- General Motors' North American car business is worth negative $4 billion, Morgan Stanley estimates.
- The bank says GM could return its stock to outperformance by exiting the North American car market.
- Follow GM's stock price in real-time here.
Morgan Stanley has some ideas for how General Motors can get its stock to performing well once again, and it involves leaving the North American passenger car market completely.
"We value GM's North American passenger car franchise at negative $4bn aggregate value (i.e. before pensions and OPEB)," analyst Adam Jonas said in a note to clients out Friday. "As GM continues to organically move its portfolio away from passenger cars (to as much as 90% light truck by 2020), the portion of passenger cars outside of those sold to rental car companies, government fleets, police cars, and GM employees and retirees is likely minimal."
The idea — which has not been publicly spoken about by GM — is one of several proposed by Morgan Stanley to remedy GM’s severe market underperformance in recent years. The stock has risen just 1.5% in the past three years, while the S&P 500 benchmark index is up 27%.
Other ideas include a radical change to the company’s financial reporting structure, an total exit from South American and Korean markets, and spinning of its well-performing Cadillac brand.
Morgan Stanley recently upgraded GM stock to an outperform rating with a price target of $48 — 27% above where the stock was trading Friday.
"We see reasonable scope for GM management to take steps towards more radical structural change in its group to address issues plaguing its multiple and to attract the talent, capital and business/technical partners required to be relevant in Auto 2.0," the bank said.
SEE ALSO: Trump's tariffs will have a 'twofold effect' on General Motors
Join the conversation about this story »
NOW WATCH: Wall Street's biggest bull explains why trade war fears are way overblown