What Investors Should Truly Be Watching with GM's IPO

Cadillac Escalade
Source: Cadillac.com
Cadillac Escalade

As GM prepares for its IPO road show, I consistently hear people (including anchors on CNBC) asking the question, should individual investors buy this stock?

I always chuckle when I hear this question because there are so many variables that the answer for some guest on our air winds up being a watered down response.

The truth is individual investors will find a lot to like about GM as an investment, and a lot of question marks the broader public is overlooking.

GM Positives:

  • It's profitable and will be profitable for some time to come: Bankruptcy dropped GM costs so low, this company is primed to make money in a terrible market for auto sales. And as those sales return, the profits will take off.
  • GM is kicking butt in China: This is is huge given the growth we will see out of China for the next 5-7 years.
  • GM has its U.S. business lined up to thrive: The product is better than ever, and managing just four core brands it is moving faster to remain competitive.

GM Negatives:

  • Europe and Opel are still a drag: As much as GM is to be congratulated for its success in China, it should scrutinized for having a money-losing operation in Europe. And yes, GM will tell you that its making progress cleaning up Europe, but I've heard that same song and dance for as long as I can remember.
  • We don't know the Akerson plan: I've talked with new GM CEO Dan Akerson and I like what he has to say about GM being more nimble and responsive. But we still don't know what his 3 or 4 year game plan is for GM. Without that knowledge, investors have to be asking themselves, how sure am I about where GM is headed?
  • GM Pension Plans: Bankruptcy cleaned up GM's balance sheet and mountain of debt, but it did nothing to change the company's pension plan obligations. And GM has a big pension obligation. Is it an issue right now? No. Could it be a problem three or four years from now? You bet.

The bottom line is that GM has a whole host of positives and negatives that investors need to pay more attention to, instead of whether the stock opens at $26-$29 a share.

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