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WARREN BUFFET, General Motors (NYSE:GM)’s savior?

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By on Company

August 15, 2014: 11:25 AM ET

 

Warren Buffett has not lost hope in General Motors (NYSE:GM) just as yet.

Berkshire Hathaway (BRKA) (NYSE:BRK.A), Buffett’s company, acquired GM’s shares which amounted to 3 million for its second quarter as stated by the Securities and Exchange Commission.

Buffett retains his confidence in the company as GM (NYSE:GM) works its way to recover its crisis reported last year.

It was said that GM (NYSE:GM) recalled around millions in cars that had defective ignition switches along with various other problems for the current year. The company set up a fund to pay back its victims which totaled to an unfortunate figure of 63 deaths which was a huge loss for the company in many ways.

The shares of GM (NYSE:GM) have decreased to around 17% for the current year. In the second quarter shares went down by 11% in the month of July.

GM’s (NYSE:GM) profits declined due to costs that came from recalls and compensation for the victims. This slash in profits was about 80% for second quarter compared to the previous year. This was the second continuous quarter that wiped out profits by recall costs.

It is normal for Buffet to make long term investments in companies when their share prices go down; therefore it did not come as a shock when he bought GM’s shares. The entire nation agrees that Buffet is one courageous investor.

 

On Thursday there was a rise above $200,000/share in Berkshire (NYSE:BRK.A)’s share of Class A for the very first time. This is the highest prices stock present in the US stock market.

 

Buffett stands as GM’s (NYSE:GM) biggest shareholder as well as a supporter of Marry Barra its chief executive as he does not doubt the company whatsoever.

In May, he told CNN that there was no one better than Bara as CEO for the company.

Buffett not only buys stocks but is also a strong owner of cars sold by GM (NYSE:GM).

In July, he bought a Cadillac CTS after which he sent a letter to the executive, telling her how much he was pleased with the company’s sales staff at the local dealership near his hometown, Neb in Omaha where he purchased.

GM (NYSE:GM) made a significant comeback as it was saved by the government from financial crisis. In 2009, when returned from bankruptcy, the company made its way to the market after a year and since 2012 it has had many Buffett investments.

Even with all the problems including recall, its car sales were strong for second quarter. Its U.S. sales increased by 7%, which were a total of around 806,000 trucks and cars; its market share was the same for its second quarter.

China, GM’s (NYSE:GM) largest market witnessed record sales. In Europe and South America, sales declined and left the global sales of vehicles to change by 2.5 million vehicles. However, the company did post its increase in revenue for the year.

 

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