The GM stock price climbed 0.6% to $35.66 Thursday as the Detroit automaker prepares to sell its first Chinese-built car in the United States. The GM stock price has now climbed 19.2% in the last three months.
But the GM stock rally won't continue in 2016...
The move of selling a Chinese-built car came as a surprise to many, and it is a first for GM. It's also a first for any U.S. automaker.
Starting in the summer of 2016, General Motors Corp. (NYSE: GM) will begin selling the "made in China" Buick Envision in the U.S. market. The Envision is a luxury crossover vehicle.
The Envision boasts a 2-liter, 4-cylinder turbocharged engine with a 6-speed all-wheel drive transmission. It will compete with the Lincoln MKC, Acura RDX, and the Audi Q5. Buick will release pricing and fuel economy closer to the time the Envision goes on sale.
The Envision will make its U.S. debut in January at the North American International Auto show in Detroit.
GM says the Envision was designed in Michigan. It also says the vehicle will fit well into the Buick lineup between two other crossover offerings, the Encore and the Enclave.
While Buick is enthusiastic for its new built-in-China car, the United Auto Workers (UAW) is not happy...
Envision Is Not Enough to Boost GM Stock Price
Envision is large enough to be assembled profitably in the United States, according to the UAW. Its size is comparable to the Ford Escape, assembled in Louisville, Ky., and the Jeep Cherokee, assembled in Toledo, Ohio.
The UAW staunchly maintains that GM should reconsider its decision to have the Envision built in China and instead have the vehicle made in one of 12 U.S. facilities.
You see, the GM bailout during the financial crisis is still fresh in the minds of many Americans.
The U.S. government spent some $50 billion to bail out GM. As a result of the company's 2009 bankruptcy, the government's investment was converted to a 61% equity stake in GM, plus preferred shares and a loan.
The U.S. government lost $11.2 billion on the bailout. That was almost $1 billion more than the $10.3 billion the U.S. Treasury Department estimated when it sold its remaining GM shares in December 2013.
GM has managed to claw its way back to profitability since then.
In its latest labor deal, GM agreed to invest $8.3 billion in its U.S. plants over the next four years with the aim of creating or retaining an estimated 3,300 jobs. The auto titan also boosted U.S. employment by 14,000, or 18%, between the end of 2009 and the end of 2014.
Now, auto research firm IHS forecasts estimate about 38,000 Envisions will leave U.S. car lots by 2017. That compares to a much larger tally of 126,000 it's now selling annually in China.
Even with the progress GM has made, clouds hang over the company and the GM stock price...
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Issues Facing GM Stock Now
- GM still has a huge image problem. The company 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 vehicles recalled in 2014 for faulty ignition switches. GM acknowledged it knew about the problem for more than a decade before finally acting.
- Earnings in 2015 have been stable, but analysts expect a dip of 4.1% in revenue next quarter. Earnings are also expected to dip $0.01 in the upcoming quarter.
- Concerns are escalating that GM is an "old school" auto company.
- 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 seat belts.
General Motors needs to be at the forefront of these technological advances for the GM stock price to have any chance of climbing long term.
At $35.64, the GM stock price is up 2.1% year to date.
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- CNET: Buick Brings Its Chinese-Built Crossover to the United States for the First Time
- CNN Money: GM to Sell Chinese-Built Car in the United States for First Time