It looks as though General Motors (GM) may be able to pay back more of the federal Trouble Asset Relief Program (TARP) than was previously estimated, due to the fact that its share price has risen significantly in the recent months. General Motors has a 52 week low of around $19 per share and a 52 week high of around $33 per share and, having dipped significantly leading into the beginning of January, it is currently on the rise, sitting right around $24 per share. The recent improvement is very important because it will have an impact on the repayment of the TARP money.
American International Group (AIG), another company aided by TARP, has also seen some significant improvement in share price recently. AIG stock climbed about 32% in price, while General Motors rose about 22%. Coupled together, these two companies are expected to repay about $8 billion more than previously anticipated. Of course, this does not guarantee that this money will come through, but it certainly is encouraging that TARP might not cost the taxpayers as much as was originally thought.
While General Motor's stock price has been rising, its share of the American car market dwindled. A recent decline in the number of new products has been a driving force behind this slide. Another factor has been the company's decision to roll back incentives. The share of the American car market that General Motors currently controls has dipped to 17.5%, which is down significantly from the 19.6% market share at the end of last year. This is something that General Motors will definitely need to turn back around.
This slide occurs at a time when the American car market itself is growing rapidly. The market is expected to be around 14 million vehicles for 2012. This is an increase of more than a million vehicles from a year ago. It is quite unnerving to see General Motors lagging behind the curve while the industry moves forward. If the company can't get this back on track, then it might have trouble fulfilling the promises to exceed the expected TARP repayment.
You don't have to go back to the 1920s when Ford (F) was the only company that was surpassing General Motors in car sales, to find great sales numbers for the company. Just last year, General Motors was the world's best selling automaker. It sold 9.025 million vehicles in 2011, which even put it ahead of Volkswagen by over a million vehicles. The company that General Motors overtook as number one, Toyota (TM), has not announced its numbers for that year officially yet, but the projection is that the final number will be somewhere around 8 million vehicles sold.
It would have been nice to continue its success. But it'd be hard to maintain the success that certain lines of General Motors cars, such as Chevrolet, enjoyed in 2011. 2012 may just be where the bounceback ends for the American automotive giant.
General Motors downward slide since 2011 is unfortunate, but the company itself is not very concerned, as it remains optimistic about the future. It seems that the cause of the downturn is mainly a lag in new products being sent out. Even as independent analysts like John Wolkonowicz, of Boston, are saying things like, "General Motors' product is getting stale," General Motors has new models ready to be rolled out in the near future. As things get rolling again, I expect to see another uptick in sales for the company. A rebound would be very welcome by both the company and the taxpayers.
One of the big new products that General Motors will be rolling out is a line of pursuit vehicles. Ford and Chrysler are also in on this current push. Ford recently retired the Crown Victoria Police Interceptor, which had been the main police vehicle across the United States since the early 1990's. This left a vast void and an opportunity for General Motors and Chrysler to get in on the fun.
The reason why Ford had to eliminate the Crown Victoria is because it was becoming much too expensive to comply with the new standards for fuel economy, rollover and roof crush protection. Some went as far as calling it a dinosaur.
The Charger Pursuit was the first replacement and it was released last spring. Chrysler has added three vehicles, including a Ram truck and Durango SUV, which will be sold later this year. General Motors also is adding three new vehicles to the ring. These are a mix of SUVs, trucks and sedans. Ford has two rookies coming into the business, modeled on the Ford Taurus and Ford Explorer. It is being said that the current lineup offered by these three companies is the strongest that there has ever been for the police force.
It may seem as though the production of pursuit vehicles would not be very lucrative, because the number of vehicles sold would be lower than other types of vehicles that could possibly be produced, but it is important to realize that these pursuit vehicles can go for as much as $70,000 per vehicle. There are many police forces across the country that will need to stock up in the near future. One state police force, in Michigan, just recently ordered 198 Charger Pursuits, 50 Chevy Tahoes and 20 Ford Police Interceptor Utilities.
Unfortunately for General Motors, going forward, it looks like Ford has a large advantage on the competition when it comes to police vehicles. This comes in large part from its having had more experience. It will be very difficult to overcome Ford in this sector of the market, especially with its market share slowly deflating. I am not very optimistic about a long-term model of growth for General Motors.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.