GM Financial Overview Introduction The General Motors Corporation is a multifaceted company but its primary function is the manufacturing of automobiles and light trucks (SIC 3711). The General Motors stock is listed on the New York Stock Exchange and has approximately 1,426,592,046 outstanding shares on the marketplace, as of 10/14/2001. It is headquartered in Detroit Michigan with offices around the world. General Motors has many other operations besides automobile manufacturing including: General Motors Acceptance Corporation Financial Services, Hughes Electronics Corporation, and the GM Locomotive Group. (Disclosure.com) Financial Statement Analysis Overall, General Motors has had five profitable years with increasing sales during the same period. GM has also paid a fixed dividend to its shareholders over the same period. The one-year, which was below average for GM, was 1998. During this period, GM was restructuring its top management and operations and also incurred a union strike of 54 days. However, GM did return to better performance in 1999 and 2000. GM overall was able to attain a fixed dividend of $2.00 per share and increase the shareholders value over the past five years. The first observation from the financial data in appendix one is that General Motors has a low profit margin and is generally less than the industry average each year. The firm is able to keep a low profit margin because they have such high sales volumes throughout the world. This strategy can be both an asset and liability in business planning. The plus side of the strategy is that GM is able to sell a large number of vehicles in the marketplace due to the lower selling price as compared to the competitor. However, the down side of the strategy is that there is a possibility that if sales volumes decrease, the firm can incur a significant decline in the EPS because the profit margin on each item sold is very low. If the global economy sours, GM can have a very difficult time meeting shareholder expectations. Another observation is that GM looks to use more debt financing that equity financing for funding their activities. The debt to equity ratio has steadily decreased over the past five years and is higher that the industry average. Also, the current and quick ratios are much lower than the industry averages. This again can pose so... ... middle of paper ... .... 1996 edt. (1997) (page 320). Murray Hill, NJ: Dun & Bradstreet. Dun & Bradstreet. Industry Norms and Key Business Ratios. 1995 edt. (1996) (page 327). Murray Hill, NJ: Dun & Bradstreet. General Motors Corp. (2001, October 14). Retrieved on October 20, 2001 from www.disclosure.com. General Motors Corporation 1998 Annual Report. (1998). (pp. 55 – 83). General Motors Corporation 1999 Annual Report. (1999). (pp. 53 - 93). General Motors Corporation 2000 Annual Report. (2000). (pp. 41- 79). Standard & Poor’s. General Motors (GM). (1999) Standard Corporation Descriptions. (pp. 6000 – 6003) New York, NY: McGraw-Hill. Troy, PhD., Leo. Almanac of Business and Industrial Financial Ratios. 32nd edt. (2001) (page 159) Paramus, NJ: Prentice Hall. Troy, PhD., Leo. Almanac of Business and Industrial Financial Ratios. 31st edt. (2000) (page 159) Paramus, NJ: Prentice Hall. Troy, PhD., Leo. Almanac of Business and Industrial Financial Ratios. 30th edt. (1999) (page 159) Paramus, NJ: Prentice Hall. Troy, PhD., Leo. Almanac of Business and Industrial Financial Ratios. 29th edt. (1998) (page 159) Paramus, NJ: Prentice Hall.
Ross, S.A., Westerfield, R.W., Jaffe, J.F., & Roberts, G.S (2001) Corporate Finance. 3 th ed.Toronto, McGraw-Hill Ryerson.
Financial statement analysis: theory, application and interpretation / Leopold A Bernstein and John J. Wild 6th edition Mc Graw Hill 1998
Candor Equities Limited. 2012. “Types of Financial Ratios”. Investing Fundamentals Candor Equities Limited Online. http://cel.candor-holdings.com/wp-content/uploads/2013/10/types_of_financial_ratios_19mar_2012.pdf. (Accessed 11 October 2015)
The next thing to analyze is the way GE is managing its assets. If you look at the numbers GE as a company has a 3.01 return on assets, while the industry has 6.10 return on assets. It seems that GE is not very efficient in converting its investments into profits. For example a short-term bond fund run by General Electric Co.'s GE Asset Management returned money to investors at 96 cents on the dollar after losing about $200 million, mostly on mortgage-backed securities (1). The GEAM Trust Enhanced C...
Vital to any ratio analysis are the steps of gathering financial data and selecting and calculating relevant ratios. This assignment provides you with an opportunity to do just that.
Watson, D. & Head, A. (2010) Corporate Finance: Principles & Practise. 5th edn. Harlow: Prentice Hall.
Currently, the major competitors within the industry are Ford, DaimlerChrylser, General Motors (GM), Honda, Toyota, and Volkswagen. A few United States (US) manufacturers produce 23% of the world’s vehicles while Japan is responsible for 21%. The tendency for the industry is to be a global producer of automobiles; parts can be made throughout the world and assembled in many different places. The trend of consolidation has continued throughout today. Presently, this is evident in the recent acquisition of Chrysler by Daimler-Benz in late 1998, thus forming DaimlerChrylser. These consolidations have proved beneficial to consumers since companies have been able to reduce costs and pass those savings on to the customers. Some of the other major examples of consolidation are Nissan selling off a controlling 37% interest to Renault; General Motor’s 49% ownership of Isuzu; and Ford’s 33% majority of Mazda. Other efforts to become more competitive have translated into the European Union dropping trade barriers and European carmakers employing cost reducing efforts. American manufacturers have seen 2-3% growth over the last few years. Some current trends are the explosion in popularity of the Sport Utility Vehicle (SUV) and big luxury vehicles.
Berk, J., & DeMarzo, P. (2011). Corporate finance: The core, second edition. (2nd ed.). Boston, MA: Prentice Hall.
GM was requested to file the Chapter 11 bankruptcy to reduce debts by allowing the courts to compel bondholders and trade unions into settlements (Wikipedia, 2015). GM was given 60 days to restructure the company. The CEO Rick Wagoner agreed to immediately resign as part of the restructure plan. In June 2009, GM filed the bankruptcy, reported $82.3 billion in assets and $172.8 billion in debt. It was the fourth largest filing in the United Stated history after Lehman Brothers, Washington Mutual, and Worldcom. GM was then removed from the Dow Jones Industrial Average (Wikipedia, 2015). In July 2009, General Motors Corp had changed the name to General Motors Company by the United States Treasury, NGMCO Inc and invested up to $50 billion, owned 60% of the share and the Canadian government owned 12.5% (Wikipedia, 2015). The re-emerging new GM is smaller and leaner company than its predecessor. It has only four brands in the US which includes Chevrolet, Buick, GMC, and Cadillac. It has successful to issue an initial public offering in New York Stock Exchange in year 2010 (GM.com,
Brealey, Richard A., Marcus, Alan J., Myers, Stewart C. 1999, Fundamentals of Corporate Finance, 2nd edn, Craig S. Beytien, USA.
Welch, I. (2011). Two Common Problems in Capital Structure Research. International Review of Finance , 11 (1), 1-17.
General motors in on the of the biggest auto makers in the United States. It holds about one percent of the United States employment. The company which sold over 219,000 vehicles in November of last year only was able to sell 155,000 cars and truck to the American Public declining 41 percent compared to last year. GM car sales of 58,786 were off 44 percent and truck sales of 96,091 were down 39 percent. The steep decline in vehicle sales was largely due to a significant drop in the market’s retail demand compared with last year, and continuing economic uncertainty that has affected consumer confidence. The market shares for General Motors have always been low, but recently it has plunged to a 20 percent starting from 1980. I have included a graph which shows the decline in all of auto industry.
...f the industry average, suggesting that there has been a relatively successful effort in the management of debt levels. Although the business had a strong debt-to-equity ratio, its quick ratio of 0.81 is fairly weak and could be cause for future problems. General Motors has experienced a steep drop in earnings per share in the most current quarter associated to its performance from the same quarter a year ago. The company has grieved a declining form of earnings per share over the past two years. However, the company anticipate this trend to inverse over the coming year. Throughout the previous fiscal year, GM informed lower earnings of $2.35 versus $2.93 in the prior year. Matched to where it was a year ago, the stock is still up and by the stock's price rise over the last year has driven it to a level which is slightly costly compared to the rest of its industry.
When you look at the history of General Motors, you will find a long, rich heritage. General Motors came into existence in 1908 when it was founded by William "Billy" Durant. At that time Buick Motor Company was a member of GM. over the years GM would acquire more than 20 companies, to include Opel, Chevrolet, Cadillac, Pontiac, and Oldsmobile. By the 1960's through 1979 was known as a revolution period for General Motors. Everyone was focusing on environmental concerns, increased prices of gasoline lead to the unprecedented downsizing of vehicles. The smaller cars lead to one the largest re-engineering program ever taken in the industry. By 1973, General Motors was the first to offer an air bag in a production car.
Jordan, B.D, Ross, S.A. & Westerfield, R.W. (2011). Essentials of Corporate Finance. New York, NY: McGraw Hill. ISBN: 978-0-07-338246-3