General Motors needs something to break out of its slump.
The stock is currently trading only about $US5 above its November 2010 IPO price.
As the US’ largest automaker risks being left behind in the race to electric and driverless cars, Morgan Stanley says its time for a “GM revolution” in order to stay in competition.
“Formation of a new entity(s) can help create a ‘currency’ to attract and retain talent, mitigate risk, fight innovator’s dilemma, and attract outside capital and partners who can have a greater role in the direction of the business,” analyst Adam Jonas wrote in a note Thursday morning.
“We call this concept ‘GM Revolution’ and believe it is critical to effecting the cultural change required to pivot the business for a sustainable future at a time of disruptive change.”
To be sure, GM hasn’t ignored the driverless revolution. The company has partnered with Waymo, Mobileye, and Apple to work on new technologies, but Morgan Stanley thinks more can be done.
“We believe outside validation from external business partners (particularly in the tech world) who can benefit from GM’s value proposition would go a very long way towards improving the credibility of GM’s message,” the bank said.
Morgan Stanley maintains its $US40 price target on GM shares — 5% above Thursday’s opening price.
It all comes down to technology. Morgan Stanley says taking a play from Fiat Chrysler CEO Sergio Marchioness playbook could unlock value.
Last month, FCA signed onto BMW’s partnership with Mobileye and Intel to continue to develop driverless cars.
Here’s some of GM’s options when it comes to a potential strategic move, according to Morgan Stanley:
“GM has all the physical attributes (for the next decade at least) to harvest and monetise valuable data from its vehicle ecosystem,” writes Jonas. “Getting the data in the right hands (at any price) can represent pure white-space optionality currently not in the share price. It’s not too late.”
Shares of GM were trading up 1.86% from their opening price Thursday afternoon.