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

One member of that senior team, GM product chief Mary Barra, presented a sweeping plan for reorganizing the way GM develops products way back in 2011. Under this plan, by 2018, GM will be building 90% of its vehicles on 14 platforms, down from about 30 in 2011.

That will lower the cost of developing new models significantly and allow GM to lavish more money and care on each — a key part of the “One Ford” plan that has led to such great cars and trucks from GM’s local rival.

What’s more, Barra has already completely overhauled the way GM designs and approves new vehicles. For years, the company’s product-development process was loaded with what she calls “churn.” These are practices like stopping and starting development in response to economic changes or management whims, or letting senior managers demand expensive changes very late in the development process.

That’s all gone now. Barra, with Akerson’s enthusiastic support, fixed that. It’s saving GM a billion dollars a year over the old way of doing things, and it means that from now on (actually, from 2011 on), GM’s new cars and trucks will get to market faster.

That means they’ll be more competitive. That means GM can sell them with fewer profit-sucking “incentives.” And that will add more and more to General Motors Company (NYSE:GM)’s bottom line as it rolls out a slew of updated models over the next two years — the first fruits of Barra’s overhauled process.

Over the next few years, that pattern will play out all around the world, wherever GM does business. As it does, GM’s profits (and, not coincidentally, the quality and desirability of GM’s products) will start to look at lot more like Toyota’s and VW’s.

Think about what that will do for GM’s stock price.

Before you buy, one more thought
GM isn’t a short-term “grab it and wait for the pop” kind of investment. You should consider buying GM stock only if you’re willing to be patient for the next few years as this story continues to unfold. And you should consider buying GM only if you’re willing to pay close attention to what the company’s doing so that you can stay confident that the story is continuing to unfold in the way we hope it will.

I do think a lot of the criticism of GM is misplaced. But this is a company that was very badly run for a long time. The current senior management team has mostly been impressive, but “Old GM” thinking still haunts some corners of the company.

That’s a long-winded way of saying that this turnaround looks good so far, but it isn’t a slam-dunk. Keep an eye on it.

But I’m more and more convinced that investors willing to take the plunge on GM will be well rewarded in time.

The article Yes, Really: General Motors Is a Buy 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. The Motley Fool owns shares of Ford.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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