In Restructuring, GM Moves Toward What It Does Best
We are raising our fair value estimate for the no-moat firm.
We are raising our GM fair value estimate to $46 after incorporating a major restructuring for
Management expects $6 billion of additional free cash flow by the end of 2020, a substantial amount in our view, with $4.5 billion of that from cost reductions and $1.5 billion from capital expenditure reductions as more global vehicle architectures are rolled out. The company seemed hesitant on an analyst call to say if the $6 billion is gross or net, and only said there's puts and takes on that number based on macroeconomic conditions. Multiple times on the call management stressed more detail will be provided around breakeven levels, GMNA operating margin, and sustainable free cash flow generation at a Jan. 11 investor day in New York. The restructuring will entail pretax charges between $3.0 billion and $3.8 billion, and be mostly special items with the majority recorded in the fourth quarter of 2018 and first quarter of 2019.
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