Should I Buy General Motors (NYSE: GM) Stock?

General Motors Co. (NYSE: GM) is one of the most recognizable brands in the United States and is worth more than $50 billion.

That's why readers regularly ask us, "Should I Buy GM Stock?"

General Motors has grown both sales and profits for years. It also continues to return more money to shareholders via dividends and share buybacks. But still, GM stock has gone nowhere over the last five years.

Investors who bought shares when the automaker went public for the second time on Nov. 18, 2010, at $33 a share, would be losing money today. Wednesday, July 15, GM stock opened at $31.85. That's a dip of 10% year to date.

GM (2)Investors were initially excited in 2010 when GM raised a record $20.1 billon just 17 months after a bankruptcy filing and controversial federal bailout. Enthusiasm, along with GM's share price, has since faded.

Investors who bought GM when it was added to the S&P 500 Index for the second time on June 6, 2013, would also be underwater. That investment is down 10% some two years later, while the S&P 500 collectively is up 28%.

When GM reentered the S&P 500, it was the 79th largest company in the index. The move was supposed to be a vote of confidence from Standard & Poor's. Today, GM's position has slipped to No. 103 on the list of 500.

Many market participants are scratching their heads over GM's lackluster performance.

The auto giant sold a company record 9.92 million cars worldwide in 2014, despite a recall of roughly 30 million vehicles over faulty ignitions. GM's 2014 sales improved 2% year over year.

Sales were robust across most categories, and GM's market share also grew. The Detroit-based company's share of large pickups rose 1% to 38.9%. Its share of large sport utility vehicles climbed 7.8% to 74.7%. European sales rose 3.5%, and deliveries to China jumped 12%.

On March 9, buoyed by healthy sales, GM launched a $5 billion share buyback program. On April 13, GM hiked its dividend 20% to $0.36 a share for a hefty 4.48% yield.

So, what is wrong with GM stock? As it turns out, plenty...

Issues Facing General Motors (NYSE: GM) Stock No. 1: Recalls

GM ushered in 2015 with the recall of 92,000 vehicles in the United States and Canada amid an ignition defect that led to engine stalls.

The recall came on the heels of the 2.6 million recall in 2014 for faulty ignition switches. GM acknowledged it knew about the problem for more than a decade before finally acting.

The death toll from the defective switches has reached 104. Victims' families have been offered compensation of at least $1 million each. Another 191 people injured in crashes caused by the switches have also been made monetary offers.

Some 4,342 claims were received by the Jan. 31 deadline. As of March 31, GM paid $200 million in restitution. The recall crisis has so far resulted in a $1.3 billion write-down.

Continue reading for three more issues mounting for General Motors (NYSE: GM) stock...

Issues Facing General Motors (NYSE: GM) Stock No. 2: Earnings

GM disappointed investors when it reported Q1 2015 results on April 23.

GM reported earnings per share (EPS) of $0.86 on revenue of $35.7 billion. Wall Street was looking for EPS of $0.97 on revenue of $37.61 billion.

The revenue miss was partially blamed on a Venezuelan currency devaluation. The company also blamed an economic downturn in Russia, where GM announced in March it would stop nearly all manufacturing.

Issues Facing General Motors (NYSE: GM) Stock No. 3: Slowing Sales

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Not all of GM's sales figures have been bullish.

Stifel's James Albertine recently expressed concerns in an investor note about pricing deterioration in GM's critical North American market. Its next wave of new vehicles will be focused on less profitable models.

In late April, GM announced production of the slow-selling Chevrolet Volt would stop for longer than expected. Sales of the 2015 hybrid have been tepid. Just 1,874 sold in Q1, down 48% year over year (YOY).

Then on July 6, GM reported flat sales in June YOY despite cutting prices by up to 20%. That was attributed to slowing growth in the world's largest car market, China.

Issues Facing General Motors (NYSE: GM) Stock No. 4: Branding Problems

Another issue is the growing perception that GM, as well as other traditional automotive stocks such as Ford Motor Co. (NYSE: F) and Fiat Chrysler Automobiles NV (NYSE: FCAU), represent the "old school" auto industry.

Viewed as leaders in the "new auto industry" are luxury electric car maker Tesla Motors Inc. (Nasdaq: TSLA) and Mobileye NV (NYSE: MBLY), a supplier of advanced driver assistance technology and products.

Cars of the future will be driverless, totally Internet-connected vehicles that will include predictive software and mobile payment systems. New standard safety features will include things like blind spot detection and inflatable seatbelts.

General Motors needs to be at the forefront of these technological advances for the stock to have any chance of succeeding long term. Replacing its image as an "old school" car company will be a big part of that.

The Bottom Line: While General Motors Co. (NYSE: GM) has improved its profits and market share, the company's stock has still declined 10% in 2015. This is not a stock to buy now, as it continues to face major problems like recalls, poor earnings, and brand issues.

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