Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

General Motors Company (GM): Yes, Really, It’s a Buy

General Motors Company (NYSE:GM) still takes a lot of heat for its 2009 “bailout” and high-speed bankruptcy proceeding.

That bailout was initiated by President Bush in late 2008, but it was President Obama’s team that shepherded the wounded Detroit giant through a fast-packaged bankruptcy that left a lot of hard feelings in its wake.

General Motors Company (NYSE:GM)

Some of those hard feelings were politically motivated, of course, stoked by commentators unfriendly to the then-new administration. But many were a result of the decisions made during the court proceeding: Holders of Old GM’s stock and bonds were left mostly empty-handed, while General Motors Company (NYSE:GM)’s union members were arguably rewarded.

A lot of those hard feelings continue to this day, and they sometimes drive some in the media to give big attention to little things that don’t really matter all that much.

But I think all of that has obscured something very important, and that is this: General Motors is becoming a really interesting turnaround story.

And it might turn out to be a really profitable, albeit somewhat risky, investment.

Ford (NYSE:F)’s example shows a path for GM

General Motors Company (NYSE:GM)’s turnaround hasn’t been nearly as dramatic as old rival Ford Motor Company (NYSE:F)‘s — at least not yet. Most investors who watch auto stocks know that Ford has been (and continues to be) a truly great story, one that will be taught in business schools for decades to come.

Under amiable CEO Alan Mulally, Ford borrowed a ton of money and financed its own massive restructuring — no bailout needed. The result: cars and trucks that went from so-so to genuinely excellent, and steady, strong profits that let Ford pay down that big debt and recover its investment-grade credit rating.

Ford Motor Company (NYSE:F) continues to shine, expanding rapidly in Asia and applying the magic that fixed its U.S. operation to the challenges it still faces in Europe. There’s no question, at least in my mind, that Ford’s stock is still a buy, as the good work it is doing overseas should drive even more big gains in profits over the next few years.

Making the case for General Motors Company (NYSE:GM) is more complicated, but I think it’s worth making.

The huge global potential of General Motors
Like many industries, the auto business is very much a global one nowadays. And as an industry with huge fixed costs (all those factories, all that tooling, all those workers), economies of scale matter a lot.

That means size matters. Scale matters. GM spent decades stumbling, but it’s still to this day one of the three global giants of the auto world, right up there in sales with its two peers, Toyota Motor Corporation (ADR) (NYSE:TM) and Volkswagen AG (ADR) (PINK:VLKAY).

GM outsold VW and was close behind Toyota in 2012, but both of its rivals made a lot more money than the General did last year. Why? There are lots of reasons, but most of them boil down to efficiency: VW and Toyota Motor Corporation (ADR) (NYSE:TM) are both more efficient in the way that they design and engineer their cars and trucks, and they both get greater benefits from those global economies of scale.

So why isn’t GM doing something about that? Why isn’t General Motors Company (NYSE:GM) doing something to take better advantage of its massive global presence? Or, to be really blunt, why isn’t GM making more money?

GM is working on it. In fact, it’s been working on it for a while, but you might not have heard about it. And the moves they’re making are good ones.

Below the radar, massive changes are already in motion at GM
Despite what you may hear in certain corners of the media, the people running GM nowadays are not dummies. In fact, CEO Dan Akerson and his senior team are sharper, more informed, and more realistic than any GM management team has been in a while.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.