In an attempt to focus on profitable markets such as North America and China and as part of a prolonged restructuring program, General Motors Company (GM) said it would “wind down” its sales, design and engineering operations in Australia and New Zealand and would suspend its Holden brand in the same geographical area by 2021.
The auto maker also revealed plans to leave Thailand, which include the withdrawal of Chevrolet by the end of 2020 and the sale of a facility to China’s Great Wall Motors.
General Motors shares closed lower for a second consecutive trading session in New York on Friday. It has also been the steepest single-session loss since February 7th. The stock went down 1.50% ($0.53) to $34.76, after touching an intraday low at $34.42, or a price level not seen since February 11th ($34.07).
Shares of General Motors Company have retreated 5.03% so far in 2020 compared with a 4.62% gain for the benchmark index, S&P 500 (SPX).
In 2019, General Motors’ stock went up 9.42%, thus, it again underperformed the S&P 500, which registered a 28.88% gain.
GM President Mark Reuss said in a press release that the US auto maker had explored a number of options to continue its Holden operations, but “none could overcome the challenges of the investments needed for the highly fragmented right-hand-drive market, the economics to support growing the brand, and delivering an appropriate return on investment.”
“At the highest levels of our company we have the deepest respect for Holden’s heritage and contribution to our company and to the countries of Australia and New Zealand,” he added.
The company also said that, as a result of the announced decisions, it could incur $1.1 billion in charges mostly during the first quarter, which include $300 million in cash.
Analyst stock price forecast and recommendation
According to CNN Money, the 16 analysts, offering 12-month forecasts regarding General Motors Company’s stock price, have a median target of $46.50, with a high estimate of $68.00 and a low estimate of $34.00. The median estimate represents a 33.77% upside compared to the closing price of $34.76 on February 14th.
The same media also reported that at least 13 out of 18 surveyed investment analysts had rated General Motors Company’s stock as “Buy”, while 3 – as “Hold”.