By Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets
As earnings season continues, analysts have been bewildered by General Motors’ (NYSE: GM) report. Over the last year, GM shares became 35% cheaper, while income was mixed, both rising and falling, and net profit turned positive only in late 2018.
The GM stock price has been under pressure, most likely because of rising debt. General Motors went bankrupt in 2009, liquidating all previous debts, but new ones started appearing soon. The debt-equity ratio reached 1.93 ever since, making it a serious question whether or not to invest in such a company that had previously been bankrupt.
Since the second IPO in 2010, GM shares have been unable to overcome the 30% rise barrier, while the DJIA rose by over 100% over the same period. This made interest in GM quite low.
With ever-growing debt and shareholder pressure, the company had to cut expenses, and this was done through cutting jobs and closing factories in various countries. For instance, the GM Korea factory is likely to get closed, with over 2,000 jobs cut. Another factory, located in Saint Petersburg, Russia may be closed, too. Meanwhile, in North America, around 36% of jobs were cut.
Overall, the former multinational giant is leaving the markets in Europe, Indonesia, Thailand, India and Australia. The company may end up present only in the US and China.
Naturally, running a company with multiple branches in multiple countries is much harder than the one working in a single country. A good example is Tesla, which in 2008 was saved by a single contract with SpaceX (both owned by Elon Musk) worth $1.8B, while General Motors was unable to do with even $30B.