AMDP Memo – Final

Date: 10/20/2022

 

To: Clark Hansen, CEO

 

From: Peter Ortiz, R&D Analyst

 

Subject: Investment Proposal: General Motors (GM)

---

You might consider investing in General Motors for a few reasons. To begin with, GM is a well-known and well-funded U.S. legacy company with a wide range of products and services. This means that GM has multiple revenue streams with a vast interconnected network across various industries and countries. Second, GM is a leader in many critical automotive, industrial, and finance sectors (2). This means that GM has countless competitive advantages in numerous industries and can leverage its resources to compete against any potential threat.

 

Finally, General Motors is a leader in the auto industry's environmental, social, and governance (ESG) practices. ESG factors such as environmental protection, social responsibility, and anti-corruption are integral to GM's business strategy. Also, GM is a three-time honoree as one of the most ethical companies by Ethisphere (1). Here is a quote from their CEO.

 

"The World's Most Ethical Companies honorees continue to demonstrate an unwavering commitment to the highest values and positively impact the communities they serve. Congratulations to everyone at General Motors for earning the World's Most Ethical Companies designation." – Ethisphere CEO Timothy Erblich (6).

 

* In light of these factors, GM's culture perfectly aligns with our values and investment standards

Our Investment Standards

1. The Triple Bottom Line 

A framework for organizations to conduct business ethically and successfully. The three "P's" comprise the Triple Bottom Line: Profit, People, and Planet (12). The P's are interconnected and work together to create a healthy and sustainable business.

2. Corporate Social Responsibility

A company's willingness to engage in practices that benefit society, including environmental efforts, philanthropy, ethical labor practices, and volunteering.

3. Social Enterprise 

Refers to a business founded on the principle that profit should not be its primary motive and that its primary purpose should be to achieve social or environmental goals.

4. Carbon Footprint 

The total amount of greenhouse gas emissions a person, organization, or country creates over a given period, usually a year (2). A carbon footprint can be measured in various ways, including calculating the carbon dioxide equivalent of a particular activity, measuring the average carbon dioxide emissions from a product or sector, or mapping the carbon dioxide emissions from a company or country.

 

GM's Current Sustainability Commitments:

• GM has pledged to invest $10 billion in renewable energy by 2030

• GM has pledged to provide EV vehicles for every customer by 2040

• GM has pledged to become the most inclusive company in the world

 

A Shift Towards Renewable Energy

GM has been making strides in renewable energy over the past few years. In 2021, the company announced it would source 100% renewable energy for its U.S. sites by 2025 (4). The investment will help to support the growth of renewables and help to reduce GM's carbon footprint. In addition, GM has also been working to reduce its energy consumption in its factories. For example, the company has installed energy-efficient lighting and heating systems in addition to solar panels in some of its manufacturing factories. These efforts will help to reduce GM's energy consumption and greenhouse gas emissions.

 

Electric Vehicles (EVs)

In May 2022, GM announced plans for a $35 billion investment in electric vehicles and charging infrastructure over the next five years (13). The investment will support the development of new electric cars and increased charging infrastructure. This investment is in addition to GM's existing commitments to develop and sell electric vehicles to create a sustainable means of transportation. Here is a notable quote from President Biden praising GM's CEO Mary –

 

"I remember your dramatic announcement that by 2035, G.M. would be 100% electric. You changed the whole story, Mary. You did, Mary. You electrified the entire automotive industry. I'm serious. You led, and it matters." - President Biden (11).

 

Inclusion, Diversity, and Equity

In 2021, GM ranked in the top 50 on Diversity Inc's list of the most diversified companies (7). GM's diversity and inclusion initiatives focus on an inclusive workplace, engaging with employees and stakeholders, and educating future generations. GM has also created several corporate cultures and leadership initiatives to promote diversity and inclusion, including the following:

• GM Diversity Leadership Program

• GM Diversity and Inclusion Fellowship

• GM Inclusion and Leadership Academy

 

Transparency in Finance

GM's transparency initiatives reflect the company's commitment to being open and transparent with its stakeholders. A notable example is the Financial Executive Council, which was created to help foster a more relaxed and collaborative culture among GM's stakeholders. The council has developed best practices for financial transparency and accountability and has also worked to promote an understanding of GM's financial performance among the company's employees. These initiatives have helped to improve GM's reputation and transparency and have helped to foster a more open and collaborative culture within the company.

 

Earnings of General Motors

In 2021 full-year performance includes Sales of $127B (3.6% YoY growth), COGS of $101B (0.67% YoY decline), Net Income of $10B (55% YoY growth), & EBITDA of $21.3B (6.8% YoY growth) (10).

The US auto industry is led by General Motors, which holds 15% of the total market share (3). 

GM delivered and exceeded its forecast and is in an excellent position to continue to meet them in the following years and beyond. Moreover, given the current global economic environment, GM is seeing strong growth in other areas, such as its global sales and EV sector. The company is making strides in its autonomous vehicle research and is optimistic about the industry's future.

 

Observation and Recommendation

GM is a well-managed, structured, and positioned company with a history of making significant environmental and social commitments. Despite current economic conditions, GM's competitive advantages and commitments make GM a sound investment for AMDP. 

 

Using GM's latest financial statements and historical data – our current market valuation and conservative DCF model value GMs stock at $53.77 per/share with a Total Enterprise Value of $156 Billion (14).

 

*GM's current stock, $33per/per share (5), is undervalued – the company represents an excellent investment opportunity.`

 

Work Cited

1. Automotive World. “Ethisphere Names General Motors One of the World's Most Ethical Companies for Second Year in a Row.” Automotive World, 26 Feb. 2021, https://www.automotiveworld.com/news-releases/ethisphere-names-general-motors-one-of-the-worlds-most-ethical-companies-for-second-year-in-a-row/.

2. Carbon-Audit-Toolkit-for-Businesses. https://www.somerset.gov.uk/climate-emergency/carbon-audit-toolkit-for-businesses/.

3. Carlier, Mathilde. “U.S. Light Vehicle Market Share by Automotive Manufacturer 2021.” Statista, 9 Sept. 2022, https://www.statista.com/statistics/249375/us-market-share-of-selected-automobile-manufacturers/.

4. Co., General Motors. “GM Set to Reach 100 Percent Renewable Energy in the U.S. 5 Years Ahead of Schedule.” GM Set to Reach 100 Percent Renewable Energy in the U.S. 5 Years Ahead of Schedule, 30 Sept. 2021, https://www.prnewswire.com/news-releases/gm-set-to-reach-100-percent-renewable-energy-in-the-us-5-years-ahead-of-schedule-301388987.html.

5. “General Motors Company (GM) Environment, Social and Governance (ESG) Ratings.” Yahoo! Finance, Yahoo!, 20 Oct. 2022, https://finance.yahoo.com/quote/GM/sustainability/.

6. “General Motors Company.” World's Most Ethical Companies, 8 Mar. 2022, https://worldsmostethicalcompanies.com/honorees/general-motors/.

7. General Motors Ranks 38th on Diversityinc’s 2021 Top 50 Companies. https://gmauthority.com/blog/2021/05/general-motors-ranks-38th-on-diversityincs-2021-top-50-companies/.

8. “General Motors.” FactSet Login, https://my.apps.factset.com/navigator/company-security/esg/GM-US.

9. “General Motors.” FactSet Login, https://my.apps.factset.com/navigator/company-security/snapshot/GM-US.

10. “GM Stock Price: General Motors Co.. Stock Quote (U.S.: NYSE).” MarketWatch, https://www.marketwatch.com/investing/stock/gm.

11. “Mary, You Electrified the Entire Auto Industry, You Led, and It Matters.” YouTube, YouTube, 16 Dec. 2021, https://www.youtube.com/watch?v=UduPjk9gonw.

12. “Planet People Profit - ESG: The Report.” ESG, 4 Oct. 2022, https://www.esgthereport.com/planet-people-profit/.

13. Walton, Robert. “Biden Administration Awards $900m to 35 States for EV Charging Network as Automakers Ramp up Battery Plans.” Utility Dive, 15 Sept. 2022, https://www.utilitydive.com/news/biden-states-ev-charging-network-ford-gm-novi/631907/.