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Why General Motors Stock Is Rising Today

By John Rosevear – May 18, 2020 at 11:18AM

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GM's truck factories have reopened, and investors are cautiously optimistic.

What happened

Shares of General Motors (GM -0.94%) were trading higher on Monday amid a broad market rally, as the company reopened several U.S. factories that had been idled since March.

As of 10:45 a.m. EDT today, GM's shares were up about 8.4% from Friday's closing price.

So what

After weeks of planning, today's the day: Several of GM's U.S. factories, including truck plants in Flint, Michigan, and Fort Wayne, Indiana, restarted production this morning. Early reports suggested that worker attendance was at or above expectations, and that operations were running smoothly amid extensive changes to protect workers from the COVID-19 virus. 

The assembly line at GM's Fort Wayne, Indiana plant.

GM reopened several of its U.S. factories on Monday. Image source: General Motors.

GM and other automakers shut down their factories in North America in March amid calls for social distancing to slow the spread of the coronavirus. GM, like most of its rivals, books revenue when vehicles are shipped to dealers, so idling its factories has been costly. 

Restarting will be a costly exercise, too, as supply chains are reactivated and working capital reinstated. But auto investors cheered the resumption of production on Monday, and rightly so.

Now what

For GM, resuming production in North America will be a process that unfolds over several weeks. The company's first priority is to get pickup trucks to its dealers to avoid tight supplies as America reopens; GM is tentatively planning to reopen its third pickup factory, in the Mexican city of Silao, later this week, according to a Reuters report.

For now, GM's factories will be running on just one shift, versus the usual two or three, as it's not yet clear what demand for new vehicles will be like in the next few months. But if GM (and its rivals and suppliers) can avoid virus outbreaks at reopened factories, and if consumers resume buying vehicles, then auto investors will be able to breathe a little easier. 

John Rosevear owns shares of General Motors. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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