Morgan Stanley removes GM as its top pick of auto stocks in the United States

Article by Christian Andrei, on January 19, 2012

Morgan Stanley doubts that General Motors Co. has the "political will" to overhaul its European operations and has removed General Motors Co. as its top pick of U.S. auto stocks. In a research note, Morgan Stanley analyst Adam Jonas said that GM shares will probably "tread water" until its first-quarter results are announced and it offers more information about its restructuring efforts in Europe.

Jonas wrote that while GM is seen to feel the urgency to make additional reductions to excessive capacity in Europe, it doubts if GM has the “political will” to make major change possible.

What lies at the heart of GM's restructuring strategy for Europe is “fixing its Opel brand.” Investors have been worried about Opel’s “sustained losses.”

Job cuts and plant closures are prevented by GM's contract with its German union IG Metall. However, GM has to decrease costs at Opel while the European debt crisis hampers demand. Sources said last week that GM may move more auto production to Europe from Korea.

This shift will give GM more flexibility to reduce Opel costs. However, Jonas said that this move will seem too "incremental, disruptive and insufficient" to be useful. He wrote that this arrangement would be viewed as “skirting the issue of excess capacity in the region and a climb-down from what we had believed GM was prepared to do to achieve sustainable profitability for GM Europe.”

The brokerage had retained its "overweight" rating on GM shares and a $45 price target. GM shares have increased by over 20% so far in 2012. This is higher than other major auto stock in the world.

Topics: gm, united states

If you liked the article, share on:

Comments

Login or Create new account to add a comment!

Recommended

Volkswagen Group’s dieselgate saga continues, but it appears the German company would be able to get out of trouble, but it would not be unscathed. This development comes as Volkswagen...
by - January 22, 2017
When a car has been in the market for nearly six years, it loses some of its luster and its customers tend to go for the all-new model with a...
by - January 22, 2017
Remember Zenos Cars, a British carmaker that specializes in designing and building lightweight and high-performance sports cars? If you are wondering how the company is faring with their E10 lightweight...
by - January 21, 2017
Mercedes-Benz has revealed that in 2017, its series 124 coupé will be celebrating its 30th anniversary. While this itself is a significant event, it will also mean that this model...
by - January 21, 2017
BMW’s 550i xDrive has long been considered as one of the most successful business sedans in the world. For the brand, this may not be enough as it has officially...
by - January 20, 2017
Facebook

Youtube Channel

Tip Us
Do you have a tip for us?
Did you film an important event?
Contact us
Newsletter
Subscribe to our newsletter!
Subscribe
Galleries