Caddy shines for GM, but Ford is a better bet
While the revived automaker has its luxury brand gleaming again, the stock remains one to be wary of.
Less than a decade after being on the precipice of financial ruin, General Motors is back in a big way. Want proof? It's set to rejoin the benchmark S&P 500 stock index after trading closes on Thursday. Plus, North America’s top automaker on Monday reported its strongest May sales since 2008, moving 253,000 vehicles, a gain of 3% on a year-over-year basis.
This was fueled by strong demand for full-size pickup trucks such as the Chevrolet Silverado, which surged 25%, as the housing sector continued to pick up steam. Sales of smaller vehicles such as the Chevy Cruze, Chevy Sonic and Buick Verano climbed 27% in the month.
But May -- and all of 2013 so far -- really belonged to Cadillac.
GM’s luxury brand posted phenomenal sales. Over the past five months, they've gained 38% to 69,750, Caddy's biggest year-to-date increase since 1976. That success shows how much the automaker has changed because in those days Cadillac was strictly a U.S. brand. Now, GM plans to triple its sales in China "over the next couple of years," as a company exec told Bloomberg.
The revitalized luster of the Cadillac brand continues to attract buyers. According to the news service, 70% of U.S. buyers of the new ATS sedan are purchasing their first Caddy, and 50% are trading in a vehicle from another manufacturer. Buyers also paid an average of 6.1% more for a Cadillac in May, which is good news for GM's bottom line.
Still, the time isn't right for investors to buy GM. For one thing, its rivals are also seeing gains in sales in the luxury market. Plus, the U.S. government still owns a sizable interest in the Detroit-based automaker, thanks to the $50 billion government bailout it received.
Officials from the U.S. Treasury have said the government will dispose of its remaining shares by early 2014, which will likely be at a steep loss. Worries about a stock sale of this scale will keep the share price depressed. In fact, the Treasury Department said today that it plans to unload 30 million more shares soon. The Wall Street Journal says Uncle Sam currently holds about 241.7 million GM shares.
GM's top domestic rival, Ford (F) is a better choice here. It's price-to-earnings ratio is cheaper, with the stock trading at a multiple of 10.6 to GM's 12.4. Ford also pays a dividend, which GM doesn't. That should be enough to keep investors steering toward Ford while GM, with some luck and fortitude, builds on it successes such as Cadillac.
Jonathan Berr does not own shares of the listed shares. Follow him on Twitter @jdberr
I cut my teeth on GM. They're an American icon almost mis-managed into oblivion. Their demise would have cost thousands of more jobs. I for one am glad to see the comeback of what was once the largest company in the world.
The article is about investments in GM and Ford....
Kinda glad to hear that Ford(F) might be better..
Wrenchn'.....Your purchase of a Caddy in 1982 and your RANT, makes little to no sense..
And is completely irrelevant to the basis of the discussion or article..
"I bought a Cadillac in 1982"..That was over 30 years ago, is everyone in your family stupid or are you the "shining example"?
Yes,D. Cox, thank you for explaining the bailouts of GM and Chrysler, and Ford's taking of benefits;
Seems most or many are ignorant of some of the facts about the Big 3, and in reality makes no difference who's Administration is responsible for the bailouts...It saved the U.S. auto industry and along with it, millions of jobs associated with it.
Today the Gov. is announcing the sale of another $30 million in GM stock, to retrieve taxpayer's monies...
Although I am somewhat remiss about Chrysler's "re-buff" of a recall and their Fiat stake in the American auto....I hope they never come back to the trough again, or be allowed to.
I made a mistake in my last post, not made awesome vehicles but "MAKE AWESOME VEHICLES"
I'm not sure about your figures of 70% of GM vechicles made in China??? hmmm.?
Care to quote reference or facts for the statement.
But am very aware of the Chinese Gov't edicts about making them there, if GM want's to sell them there.
We kind of started that a long time ago, in this Country with Asian and some European Manuf'rs.
Those GM plants also bring back some profits and Shareholder value to our Homeland.
Also hard for me to believe "anyone" gave you a "thumbs up" for that remark, Sharri...hmmm?
Although Ford has had some fall back in Europe, they are making better inroads into Asia and India.
With GM leading(as far as American) in China, I still expect Ford to catch up with their numbers abroad in those locations...
Ford trucks are a major influx of money for them; We invest in Ford, hoping down the road for a better dividend or increase, but with the appreciation and growth of stock...Overall (F) has done us quite well..
Strangely have owned GM in the past, none for several years, but invest in Ford now.
And ironically drive mostly GM vechicles, once a Chebby man, always a Chebby fan.
Another grind is the Union issue always comes up, which by the way sounds moronic...
It's about JOBS, idiots.....Union or otherwise, it's what makes America, keep on ticking.
Not sure why anyone should buy Ford stock over GM because of the big picture for Ford isnt as rosey as it is for GM.
Lincoln is crap and its sales prove it. Ford needs to spend a ton of cash to fix Lincoln. Cash they frankly don't have. GM has 2 Luxury brands that are beating Lincolns sales (Cadillac and Buick.)
GM has less exposure in Europe than Ford does. On top of that Fords losses are starting to get bigger and GMs losses are starting to decrease. Ford is only making money in North America (and most of their profits are from Ford motor credit not Ford Motor Company.) GM makes money in North America, Australia, and Asia!
Throw in the fact that Fords May sales numbers came out which sounded impressive until you hear the fact 33% of their sales were Fleet! GM has less than 25% Fleet sales and they make 2 cars for Fleet only!
GM is #1 in the USA and #1 in China. The 2 largest Automobile markets. Ford is soo far behind in China its not even Funny. You can talk how Fords sales increase 50% in China in a month but going from 50,000 to 75,000 is nothing considering when GMs sales increase at 9% their sales gains are over 25,000 units making their lead over Ford that much bigger!
At some point in time Fords customers will wake up to all the features they dont get from Ford vehicles and when their true quality from all their mexican built cars starts to show it will be status quo once again.
The problem with Mirage is he is "hardcore" anti-union and of course Obama...
He's one of the reasons I voted for Obama the "first" and only time, last election.
I didn't really care all that much for O, but the other choice was "ridiculous."
I've never owned a 'Vette, I don't know why ? I have driven several...Just haven't, but came close.
We have owned about 4 Camaros, one "special ordered" and another that was the "second" one purchased in the State...Today probably not, because I would kill myself.
I'm impressed with what offering they have today on both Vechicles.
As far as a Caddy I might consider one, my friend has an Escalade, it's a sweet ride(no Obama's)
And Ford; if they are going do the Lincoln right or correctly, they need a "new platform."
I will support GM when they return the $752,000 they stole from me and gave to the unions.
I will sing their praises when they pay off the loans the tax payer's gave them.
However, I will NEVER buy a 'gubmnt motors' product.
Copyright © 2014 Microsoft. All rights reserved.
VIDEO ON MSN MONEY
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.