President Barack Obama has always stood behind the 2009 bailouts of General Motors and Chrysler and he was vindicated as both companies made a surprising recovery in a very short time period.
While Chrysler is out of the picture, the U.S. government still holds a 32 percent stake in GM and is searching on how to implement an exit strategy without losing a large portion of the S$51 million it poured in the automaker during the bailout.
Analysts believe that the 2014 Chevrolet Silverado and GMC Sierra full-size pickups that were unveiled this week may provide the administration with the way out that it needs.
The reason is that combined sales of those two trucks accounted for 23 percent of GM’s total 2011 sales and generated 16 percent of its global earnings before interest and taxes this year.
These were the old versions that dated back to 2006. It’s reasonable to expect that the revamped Silverado and Sierra, which have retained their rugged looks but are significantly improved under the skin, can do even better.
Citigroup analyst Itay Michaeli told Bloomberg News that the launch of a new pickup “tends to correlate very well with positive stock returns for GM”.
“It’s really hard to find a product for GM that’s more important”, IHS industry analyst Rebecca Lindland told the news agency. “From a volume and financial standpoint, this is GM’s Super Bowl.”
GM shares have increased 24 percent so far this year. In order to reach the US$33 IPO price that the U.S. Treasury Department wants in order to sell its stake, it must gain 31 percent.
If the administration wanted to fully recuperate its initial investment, the share price should reach US$50. Of course, under the current climate that’s nigh impossible so the main target is to offload the shares by minimizing losses.
Thus, increasing sales of the revamped Silverado/Sierra duo will provide both parties with a win-win scenario: not only will GM’s profits rise but will (baring any unexpected event) also help increase its stock price, helping the government offload its shares.
Company executives are buoyant about their new product(s): Jeff Luke, executive chief engineer for full- size and midsize trucks said that the new pickups “will once again raise the bar in the full-sized truck segment” as they will feature improved fuel efficiency, horsepower and torque along with better comfort and functionality.
By Andrew Tsaousis
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