Hummer EV’s will be revealed on October 20th.
That said, there are still some good things happening for GM in 2020, including a 27 percent growth in Silverado sales during Q1 2020, market share gains and production increases for the Silverado and the Sierra during Q2 2020 as well as strong Chevrolet Blazer sales and Chevrolet Trailblazer sales. Notably, GMC Sierra inventory is extremely low as the automaker can’t build enough of them to meet strong demand. Most of GM’s range of redesigned full-size SUVs are now in stock on dealer lots, which includes the 2021 Chevrolet Tahoe and 2021 Suburban as well as the 2021 GMC Yukon and 2021 Yukon XL.