General Motors Company (NYSE:GM) appears to be quite a value play. The company doesn’t pay a dividend, but easily could, and the the car maker has made significant restructuring efforts to clean up its balance sheet, and position operations better to capitalize on an expected increase in vehicle demand. Comparing the company to major U.S. and overseas peers, the stock could easily be undervalued by as much as 65%.
General Motors Company (NYSE:GM) expects to see its future growth generated from emerging markets, yet, the U.S. auto market will also help drive the company higher. The U.S. market is expected to continue growing in 2013, with S&P estimating the sale of light vehicles to reach 15.4 million in 2013, up from 14.4 million in 2012. Part of this demand increase will be due to the fact that the average age of vehicles on the road exceeds 11 years, which has been a result of purchase postponements during the weak economy.
GM also has a relatively sturdy balance sheet, with cash of $26 billion and debt of $16 billion. What’s more is that the car maker doubled its credit facility towards the end of 2012 to bring its total cash and credit available to $42 billion. Part of this excess cash will go toward repurchasing 200 million shares from the U.S. government for $5.5 billion, reducing the U.S. Treasury’s stake in the company from 26.5% to 19% (read more about GM’s repayment plans).
One of the biggest issues for carmakers is their ability to innovate. As a result, there are inherent risks with every car maker that involves innovation (read more about this risk). As a result, GM plans to refresh 80% of its model lineup by 2014, which includes rolling out a new light truck platform, replacing its current seven year old GMT900 platform.
The other notable growth opportunity for General Motors Company (NYSE:GM) is China. Chinese auto sales more than doubled from 2007 to 2012, growing to 15.5 million from 6.7 million, making the country the largest auto market globally. What’s more is that the Chinese auto market is expected to grow by 10% in 2013, compared to only 8% for the U.S. market.
Ford Motor Company (NYSE:F), unlike General Motors Company (NYSE:GM), does pay a dividend, one that yields 2.97% (read about Ford as a dividend play). However, one big disadvantage to Ford is that its China market share is only around 3%, while GM’s is closer to 15%. Ford also saw its cash flow from operations decline 33% in 2012 on a year over year basis, and expects the pre-tax operating profit to remain flax in 2012.