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Why It's Time to Buy "Government Motors" Stock

http://www.fool.com/investing/general/2013/04/20/time-to-buy-government-motors-stock-yes-really.aspx

John Rosevear
April 20, 2013

The 2014 Chevy Silverado, one of a whole series of new products GM will launch over the next two years. Photo credit: General Motors Co.

I hear it from readers all the time: General Motors (NYSE: GM) is still the automaker that lots of you love to hate.

I get it. The 2009 bailout-bankruptcy-overhaul orchestrated by the Obama administration left a lot of hard feelings in its wake. Bondholders who lost out and dealers who were forced to close felt burned, and to this day they, and plenty of other folks, hold it against GM.

I've been writing about GM for a long time. I know all the arguments, I've heard it over and over from all sides.

But here's the thing: This GM is a different company from the one that went down the tubes in 2008. It has a different CEO, different leaders in key positions, and a whole different strategy from the one that got Old GM in so much trouble before 2009.

I've bought stock in this new GM, because more and more I like what I see from the new team. Here's why I think it's worth setting aside those hard feelings and taking a closer look at this new improved automaker.

A big transformation that's still unfolding
Even with the boost provided by the bailout (and maybe more importantly, by the bankruptcy that allowed them to shed a whole bunch of unwanted brands and factories), GM's turnaround hasn't been as dramatic as the one pulled off by its old crosstown rival, Ford (NYSE: F).

But in way, that's what makes GM an intriguing investment opportunity. GM still has lots of work to do, and the stock price reflects that. But that work -- some of which is many years overdue -- is now getting done:

  • North American product overhaul. GM has a ton of new products on the way for the U.S. market. New pickups, new SUVs, new cars from Chevys to Cadillacs -- over the next two years, executives say, GM will go from having the oldest product line of any major automaker in the U.S. to having the freshest.
  • Huge changes in Europe. GM's German subsidiary, Opel, has lost more than $18 billion-with-a-"b" since 1999, and it could lose $2 billion more in 2013. But CEO Dan Akerson has driven an all-out overhaul of Opel over the past year. A factory is set to close, the management team is all new, a cost-sharing arrangement with French automaker PSA Peugeot Citroen (NASDAQOTH: PEUGY) is in place, and a bunch of new models are on the way. GM says Opel could break even as early as 2015.
  • A real global luxury brand. GM sold more vehicles than Volkswagen (NASDAQOTH: VLKAY) in 2012, but VW made almost twice as much money. One reason: VW'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, BMW (NASDAQOTH: BAMXF) 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 GM and its global peers, Volkswagen and Toyota (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 fi