GM needs to cut losses and exit China market: BofA analyst
General Motors (GM) delivered a beat and a raise sending the automaker’s stock higher. Following the earnings report, Yahoo Finance’s Executive Editor, Brian Sozzi, sat down with General Motors' CFO, Paul Jacobson, to discuss the results. Bank of America managing director John Murphy joins Seana Smith and Madison Mills on Catalysts to look at the CFO’s comments, GM’s cost-cutting efforts, and what’s next for the automaker. The analyst attributes the earnings beat and positive shift in investor sentiment around the stock to “the cost-cutting side, which has been pretty successful,” coupled “with a focus on the right product and the right mix, which is helping pricing as well. So there's a combination of great execution from a cost perspective, but also great execution from a product portfolio and pricing perspective that are creating these very large margins, near record margins.” Murphy says, “Pricing is the billion dollar question in the in the in for GM, and for the industry at large right now, I think what you're seeing is a pretty good management of short-term inventory on on dealer lots by GM. He adds, "We actually probably have more clear air on pricing than people realize, at least through the end of next year. Now, there'll be some negative mix for sure... but I think pricing itself is probably far better off than people realize or fear." Amid concerns about weakness in the China region, Murphy says, "It's going to be very difficult for the international manufacturers" to compete with the domestic manufacturers in China. "That's going to continue to be a problem for quite some time to come. I think the reality is GM needs to shrink dramatically or probably even exit the China market sooner rather than later to really stem these losses." GM needs to focus on its core profit center, which is North American trucks, rather than chasing the China market. "Ultimately, it's going to be a tough decision. It's a little bit scary to walk away from that kind of scale, but it will probably ultimately be the right decision." To watch more expert insights and analysis on the latest market action, check out more Catalysts here. This post was written by Naomi Buchanan.
