Buy General Motors Now, Profit From New Releases In 2013

| About: General Motors (GM)

With a global recession and the threat of pollution hanging over the political environment, the pressure is on in the car industry. Car manufacturers such as General Motors Company (NYSE:GM) must work harder than ever to maintain and expand their market. So how is General Motors coping with these demands, and how is this reflected in its stock price?

Despite attempts to work alongside BMW in creating futuristic fuel cells for power efficiency, the company's stock hit a low of below 20 dollars a share on Wednesday. Although this can indeed be blamed in large part on the instability of the global economic climate, General Motors must do more to maintain its leading market position.

Currently, General Motors' stock has a price-to-earnings ratio of around 6.5. The average for the 12 months as a whole, when the ratio has been normalized, is even lower - standing at 4.5. In my opinion, GM's prosperity is marred by how Ford (NYSE:F) has one thing that General Motors doesn't have - an upgraded investment rating of BBB- from BB+. Fitch, which is one of the world's major credit rating agencies, defines this upgraded level as a company which is an acceptable risk to take.

Unfortunately, General Motors currently face the label of being more prone to economic changes - and considering the impact of the credit crunch in 2008, a similar crisis could easily happen again and create turmoil in the company. Honda (NYSE:HMC) was downgraded in February by Moody's after facing an uphill battle to retain market share, whilst Italian company FIAT (FIATY.PK) tumbled from BB- to BB in light of a tough South American market. In the long term, General Motors must strive to reduce the perception of its stock as a relatively risky investment to achieve an upwards-crawling stock price.

When we consider General Motors' activity on an international scale, a lot of it is very dynamic and promising. In China, General Motors is taking steps towards the upgrade of its vehicles and marketing strategies, which is having positive sales results.

General Motors China has agreed to collaborate with China Automotive Technology and Research Center in order to meet two ends: the first, to organize and manage the demonstration fleet of General Motors' Chevrolet Volt for 12 months; the second, to schedule and plan events which will increase consumer and investor support for General Motors' future electric vehicles. The fact that General Motors is taking steps to fulfill two very different demonstrates both the scope and the depth of the company's plans to develop for the future.

Similarly, General Motors is seeing development with new models such as the brand new Chevrolet Captiva, which is set to go on worldwide sale this summer. An upgraded version of the original Chevrolet design, the new model boasts new headlights, a redesigned bumper and double decker grille. Small changes have also been made to the taillight system, but largely the previously used blueprint has been stuck to.

Given the popularity of the former model, the Chevolet Captiva is sure to sell strongly despite the lack of economic boom, and we can expect it to have a positive impact on the company's stock market performance in the latter half of 2012; I would be surprised if we don't see the stock rise above a benchmark 22 dollars by December.

However, unfortunately, not all of General Motors' recent developments have been positive. Notably, the company was forced to recall over half a million Chevrolet Cruze models due to an engine defect that posed a fire hazard. Impacting drivers in the US, Canada and Israel, the inconvenience caused to car owners did not leave a positive impression of General Motor, particularly as the defect posed a serious safety threat. Luckily, no known accidents were caused by the defect, meaning the black mark on the company's reputation will be small - I can't foresee this incident having a lasting effect on General Motors' stock market performance.

Nevertheless, the company can't afford to make any more such mistakes. A further less-than-positive recent development with regards to vehicle faults for General Motors was the company's recent decision to recall over 66,000 vehicles due to a variety of potential defects. According to a number of sources, including Reuters and the NASDAQ online community, General Motors has recalled a number of different models of vehicle in addition to the Chevrolet Cruze, including the Chevrolet Express and the Buick Enclave. Having to recall such a huge number of vehicles will not only shake the confidence of consumers and investors in the company, but it will also provide significant ammunition for the probing questions outlined above.

That said, other companies have also been embattled in recalls, such as Toyota (NYSE:TM), which had to deal with 5 million recalls in the space of two years due to unexpected acceleration issues in three different models. Investors may now be accepting that recalls come with the territory in the car industry, but I doubt this attitude will last, with the stock market tougher than ever.

Also, there have been concerns regarding how General Motors has relieved itself of commitments relating to the pensions of their workers. In a landmark decision, the company has relieved itself of a $26 billion obligation to its employees, and it's expected that many more companies will follow in GM's footsteps.

What's more, there can be the threat of companies in economically-developing countries making the move to the US. Tata (NYSE:TTM) is an Indian-based car manufacturer that has enjoyed strong performances in India, creating a high barrier of entry to western competitors. Not only is this big player eyeing up China, with the potential to give GM a run for its money, but it also owns the Land Rover brand following an acquisition from Ford during the financial turmoil of 2008.

Overall, I think that despite General Motors' recent mixed fortunes, the company is set to see a turn for the better, and its share price will rise. Despite the company's losses in Europe, people have been aware of this for a long time, and the fact that General Motors is taking significant steps to rectify the problem will reflect well on the company. Additionally, the company's expansion into China demonstrates that General Motors is a dynamic and forward thinking company, and that although it may be seeing some losses, it is doing all it can to turn this around.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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