A real global luxury brand. GM sold more vehicles than Volkswagen AG (ADR) (PINK:VLKAY) in 2012, but VW made almost twice as much money. One reason: Volkswagen AG (ADR) (PINK:VLKAY)’s luxury brand, Audi, is a big source of profits. GM is putting big bucks — and big effort — behind a push to put its old luxury brand, Cadillac, on the same level as Audi, Bayerische Motoren Werke AG (ETR:BMW) and Mercedes-Benz. Not in the U.S., but in Europe and China as well. If it works — and while it’ll take time, the chances look pretty good — it could add billions to GM’s bottom line every year.
Each of these efforts represents one good answer to the question: Why isn’t GM making more money? Closing the profit gap between General Motors Company (NYSE:GM) and its global peers, Volkswagen AG (ADR) (PINK:VLKAY) and Toyota Motor Corporation (ADR) (NYSE:TM), is one of Akerson’s highest priorities.
As a GM shareholder, that’s exactly what I want to hear from a CEO.
More big changes, below the surface
There’s plenty more that’s different about the new GM. Old GM’s finances were a mess, but new GM has a “fortress balance sheet” under the sharp eyes of CFO (and Corvette enthusiast) Dan Ammann, with careful financial controls and a huge cash reserve.
Old GM’s product-development process was famously wild, with stops and starts and last-minute changes driven by executive egos that added millions (and more importantly, months) to important new-vehicle projects. That’s over: Product chief Mary Barra has completely overhauled (there’s that word again) the way GM develops cars, saving $1 billion a year — and a longer-range overhaul of GM’s global platform strategy is under way that will save billions more by 2018.
Most importantly, for an automaker, is this: Old GM’s products were mostly just OK. New GM’s products aim to be best-in-class — and more and more often, they’re getting there. That means more sales with less need for discounts, and that will do wonders for GM’s bottom line in time.
The upshot: Take an objective look
If you’re mad at the president, go ahead and be mad at the president. But separate that from what is going on at General Motors today.
Investing well involves separating feelings, even hard feelings, from careful analysis. This GM isn’t the Old GM that ran itself into the ground. It has the best of that old company — which at times, was very good — combined with new management that is taking a serious, responsible, focused approach to becoming an industry leader.
The article Why It’s Time to Buy “Government Motors” Stock originally appeared on Fool.com is written by John Rosevear .
Fool contributor John Rosevear owns shares of Ford and General Motors. Follow him on Twitter at @jrosevear. The Motley Fool recommends Ford and General Motors and owns shares of Ford.
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