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What's Really Changed at the New GM?

A lot, actually. This automaker has tremendous upside as it fights industry headwinds and transforms itself into a global presence.

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What makes a great car company? At the big-picture level, we think the answer is simple: Great products made in the most cost-effective manner possible. So we are taking a deeper dive into  General Motors Company (GM), or New GM, to see what's really changed since it emerged from the bankrupt­cy of General Motors Corporation (Old GM). We find that in some ways GM still has work to do, but in other areas, such as labor costs, the new GM is a radically different company that is superior to Old GM.

The stock still seems extremely cheap to us on a discounted cash flow basis and at a P/E multiple of less than 5 times 2013 consensus, but not as cheap when looking at enterprise value, including GM's huge pension underfunding of $32.7 billion. Although Europe, legacy costs, and government ownership are likely to keep GM's P/E multiple depressed this year, we continue to believe the stock offers compel­ling value for the long-term investor.

David Whiston does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.