General Motors (GM) intends to reopen its lucrative Mexican pickup plant as early as next week, according to Bloomberg.
The Mexican government has now approved factories carrying out ‘essential activities’ such as auto manufacturing to restart from May 18.
The move came under pressure from the US auto industry which relies heavily on Mexican exports. According to The Center for Automotive Research $60.8 billion (39%) of auto parts used in the US came from Mexico last year.
“GM’s three vehicle-assembly plants in Mexico, including a full-size truck factory in Silao, could start up as early as next week in compliance with conditions set by the government, said the people familiar with the matter, who asked not to be identified because the company hasn’t announced its plans yet” Bloomberg writes.
As well as the truck factory, GM also has a plant in San Luis Potosi (manufacturing the Chevy Equinox), and in Ramos Arizpe (which makes the Chevy Blazer).
Analysts have a cautiously optimistic outlook on GM right now, with a Moderate Buy consensus and a $31 average price target (43% upside potential). Shares have plunged 41% year-to-date. (See GM’s stock analysis on TipRanks).
“This recent downturn driven by COVID-19 gives us solid confidence that GM can hold up in a downturn, as recent transformation actions that have focused on improving capacity utilization and producing fewer low profit cars benefit GM’s performance” comments RBC Capital analyst Joseph Spak. He has a buy rating on GM with a $33 price target.
“We believe uncertainty around downturn performance has been a contributing factor weighing on the multiple, but we think investors should begin to fade the overly pessimistic view” the analyst adds.
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