Political risk analysis_essay.docx

1 | P a g e
Contents
I. EXECUTIVE SUMMARY ..................................................................2
II. GENERAL OVERVIEW OF TRUMP’S PRESIDENCY ..................2
III. INDUSTRY OVERVIEW .................................................................7
IV. BUSINESS STRATEGY ANALYSIS ..............................................9
V. FINANCIAL RATIOS ANALYSIS (See Appendices)....................12
VI. FORECASTING (See Appendices).................................................16
VII. VALUATION ANALYSIS (See Appendices)...............................22
VIII. SENSITIVITY ANALYSIS (See Appendices).............................23
IX. CONCLUSION AND FINAL RECOMMENDATION ..................24
X. APPENDICES...................................................................................25
XI. BIBLIOGRAPHY............................................................................28

2 | P a g e
I. EXECUTIVE SUMMARY
This equity research report addresses the need to analyse the ramifications of Trump’s
Presidency and provide an analyst recommendation on the chosen company which is General
Motors (GM). As a result of our comprehensive analysis, we came to a conclusion that the
recommended action is to weak hold or moderate sell the stock.
Our report starts with a General Overview of Trump’s Presidency, specifying Trump’s policies
that create political risks to GM. The third section is all about the Industry Overview where the
Automotive Industry is analysed using Porter’s 5 Forces. The fourth section starts with a brief
company background of General Motors and then analyses the qualitative analysis of political
risk faced by GM (SWOT Analysis). The fifth section talks about the financial ratios analysis on
GM.
The main focus of the report lies in the forecasting analysis of the Income, Balance Sheet and
Cash Flow Statements of General Motors. Specifically, we forecasted particular items that might
be affected by a political heatwave caused by the New Leader of the Free World. Forecasting is a
proxy for determining the value of General Motors where DCF Model and Sensitivity Analysis
are adopted.
After working out the value of the firm, we recommended to underperform, or weak hold the
stock because of the GM stock ($29.50) being lower than yesterday’s stock ($34.25).
Comparisons were also made with the intrinsic value which does not include political risk. It was
estimated that the price of the stock will be negatively affected by a prospective political
unpredictability and positively influenced by the exclusion of political risk.
II. GENERAL OVERVIEW OF TRUMP’S PRESIDENCY
Trump’s Election Win
The United States of America welcomed a new President on the 11th of November 2016. Donald
Trump, the Republican candidate, clinched victory over his Democratic rival Hillary Clinton to

3 | P a g e
become the 45th President of the US. The newly-elected Commander-in-Chief won after
surpassing the 270 electoral votes needed to become President. Trump’s victory came after an
eventful ‘Make America Great Again’ election campaign. Few expected Trump to defeat his
rival, as his vision to create an ‘Independent America’ was not agreed by many people.
According to CNN (2016), “Clinton’s chances of winning the presidency rose from 78% last
week to 91% Monday before Election Day”. The reason behind the numbers is because the
Republican candidate made promises which were, and still are, considered to be unpopular by
the public and which will be discussed later. Controversially, he has already signed executive
orders abolishing the Trans-Pacific Partnership Agreement and banning Muslims. It was a close
call but in the end Trump won the race.
Trump’s policies that may impact the Auto Industry
1.Renegotiation or cancellation of NAFTA (North American Free Trade Agreement): One of
Trump’s trade plans is to either renegotiate NAFTA, a 23-year agreement which gives USA,
Canada and Mexico the opportunity to access each other’s markets, or terminate it (Walker,
2017). According to Mr Trump, NAFTA is the worst deal ever approved in the US because of
the loss of manufacturing jobs in America, due to companies shifting their production in regions
where costs are low, and the US’s $60bn trade deficit with Mexico (The Daily Mail, 2017).
However, if Donald Trump renegotiates or cancels NAFTA, there would be a loss of 31,000 US
automotive jobs (Felton, 2017). There would also be a decrease in competitiveness of US
automotive industry as a trade war would increase prices and hurt American consumers (Muller,
2017). Furthermore, companies like Ford and GM could leave Mexico and Canada and seek
other regions which would be more affordable. The renegotiation or cancellation of NAFTA
may, therefore, be a disaster and bring great risks to the global automotive industry.
2. 35% border tax on products from Mexico:
Donald Trump has warned the automotive
companies that they have to pay 35% border tax
if they continue producing and importing cars
from Mexico to the US. As Figure 1 shows,
Figure 1: % of vehicles parts from Mexico
(Source: The Wall Street Journal, 2017)

4 | P a g e
Mexico is a key country for the auto industry as some of the biggest brands produce parts of their
vehicles there. Nevertheless, Twitter, a source of political risk for companies, was used by
Trump to target GM saying that they should either “Build plant in US or pay big border tax!”
(Revesz, 2017). Already, some companies are taking action after Trump’s threats. For example
Fiat Chrysler has already issued a statement saying that they would invest $1 billion in creating
2,000 jobs in existing plants in Michigan and Ohio (David, 2017).
This policy, however, poses possible threats to the auto industry. If the 35% tax was imposed,
US jobs could be lost and demand for vehicles may decline because of higher prices, thus,
hurting both consumers and automakers (Bunkley, 2017). However, this policy might lead to
alternative solutions as the auto companies can move their production elsewhere. Firms facing
high tariffs in Mexico can shift their production in other countries where they are not faced with
the same tax. Hence, this presents a silver lining in the end for the companies that will suffer
from the high border tax if they stay in Mexico. In retrospection, President Trump’s imposition
of 35% border tax would bring disadvantages to the companies who have factories in Mexico.
However, companies are already thinking of alternative ways to solve these problems by
switching their production to non-targeted countries. Nonetheless, we believe that this policy will
bring more harm than good for the company in the short term.
3. 45% Tariff on imports from China: Donald Trump’s protectionist measure of imposing a
tariff could also lead to a trade war with China. The President wants to tax the companies that
produce their products from China. Currently, the tax on Chinese imports is 3% (Mody, 2016)
which means that a huge increase from 3% to 45% could hit the automotive industry hard. GM
could be one of the main auto companies that will be hit the hardest. The Chinese market is
significant for GM as they sold more vehicles there than in the US, according to Morrison
(2017). They manufacture Cadillac in an area near Shanghai and the car would be the second
GM model to be built in China and sold in the US (Japan Times, 2017). Any possible trade war
between the countries would negatively affect GM as Cadillac imports to the US would stop and
they would be produced only for the Chinese market. Furthermore, China could retaliate and hurt
the US automakers by adopting their own policies (Bradsher, 2016). Therefore, we believe that
this policy would bring more disadvantages than advantages to the auto companies.

5 | P a g e
4. Lowering of Corporate Tax Rate from
35% to 15%: The reduction of corporate
tax is another policy that Donald Trump
wants to bring on the table. According to
Bryan (2017), Trump had a meeting with
CEOs of many automakers where he
promised to reduce taxes massively from
35% to around 15%. The rationale behind this is so that companies like Ford could move their
production to the US. According to Figure 2, there has been a growing increase in the sales of
cars and light trucks from 2010 onwards. The reduction of the corporate tax would then lead to a
further increase in car sales in the US as more firms will be switching their manufacturing from
abroad to the US.
The decrease in the corporate tax rate will bring more positives than negatives for the auto
industry. GM, for example, could have an incentive to produce locally and this could possibly
limit offshoring and increase profitability. However, auto companies could suffer if other
countries respond by also lowering their corporate taxes for them. For example, companies might
be tempted to switch their production to Cyprus, a country that has the most favourable tax
system in the EU with a corporate tax rate of 12.5% (PwC Cyprus, 2017). They may have to
make a difficult choice of whether they will continue producing in those countries or shift their
production abroad. Nevertheless, the positives outweigh the negatives, and therefore, there is a
high probability for a positive impact on the auto industry.
5. Easing of Regulations and Energy Policy: Easing regulation and Energy Policy is another
policy that will, to a large extent, impact the automakers. The Obama Administration wanted to
impose strict fuel standards, a programme aimed to reduce carbon dioxide emissions through
2025 (Plumer, 2017). However, the CEOs of big automakers, such as Mary Barra of GM, asked
the President to ease the environmental regulations (Beene, 2017). Automakers want the rules to
be weaker because the standards are expensive to comply. Not only that, the vehicle standards
require auto companies to produce more electric vehicles at a time when demand for those is
weak and, thus, would be hard for automakers to meet the required fuel consumption
Figure 2: Car and Light Truck Sales (Source: Business Insider, 2017)

6 | P a g e
requirements (Lambert, 2017). Most customers are not particularly interested in buying electric
and hybrid vehicles. The standards, therefore, increase the cost of manufacturing vehicles which
is then passed to buyers in the form of higher prices, depressing the auto sales for automakers.
The easing of regulations would help the companies produce more vehicles locally and at a
cheaper cost. Even though this policy is not good for the environment, it is beneficial for the auto
companies; therefore, we believe that it will have a positive impact on the automotive industry.
Summary
Trump’s Potential Policies Impact on Auto Industry
Renegotiation or cancellation of NAFTA
35% border tax on products from Mexico
45% tariff on imports from China
15% corporate tax rate
Ease of regulations
Overall, this section analysed some of the potential policies that will pose great political risks
and uncertainties in the automotive industry. Figure 3 shows a summary of some of the policies
that are related to the automotive industry and the type of impact they may bring to it. From the
illustration, 3 policies show a negative and 2 policies a positive impact on the Auto Industry. In
addition to the analysis, this clearly demonstrates that the industry is likely to suffer in the next 3
years. The Industry will be further analysed in the next section including how the policies affect
Porter’s five forces.
Figure 3: Table showing impact of Trump’s policies on the Auto Industry
Negative ImpactPositive Impact

7 | P a g e
III. INDUSTRY OVERVIEW
Brief Overview of Automotive Industry
The automotive industry is a big industry with
Europe, China and the US making up the three most
important markets for the selling of vehicles. There
are 14 companies that dominate globally, as shown
in Figure 4. The performance of the industry has
been strong recently. According to Parkin, Wilk and
Singh (2017), 88 million autos were sold worldwide
in 2016, a 4.8% increase from 2015. However, the industry may suffer as a result of Donald
Trump’s policies. For example, the likelihood of helping the carmakers by softening regulations
for them on environmental matters such as greenhouse gases will be overshadowed by proposed
actions like the imposition of a higher border tax on Chinese and Mexican imports. Overall,
Donald Trump’s approach to trade will hurt the auto companies more. In this section, we briefly
examined the Industry using Porter’s 5 forces.
Porter’s 5 Forces Analysis
Threat of New Entry: The
threat of companies trying to
enter the auto sector will be
relatively moderate as a result of
Donald Trump’s 35% and 45%
border tax on Mexican and Chinese imports respectively. On one hand, trade barriers will reduce
the possibility of new entries into the American market, thus, restricting competition. Bloomberg
(2017) estimated that US vehicle sales will decrease in 2017, as shown in Figure 5, due to the
rise in the prices of cars as a result of President Trump’s possible policies. Alternatively, it is
possible that the threat of new firms entering a market is high. For example, Guangzhou
Automobile Group (GAG) could enter the US by planning to open a Research and Development
(R&D) facility in order to make their Trumpchi brand compliant with regulations
(BloomberBusinessweek, 2017). An R&D center may expose GAG to the latest technology and
Figure 4: (Source: Business Insider, 2016)
Figure 5: US light-vehicle sales have stopped growing (Source: Bloomberg,
2017)

8 | P a g e
make sure that they promote a brand that is of high quality and low cost so that they could
compete with the rest of the automakers. In this case, there could be a great threat of a foreign
automaker entering a market of companies. All in all, since there are two different arguments,
there is a big possibility that this force could be neutral.
Availability of Substitutes: The impact of President Trump’s policies on the auto industry may
consequently lead to the strengthening of substitutes. The higher the cost of a vehicle then the
more likely it will be that consumers will switch to other means of transport such as a bus or a
train. According to a report by the Automotive News, a likely border tax on vehicles produced
from Mexico would push the prices of Ford and Toyota for example by $282 and $2,651 per car
respectively (Bunkley, 2017). Most of the vehicles sold are trucks and SUVs even though the
likelihood of a price increase in oil caused by Trump’s foreign policy in adding sanctions upon
Iran might persuade buyers to switch their preferences to electric cars. It is forecasted by
Bloomberg Database (2017) that electric car availability will increase in the next 3 years. GM is
already investing on electric vehicles according to Molla and Denning (2016). The main idea is
that the 2 factors mentioned show that there is a big threat of substitutes.
Bargaining Power of Buyers: The bargaining power of Buyers is high. There are a variety of
brands a customer can choose to buy from and this could lead them to switching from one brand
to the other. However, the power will become low when Trump implements his own policies.
Customers will not have a say in determining the price as this aspect will be decided by the
American Government and GM. Therefore, we predict in the short-term future that the power of
buyers will be low.
Bargaining Power of Suppliers: The Power of Suppliers is moderate. GM is dependent on
numerous suppliers to manufacture its vehicles using basic needs such as raw materials (GM 10-
K, 2017). GM has more than 100 suppliers and some of them, such as Comau, LLC which
creates a robotic assembly system for improving vehicle launch quality, and LG Electronics
which assimilates a lithium-ion battery pack in Chevrolet Bolt EV, were awarded the Innovation
Award of the Year 2016 (GM Website, 2017). Relying on many suppliers means that the Power
of Suppliers is Strong. However, GM has the ability to set authority over its suppliers. According

9 | P a g e
to GM Green (2017), GM asked its supply chain to reduce emissions and 70% of invited
companies reduced the carbon emissions by 90m tons and saving money in the process.
Nevertheless the power might be low after the implementation of Trump’s policies. There will be
a loss in the power of suppliers due to the NAFTA Withdrawal which will result in “higher costs
to producers and a less competitive NA auto suppliers industry” (Felton, 2017). Therefore, the
power of the suppliers becomes weak after Trump’s policies are put in place.
Competitive Rivalry among Firms in the Industry: Competitive Rivalry is quite high in the
Auto Industry. GM faces increased competition from its rivals. According to data taken by
Bloomberg (2017), GM has the second market share globally in 2016 (16.52%) only behind
Volkswagen which has a 17% market share. There are currently over 10 brands such as
Volkswagen, GM and Ford which dominate most of the market and this show how competitive
the Industry is. The arrival of Trump and his policies might have any effect on the Competitive
Rivalry. On one hand, companies might become less competitive due to the renegotiation of
NAFTA or the imposition of border tax, but on the other hand they might become more
competitive as a result from the introduction of a 15% corporate tax and/or easing of energy
regulations. Therefore, there will be no change in this force so its competitiveness will remain
high.
IV. BUSINESS STRATEGY ANALYSIS
Company Background
GM is one of the biggest automotive manufacturers in the world with its headquarters in Detroit,
Michigan. It was founded by William Durant, Charles Stewart Mott and Frederic Smith in 1908.
The company operates globally, dominating the regions of Europe, North and South America
(MarketLine, 2017). GM controls 10 brands which are: Buick, Cadillac, Chevrolet, GMC,
Holden, OnStar, BaoJun, Isuzu, Jiefang and Wuling and is made up of 2 segments which are the
Automotive and Financial Services. The company is trading at the New York Stock Exchange as
well as the S&P 100 and S&P 500 stock market indexes. The analysis will focus on GM because
it is one of the companies that are deeply affected by Trump’s protectionist policies. The
President recently tweeted about GM saying that the carmaker should manufacture the Mexican-

10 | P a g e
made model of Chevy Cruze in the US otherwise they will have to pay a border tax (Pramuk,
2017). Subsequently, GM’s shares dropped by 0.7% (Reklaitis, 2017) immediately after the
tweet and even though it is a short-term effect, the long-term impacts of Trump’s policies are
worth discussing. We will look at the effects of the policies on GM, both quantitatively and
qualitatively.
SWOT Analysis
Strengths: 1. Strong Market Position: The market
position is very strong for GM and this mainly comes
from the company’s involvement in the US and
Chinese market. The Detroit auto company has
offices in 100 locations in the US as well as
warehouse and assembly operations in around 60
countries around the world (Global Data, 2017). The company sold a total of approximately 10
million vehicles worldwide in FY2016 with a market share of 16.52%. Similarly, the company
sold 3.043million vehicles in the US and led the market with a market share of 17.42%. In the
Asia-Pacific market, GM is the second highest automaker (sold 3.914m vehicles in China alone)
with a market share of 11.89%. The American giant also had the eighth market share in Europe
(6.14%). Having a large geographical presence, the company can expand, interact with a large
customer base and then gain a competitive advantage over its competitors.
2. Strong Brand Portfolio: GM offers a wide range of brands to its customers and one brand that
has come to attention recently is Chevy Cruze. The model is manufactured in Ohio and only
recently started producing Cruze hatchbacks in Mexico, where labour costs are significantly low.
According to Welch and Butters (2016), the vehicle “gets about 70% of its US sales from
Chevrolet”. In 2015, GM stated that it would invest $350 million towards building the next
generation of Cruze cars in Mexico (Woodall and Shepardson, 2017). Likewise, the automaker
also produces the Buick Envision, a Chinese-made model, which was first introduced back in
2014. As a result, GM’s operating profit rose by 67% from 2014 to account for approximately
$11bn in 2015 because of the increase in demand for Buick Envision (Colias, 2016). These
brands are some of the most powerful brands in the world which can attract customer’s needs,
and thus produce positive financial results and create value for GM.
Figure 6: Strong Market Position (Source: Bloomberg Database,
2017)

11 | P a g e
Weaknesses: 1. Dependence
on US and Chinese Markets
(See Appendices): GM is the
leading automaker in the US
and Chinese Market and this
is where its strength lies.
According to GM’s Global
Sales (2016), around 8
million vehicles were sold in North America and China out of a total of 10 million. This poses a
great risk because GM’s excessive reliance on two markets may be threatened by factors like
President Trump’s policies which include his desire to impose 45% tariff on imports from China.
If this policy is implemented, then dependence will be a weakness because the price of imported
vehicles from China will increase, thus reducing the demand for those vehicles in the US. A
reduction of demand will lead to a reduction in Total Revenues and Profits and GM will
subsequently suffer.
Opportunities: 1. Growing demand for fuel efficient and electrical vehicles: GM’s investment
in fuel efficient and electrical vehicles is a good alternative which can protect the environment,
and this presents itself as an opportunity to grow more. It is expected that 7.5million sales will be
made by 2020 and 1 billion made from plug-in hybrid vehicles (PHEVs) and battery electric
vehicles (BEVs) by 2050 (Global Data, 2017). Furthermore, the cost of the lithium-ion battery
that will be used is low, hence, paving the way for the auto companies to invest in them.
According to Perkowski (2017), the cost of the battery for Chevrolet Bolt in 2010 was $750 per
kWh but in 2012 it is predicted to be $150. The low cost will be transferred to the customer in
the form of lower prices for the vehicles which will leads to an increase in demand raising GM’s
revenues and profits.
2. Reduction in corporate tax will help GM reduce its pension problem: President Trump has
vowed to reduce the corporate tax to 15% to draw the automakers back to the US. This is also an
incentive for GM to relocate some of its operations to the US in order to reduce their pension
plan problem. Many firms have suffered from the underfunded pension obligations mainly
because the interest rates were low and this caused a pension deficit where liabilities were higher
Figure 7: Table showing impact of Trump’s policies on the Auto Industry
(Source: GM Global Sales)

12 | P a g e
than assets. The lowering of the corporation tax would lead to the acceleration of payments, and
as the pension contribution is tax deductible, GM will be able to reduce the gap between
liabilities and assets (Monga and Gillers, 2017). President Trump’s corporate tax policy offers
the company an opportunity to not only initiate its operations domestically, but also be able to
reduce the pension plan obligations problem.
Threats: 1. Threat of Import Tax by President
Trump: The President threatened GM by saying
that they will have to pay a border tax if they do
not make Chevy Cruze in the US (Yuk, 2017).
Moreover, President Trump has said that Chinese
imports such as Buick Envision SUV, a model
manufactured in China under a joint venture with
SAIC Motor, have to be taxed (Young, 2016). It is clear that GM operations are generally
attracted to low labour costs in countries like Mexico and China. Figure 8 shows how much the
firm relies on Mexican pickup trucks. Any increase in tax will delete the cost advantages and
lead to an increase in the price of Mexican and Chinese-made vehicles. Higher prices will lower
demand for those cars as consumers will have no choice but pay a higher price. This could then
lead to a fall in profit margins for the company. Additionally, switching production from one
country to another is costly. President Trump addressed GM on Twitter, stating that they must
build Chevrolet Cruze models in the US. Even though GM responded to the tweet saying that
most of them are built in the US (190,000 sold in the US in 2016 compared to 4,500 in Mexico)
(Pramuk, 2017), relocating all its operations from a country that generates great profits due to
extremely low wages to a country with higher minimum wages can be very costly and time
consuming. Border tax is therefore a big risk and a threat to the company.
V. FINANCIAL RATIOS ANALYSIS (See Appendices)
One of the tools that will be used to assess the performance of GM in the past 3 years is Ratio
Analysis. Specifically, Sustainable Growth Rate Framework and Profitability ratios will be
analysed in this section. There will also be an explanation as to why these ratios were chosen as
Figure 8: Share of pickup truck parts (Source: NY
Times)

13 | P a g e
well as understand the connection between them and the political risk posed by Trump’s
Presidency.
Sustainable Growth Rate Analysis
Net profit margin: According to Palepu and Healy (2008, p.5-6), this ratio shows how many
dollars, that GM collects when it sells its vehicles, are converted into profit. Across the last three
years there have been fluctuations in Net Profit Margin where it rose from 2.53% in the FY2014
to 6.36% in the FY2015, signaling an improvement in profitability, but then dropped to 5.67%.
The increase in the Net Profit Margin from 2014 to 2015 was contributed by several factors such
as the increase of SUVs and pick-up trucks (Wright, 2015) and benefits from strong car sales in
China (Isidore, 2016). However, Net Profit Margin slightly decreased from 2015 to 2016 mainly
due to the increase in income tax shown in GM’s Income Statement (Bloomberg Terminal,
2017). The increase in the expense was to cover the absence of the 2015 income tax benefit
(GM’s 10-K, 2016). The rise of income tax means that a higher value may be subtracted from the
Pretax Income, thus, lowering the Net Income which could then lower the Net Profit Margin.
Asset Turnover: There has been a gradual fall which can be seen in the Asset Turnover from
0.91 in the FY2014 to 0.80 in the FY2016. This shows that the lower the asset turnover ratio the
less efficient GM is in using its assets, hence, reflecting the firm’s poor management. The reason
for the steady fall in the ratio could be because of the increase in Total Assets from 2014-2016.
After calculating this ratio, the next step would involve the process of trying to find the Return
on Assets (ROA) which is the combination of Net Profit Margin and Asset Turnover. Exhibit 10
shows an ROA graph very similar to the Net profit Margin because a change in Net Profit
Margin is directly proportional to the change in ROA.
Financial Leverage: Financial leverage is defined using the equation Total Debt/Total Equity.
(Palepu and Healy, 2008, p. 5-7). The diagram shows a continuous rise in financial leverage
from 1.30 in the FY2014 to 1.92 in the FY2016 and this is because of a change in Average
Assets. After calculating the Financial Leverage, it is possible to locate ROE, which also
experienced a continuous rise from 2.97% in FY2014 to 8.70% in FY2016. ROE is driven by

14 | P a g e
Financial Leverage because the changes in the leverage are more significant than the changes in
the ROA. Therefore, a change in ROE may be driven by a change in the Net Profit Margin.
Dividend Payout Ratio: This ratio measures the proportion of net income used to pay
shareholders in the form of dividends. Exhibit 5 shows that there was a huge drop of the ratio
from 68.57% in the FY2014 to 22.59% in the FY2015 because of the increase in EPS from $1.75
to $6.11. Meanwhile, the Dividend per share increased but at a smaller rate, paving the way for
the mass reduction in Dividend Payout Ratio during that period. Another reason for the fall may
be the share repurchase program which was considered by the CEO of GM, Mary Barra.
According to Vlasic (2016), GM decided to buy back $5 billion in stock in order to improve the
then flat share price. After the decision was made, GM repurchased 70% of authorized program
at the end of 2015 (GM, 2016). Buyback program is when a company buys its own shares back
from the market, reducing the number of total outstanding shares and increasing the EPS of the
company. After calculating the Dividend Payout Ratio, the Sustainable growth rate which is
equal to ROE * (1-Dividend Payout Ratio) was worked out.
Profitability Ratio Analysis
Gross Profit Margin and EBITDA Margin: Gross Profit Margin measures the profitability of
GM by expressing the link between Sales and Cost of Sales in % (Tulsian, 2014). Exhibit 8
shows a slow increase from 11.45% in FY2014 to 18.06% in FY2016. Additionally, the
EBITDA margin shows the performance of GM reflecting on operating costs (excluding
Depreciation and Amortisation). It is calculated by dividing Sales from EBITDA and there has
also been a small rise of this ratio from 4.85% to 5.25%. Both ratios increase partly because of
an increase in global sales.
Linking Ratio Analysis with Trump’s Presidency with GM’s SWOT Analysis
Once we analysed the ratios, we will then use them as proxies for calculating the forecasted
values of the company. Specific ratios whose components will be directly or indirectly impacted
by Trump’s presidency were selected. These ratios, which will be measured once the Forecasted
Financial Statements will be made for 2017-2019, may, therefore, be different than the ones

15 | P a g e
calculated. The next parts will briefly explain which accounting items from the selected ratios
may be affected by the political risk accompanied by Donald Trump’s presidency.
1. 35% and 45% border tax on imports from Mexico and China: The likelihood of a tariff on
Mexican imports will prompt GM to pass the tax to US customers in the form of higher prices,
impacting the revenue and profit margins of the company. The higher price for a Mexican-made
vehicle will discourage customers from buying it, thus, reducing the demand for those cars.
Moreover, there is the probability that the tax will increase the price of a vehicle sold in the US
by $2,300 (DB, 2017). GM’s Gross Profit Margin, ROA and ROE and PP&E turnover may all be
affected because of a change in the US and Global Sales. The 45% tariff on Chinese imports will
also affect the ratios mentioned above.
2. Reduction of corporate tax to 15%: The President has also proposed to reduce corporate tax
to 15%. This policy can bring benefits to GM as a lower corporate tax means that they may be
able to solve the problem of pension contributions. Since the item is in the Balance Sheet, a
decrease in pension liabilities may cause a reduction in total liabilities and then a rise in the
Shareholder’s equity, impacting the Financial Leverage of GM. The decrease in the tax rate
could also reduce the income tax expense of GM, hence, positively impacting the current net
income and increasing the Total Equity which could then change the selected Ratios mentioned
in the section. Finally, the cutting of corporate tax rate could boost the Earnings per Share of the
company and therefore, reduce its Dividend Payout ratio in the future as Durden (2017) assumed
that companies would be able to add $8-$9 to its EPS.
3. President Trump’s ease of environmental regulations: One of President Trump’s major
changes is to repeal Obama’s Clean Power Plan. The Obama Administration constructed a plan
that would increase the efficiency of US vehicles in an effort to reduce carbon dioxide emissions
(Plumer, 2017). However President Trump is against it saying that it is costly for automakers.
The initial plan promotes companies to produce more hybrids and electric vehicles (EV) which
are less demanded by the public now. However, oil prices are low while EVs are expensive, thus,
auto sales are reduced. According to the Whittier Daily News (2017), drivers are charged $88 for
charging their vehicles compared with paying $3 a gallon for a gasoline car. The relaxation of

16 | P a g e
the fuel standards may most likely reduce the revenues GM gains from the electric vehicle
market but the reduction will be small because they are not investing as much as in non-electric
ones. Therefore, the impact on the Sustainability Growth Ratios and Profitability ratios may be
small now. However, we might see a greater impact on these ratios in the long-term future as
20m EVs will be sold each year by 2030 because costs of lithium-ion-made batteries will
dramatically fall thus encouraging firms to manufacture more environmentally-friendly vehicles
(Desjardins, 2016)
VI. FORECASTING (See Appendices)
In order to estimate the future Cash Flows of GM affected by Trump’s policies, the Income,
Balance Sheet and Cash Flow Statements have to be forecasted. We analysed quantitatively how
Trump’s potential policies will potentially affect certain accounting items in the financial
statement and then constructed a forecast for each of the next 3 years. However, before we
analysed, we applied some assumptions that had to be taken into consideration when forecasting
the accounting items:
 All accounting values in GM’s Financial Statements are recorded in US Dollars. Any other
currency or a mix of currencies will cause confusion so sticking with one is essential for our
analysis
 Assumption that consumers pay 100% of Trump’s proposed import taxes and that GM will
only pay income tax affected by a reduction of the corporate tax (income tax expense is only
affected by a change in Corporate Tax excluding the Import Tax Adjustments as they are
paid by the consumers.
Income Statement Forecast (See Exhibits 10-12 and Figure 9)
1. Revenue/Sales Growth
Automotive Sales: The first step before forecasting the Automotive Sales was to split the item
into US and non-US Revenue to forecast each one separately. We then combined them together
to calculate the estimated Automotive Sales. From FY2014 to FY2016, US Auto Sales grew by
an average 7.70% [=(5.8%+6.89%+10.84%)/3]. However we projected that US Auto Sales
growth to decline to 1.29% in FY2017E, -1.34% in FY2018E and -1.36% in FY2019E. The
reason for the sudden decline in E.G.R. is linked to the 3rd
Assumption: The 35% and 45%

17 | P a g e
Imported Tax on Mexican and Chinese goods will impact the US Market as GM produces
Mexican- and Chinese-made Models in which most of them are sold in the US. Consumers will
pay the 100% tax that is passed on by the company and that will affect the US Auto Sales as
more consumers will stick to the vehicles they already own and thus demand for new models will
decline. Therefore we used Price Elasticity of Demand (each step shown in Exhibit…) since
demand for vehicles is price elastic and, combined with our choice of picking Deutsche Bank’s
prediction of the price increase of a GM vehicle ($966), the number of vehicles sold and the
price for each vehicle sold in the US were forecasted to compute the estimated US Automotive
Sales for each of the next 3 years (DB Analyst, 2017, p.6). The second step was to calculate the
forecasted the Non-US Automotive Sales. The E.G.R for each of the next 3 years was predicted
to be -9.60%, in line with the average YoY growth rate in the last 3 years. This means that Sales
are forecasted to decline slightly over the next 3 years due to the Import Taxes imposed by
President Trump, reducing demand for customers and Total Vehicle sales.
GM Financial: The other source of revenue for GM Financial which is the provider of financial
solutions for the company (10-K, 2017, p.9). The E.G.R for each forecasted year is expected to
be 52%, the average of the last 3 year’s A.G.R [=(14.15%+70.93%+71.26%)/3], leading to an
increase in GM US Financial Revenues for the future. Political Risk might impact GM US
Financial, however, the historical positive trend in its Revenues is expected to continue due to
the improvement of retail vehicles sales (Parker, 2016) and the increase of leased vehicle income
of $1.7bn in 2016 (10-K, 2017, p.31). Additionally, GM is planning to increase the share of
prime loan in North America and expand its Customer Relationship Management (GM Financial,
2017). Even though a reduction in corporate tax might lead to a possible increase in interest rates
by the US Central Bank (Fleming, 2017), all the positive actions taken by GM will most likely
outweigh the cloud of uncertainty of Trump’s policy thereby increasing the GM US Financial’s
Revenues. Political risk does not impact GM Non-US Financial’s Revenues. The second step
was to calculate the GM Non-US Financial where we projected the E.G.R of each year to be -
0.40% compared to FY2015A’s A.G.R. of -0.39%. There was a decrease of $0.3bn in finance
charge income and other income outside of North America in 2016 according to GM’s 10-K
form (2017, p.31).This decrease, therefore, will likely lead to a decline in the sales and that is
why -0.40% was chosen.

18 | P a g e
Total Revenue Forecast: After predicting the forecasted E.G.R and revenues for each source,
we could then construct a Total US and a Non-US Revenue Tables. Exhibit, which explains the
US Rev Forecast, shows a slowdown in growth rates of the, from 13.36% in FY2016A to 3.55%
in FY2019E, but a slow increase in Revenue from $118,310million in FY2016A to $135,466
million in FY2019E. Exhibit, which explains the Non-US Revenue Forecast, shows a decline of
growth rate from 0.16% in FY2016A to -9.12% in FY2019E and a decrease in Revenues as a
result of the changes in E.G.R. Figure 9 displays the final Total Revenue Forecast of GM and it
was constructed by adding the two Exhibits together. There is a small increase in Revenues from
$166,380million in FY2016A to $171,494million in FY2019E.
2. Automotive Cost of Sales: The formula for Cost of Sales is: Beginning inventory + Purchases
- Ending Inventory (Palepu and Healy, 2008). The forecasted Cost of Sales was calculated as a %
of sales. Our estimations of 85.78% of Sales in FY2017E, 86.26% in FY2018E and 87.26% in
FY2019E have led to a small increase in the Cost of Sales during that period. Trump wants to
kill the clean energy program and stop the funding of energy grants (Worland, 2017). GM would
then have insufficient funds to invest in cheap renewable energy and have no choice but buy
more fossil fuels. At the same time price of raw materials such as steel and oil are increasing and
this would increase Purchases which would then increase the Cost of Sales (AutoFleet, 2017).
There is also the assumption that prices of raw materials will continue to rise even more in 2018
and 2019 and that is why is a higher percentage of sales was used for those years.
3. Depreciation, amortisation and impairment (D,A&I): D,A&I was forecasted as a percentage of
Revenue using two calculations: 1) Forecast Ratio = Depnt / Revt and 2) Depnt+1= Forecast
Ratio*Revt+1 (Rantapuska, n.d.). After the interpretation of the calculations, the depreciation was
forecasted to be 6.26% in FY2017E and it stayed constant as 6.26% to Total Revenue during the
forecasting period.
Figure 9: Total Revenue Forecast (Source: Microsoft Excel)

19 | P a g e
4. Selling, Gen&Admin Expense: Selling, Gen&Admin Expense in each of the forecasted years
was calculated to be 7.04% of sales, the same as the one in FY2016A. It was kept constant
throughout the forecasted period because Total Net Sales and Revenue, the key driver of this
expense, experienced a relatively small increase throughout the year. Therefore, we kept this
item constant.
5. Other Expenses: For FY2017E, Other Expenses and Goodwill Charges was 5.28% of sales,
using the prior year rate. However we forecasted this expense to decrease to 3.90% in FY2018E
and 3.80% in FY2019E as a percentage of sales due to the likelihood of cost of shifting
production of pickup axles from Mexico to Michigan (reacting to Trump’s protectionist policies)
being mostly covered by GM’s pledge to meet its 100% Renewable Energy Goal which will
reduce price volatility and costs (GM Green, 2016; Bunkley, 2017). Overall Other Expenses
would still increase, but at a slower rate in the second and third forecasted year.
6. Interest Expense and Interest Income: Interest Expense was forecasted as a percentage of
Revenue using two calculations: 1) Int Expense Ratiot+1 = Interest Expenset/Total Debtt-1 and 2)
Int Expt+1 = Int Expense Ratiot+1*Total Debtt+1 (Rantapuska, n.d.). After the use of these
formulae, Interest Expense was projected to be 0.43% in FY2017E 0.41% in FY2018E and
FY2019E of sales. Interest Expense was calculated as a percentage of cash and cash equivalents
(excess cash) using two calculations: 1) Int Inct+1 = Interest Incomet/Excess Cashtt-1 and 2) Int
Inct+1 = Int Inc+1*Excess Casht+1 (Rantapuska, n.d.). Interest Income, which is associated to debt,
will increase at slow rate in the coming years because of a higher interest rate the Federal
Reserve to tackle Trump’s corporate tax reduction policy. Therefore, we used similar formulae
and combined them with Political Risk to calculate Interest Income and Expense in the three-
year forecasted period.
7. Tax: We assume that the corporate tax rate will be 15%, the same as what Trump suggested.
However, if the import taxes were not 100% passed to consumers then the corporate tax would
be 20% (35%-15%) from a Border Tax Adjusted IRS Perspective (DB, 2017). Since all the
import tax is passed to the consumer, 15% is the rate we used. We thereby multiplied each

20 | P a g e
forecasted Income before Income tax to compute the forecasted Income Tax Expense for each of
the forecasted years.
Balance Sheet Forecast (See Exhibit 13)
1. Trade Receivables, Inventory, Cash and Cash Equivalent: These items were all grouped
together because they are driven by Net Sales and Revenue growth. The larger the Revenue, the
larger the items as they have to support the cash flows from operating activities. Since the Sales
Growth is affected by Trump’s import tax plan, a threat to the firm, these items will also be
influenced in the same way. We, thus, calculated the three year historical average, which is
36.27% =[(37.33%+36.36%+35.13%)/3] as a percentage of Sales in order the forecast the Trade
Receivables, Inventory, Cash and Cash Equivalents.
2. Other Current Assets: This account includes items such as financial derivatives and
receivables of GM Financial which are not included in the operating activities. GM Financial is
forecasted to increase in the upcoming three years and improve this account. The last three-year
average as percentage of sales, 12.06% = [(16.3%+9.2%+10.67)/3], was put into practice to
project the 3-year future period.
3. Net Property, Plant & Equip and Intangible Assets: The probable protectionist measures might
affect the first account mentioned in the future. GM’s plan to shift production from members of
NAFTA Canada and Mexico to the US may lead to GM having to build new factories for
manufacturing vehicles. The historical three-year average of Net PP&E as a percentage of sales,
19.94%=[(17.79%+20.50%+21.53)/3], was utilised to predict the size of the account in the
future. Intangible Assets contain items such as brand names and customer relationships which
are all Non-Current Assets (10-K, 2017, p.52). GM was named Top Manufacturer in Auto
Loyalty Awards (HIS Markit, 2017) and GMC, one of GM’s brands, recently won most refined
brand for fourth consecutive year (GM, 2017). We believe that these awards and the top
recognition GM receives every year will strengthen brand loyalty and customer relationships
even when Trump’s Policies will be implemented. We hence forecasted the value of Intangible
Assets utilising the three-year average percentage of Sales, 3.93% = [(4.11%+3.90%+3.76%)/3].

21 | P a g e
4. Other Non-Current Assets: This account is driven mainly by deferred tax assets which are
driven by changes in corporate tax. Deferred Tax assets is defined as the” amount of income tax
recovered in respect to the carryforward of unused tax losses and unused tax credits” (Deloitte,
no date.). A change in the corporate tax rate applied by Trump would impact Deferred Tax
Assets which would also alter Other Non-Current Assets. Therefore this account was kept
constant as a three-year average of percentage of Sales in the next few years, which is 52.68%
=[(38.30%+57.60%+62.15%)/3].
5. Operating Current Liabilities without Short-Term Debt: Accounts Payable and Other Payables
and Accruals are the items accounted in this section which depend on the economic situation of
the customers. It is also driven by Net Sales and Revenue as customers would not afford to buy a
more expensive vehicle as a result of a potential Import Tax. This account will follow the pattern
of Net Sales and Revenue, hence estimating it using a 3-year average percentage of Sales,
15.48%=[(14.45%+15.79%+16.20%)/3] for Accounts Payable and
17.91%=[(18.07%+18.11%+17.55%)/3] for Other Payables and Accruals.
6. Non-Current Liabilities without Long-Term Debt: Pension Liabilities is one example of a
Non-Current Liability. We discussed earlier that a reduction in corporate tax rate will bring
benefits to GM as it will help the company deal with then underfunded pension problem.
However, we do not believe that it will have an immediate impact on the Non-Current Liabilities
in FY2017E so we set up 25.39% of Sales, higher than the previous year. We then reduced the
amount as percentage of sales to 22.39% in FY2018E and 19.39% in FY2019E.
7. Financial Leverage: Financial Leverage was discussed in the Financial Ratios Analysis where
it was one of the variables measuring ROE. The slight increase in ROE was influenced by an
even smaller increase in Financial Leverage. However there is the concern that Financial
Leverage will increase in the future (see Exhibit …). hurting the solvency of GM. All in all, GM
will try and keep the Long- and Short-term Debt at a respectable level so we predicted both
items’ forecasts as a percentage of Total Assets in FY2016A, maintaining the capital structure.
Short-Term Debt is projected to be 13.09% [FY2016A – 29,028/221,690] to the Total Asset of

22 | P a g e
the year while the Long-Term Debt will be 26.08% [FY2016A – 55,600/221,690] to the Total
Asset of the year.
VII. VALUATION ANALYSIS (See Appendices)
DCF Model was employed to compute the intrinsic value of GM with and without Political Risk
based on the Forecasts above and the Cash Flow Forecast Analysis (see Exhibit…). The
Weighted Average Cost of Capital (WACC) was used in the model (see Exhibit…).
Inclusion of Political Risk (See Exhibit …)
1. WACC: Cost of Equity and Cost of Debt are needed to compute WACC. Cost of Equity can
be measured using the Capital Asset Pricing Model (CAPM) formula: Ke (Cost of Equity) = RF
(Risk-Free Rate) + (RM – RF) (Country Risk Premium) * β (Beta) (Palepu and Healy, 2008, p.8-
3). The Risk-Free Rate is 2.405%, beta 1.282, Country Risk Premium 6.979% and Expected
Market Return 9.384% (Bloomberg Database, 2017). Cost of Equity is 11.40%
[(0.02405+(0.06979*1.282))]. Cost of debt was calculated using the interest rate in the FY2016A
and the Total Debt in FY2015A [(Interest ExpenseFY2016A/Total DebtFY2015A)] and the result is
0.91% [(572) / (43,549+19,562)]. In order to quantify the WACC, Debt/Equity in FY2016A will
be used as Short- and Long-Term Debt’s forecasted % of Sales will stay the same throughout the
period FY2017E-FY2019E. The WACC equation is: (E/V)*Re + (D/V)*Rd*(1-Tc). The tax rate
(Tc) is assumed to be 15% in the inclusion of Political Risk posed by President Trump. WACC is
4.410%[[(44,075)/(29,028+55,600+44,075)]*0.1140+(29,028+55,600)/(29,028+55,600+44,075)
*0.0091*(1-0.15)].
2. Terminal Value: Terminal Value of GM is determined by the perpetuity growth rate of 3.11%
and the WACC of 4.410%. The Perpetuity growth rate of GM (g) is in line with Automotive
Industry’s growth. It would have been difficult to achieve growth of more than 3.11% because it
basically assumes that GM will always outmuscle the Auto Industry which is impossible
(Rotkowski and Clough, 2013). Another reason for the choice of 2% is that it follows the
industry outlook which is more capital and labour intensive. Terminal value of GM from the
forecasted year FY2019E is TV = FCF*(1+g) / (WACC-g). After figuring out the Terminal

23 | P a g e
Value, the discounting factor for each forecasted year was then worked out in order to find the
Present Value of FCF to date.
3. Intrinsic Value: The final step was to compute the intrinsic value. By adding all the Present
Values of FCF to Date and the intrinsic value, the end product represented the Total Value of the
company. The Total Equity Value of GM was calculated by subtracting Total Debt of GM from
the Total Value of the firm. The intrinsic value was finally obtained by dividing the Total Equity
Value by 1,509 billion shares outstanding which gave a figure of $29.50, slightly lower than the
current market price of $34.25 as of 10th
of May 2017 (Bloomberg Markets, 2017).
Exclusion of Political Risk (See Exhibit…)
After we obtained the intrinsic value of a GM share, our task was to calculate the intrinsic value
of GM not suffering from Trump’s Presidency. The assumption made here was the expectation
of no corporate tax rate adjustment, meaning that the tax rate remained at 35% and not being
changed to 15%. For simplicity, the tax rate was the only variable that changed and, with the
help of Microsoft Excel, typing the new tax automatically changed all the numbers in the DCF
Model. The intrinsic value of GM without the effect of Political Risk is $38.06, slightly higher
than the current market price of $34.25.
VIII. SENSITIVITY ANALYSIS (See Appendices)
The final chapter in the report explains the Sensitivity Analysis by considering different possible
outcomes and estimating the value of General Motors under each outcome. Three scenarios are
considered in the analysis of impact of Trump’s Presidency on GM: best case, base case and
worse case. We will change a few accounting items in each scenario depending on different
factors. Tax rates and Sales Growth are some examples that will be used to analyse the company
in each case.
Best Case: PSA buys GM’s European Unit Opel for $1.9 billion and the blockage of Trump’s
policies – GM agreed to sell Opel to one of its rivals, PSA Group. Opel’s operation became a
problem for the American carmaker after the division failed to meet the target to break even in
2019 leading to $9bn loss since the financial crisis of 2008 (Nussbaum, 2017). The selling will

24 | P a g e
positively impact the Trade Receivables, Inventory, Cash and Cash Equivalents as the value of
Cash and Cash Equivalents will rise. Estimated Growth Rate and Future Cash Flows could also
experience an increase from the sale of Opel. At the same time there is the possibility that the
Republican Congress might attempt to block Trump’s Tax Plans, benefiting General Motors and
other big corporations from not paying the high Import Tax (Chafetz, 2016). The combination of
the two events would most probably increase Automotive Sales Growth Rate from 7.49% in
FY2016A to 8% in each of the next years. After computing the new rate on Microsoft Excel, the
intrinsic value per share is now $40.24, higher than the current market price.
Base Case – The Base Case is Trump not renegotiating NAFTA, not implementing import taxes
and reduction in corporate tax and not implementing the Ease of Environmental Regulations. No
tariff will change the Sales Growth Rate from 7.49% in FY2016A to 7.59% in FY2017E-
FY2019E. Corporate tax will remain 35% and these adjustments will improve the value of
intrinsic value per share to be $36.29, higher than the current market price.
Worst Case – The Worst Case Scenario are the policies discussed in the report. A 35% and 45%
Import Tax on Mexican and Chinese goods, corporate tax cuts from 35% to 20% and the Easing
of Environmental Regulations impacted the value of firm. We have already computed the share
price to be $29.50.
IX. CONCLUSION AND FINAL RECOMMENDATION
Based on the political risk analysis above, the recommended action on General Motors is to
moderate sell or weak hold (underperform) because its intrinsic value ($29.50) per share is lower
than the current market value ($34.25). Underperform is an analyst recommendation describing
the stock being lower in value than the market price. At the same time, the exclusion of the
political risk of Donald Trump’s policies increased the value of the share to $38.06 which is
higher than the current market price. We can therefore conclude that the impact of political risk
will increase the chances of GM suffering in the future but share price will increase if the
political risk is not taken into consideration. Due to the uncertainty surrounded by the
Commander-in-chief, it is wise to moderate sell or weak hold until the economic landscape
becomes clearer.

25 | P a g e
X. APPENDICES
Figures for Financial Ratios Analysis Sections
Exhibits 1-9: (Source: Palepu and Healy, 2008,p.5-2; Bloomberg Database, 2017)
Exhibit 1: Net Profit Margin Exhibit 2: Asset Turnover
Exhibit 4: Dividend Payout RatioExhibit 3: Financial Leverage
Exhibit 5: Return on Assets Exhibit 6: Return on Equity
Exhibit 7: Gross Profit Margin Exhibit 8: EBITDA Margin
Exhibit 9: Ratio Analysis

26 | P a g e
Exhibits 10-15: All Forecasts (Source: Bloomberg Database, 2017)

28 | P a g e
XI. BIBLIOGRAPHY
AutoFleet. (2017). “Goodyear’s Raw Material Costs Increase $300M in 3 Weeks”, Automotive Fleet. [Online]. Available at:
http://www.automotive-fleet.com/channel/global-fleet/news/story/2017/02/goodyear-raw-material-costs-increased-300-million-
in-3-weeks.aspx (Accessed 3 March 2017)
Beene,R.(2017). “Auto CEOs Ask Trump to Revisit Obama-era Fuel Efficiency Rules”, Bloomberg Politics. [Online]. Available
at: https://www.bloomberg.com/politics/articles/2017-02-11/auto-ceos-ask-trump-to-revisit-obama-era-fuel-efficiency-rules
(Accessed 26 February 2017)
BloombergBusinessweek. (2017). “Chinese Carmakers Think They Can Finally Win America Over With an SUV”, Bloomberg.
[Online]. Available at: https://www.bloomberg.com/news/articles/2017-01-26/chinese-carmakers-think-they-can-finally-win-
america-over-with-an-suv (Accessed 3 March 2017)
Bloomberg Markets. (2017). “GM Share Price”, Bloomberg. [Online]. Available at: https://www.bloomberg.com/quote/GM:US
(Accessed 10 May 2017)
Bradsher, K. (2017). In China-US Trade War, Trump Would Have Weapons, The New York Times. Available at:
https://www.nytimes.com/2016/11/11/business/international/trump-china-us-trade-war.html, (Accessed: 12 February 2017)
Bryan, B. (2017). Trump: We’re going to ‘cut regulations by 75%’ and impose a ‘very major border tax’, Business Insider UK.
Available at: http://uk.businessinsider.com/trump-cut-regulation-border-tax-imports-2017-1?r=US&IR=T, (Accessed: 1 March
2017)
Bunkley,N.(2017). “GM to invest $1bn in US manufacturing, move axle work from Mexico”, Automotive News. [Online].
Available at: http://www.autonews.com/article/20170116/OEM01/170119817/gm-to-invest-$1-billion-in-u.s.-manufacturing-
move-axle-work-from (Accessed 3 March 2017)
Bunkley, N.(2017). “Tax threat heightens concern about affordability”, Automotive News. [Online]. Available at:
http://www.autonews.com/article/20170213/RETAIL01/302139962/tax-threat-heightens-concern-about-affordability (Accessed
13 February 2017)
Chafetz, J. (2016). “Even a Republican Congress might block some of Trump’s agenda”, The Washington Post. [Online].
Available at: https://www.washingtonpost.com/posteverything/wp/2016/11/17/even-a-republican-congress-might-block-some-of-
trumps-agenda/?utm_term=.15bc3f57cbdc
Colias, M. (2016). GM reduces European loss as global profits soar, Automotive News Europe. [Online]. Available at:
http://europe.autonews.com/article/20160203/COPY/302039936/gm-reduces-european-loss-as-global-profits-soar (Accessed 11
April 2017)
David,J.(2017). “Fiat to invest $1bn in Michigan, Ohio plants, create 2,000 jobs”, CNBC. [Onliine]. Available at:
http://www.cnbc.com/2017/01/08/fiat-to-invest-1-billion-in-new-michigan-ohio-plants-create-2000-jobs.html (Accessed 22
February 2017)
DeBord, M. (2017). It would be a disaster if automakers do what Trump wants, Business Insider UK. Available at:
http://uk.businessinsider.com/trumps-plan-for-automakers-is-flawed-2017-1?r=US&IR=T, (Accessed: 6 March 2017)
Deloitte. (no date). “IAS 12 – Income Taxes”, Deloitte. [Online]. Available at: https://www.iasplus.com/en/standards/ias/ias12
(Accessed 16 March 2017)
Desjardins, J. (2016). “Here are the raw materials we need to fuel the electric car boom”, Business Insider. [Online]. Available at:
http://uk.businessinsider.com/materials-needed-to-fuel-electric-car-boom-2016-10 (Accessed 11 February 2017)
Deutsche Bank. (2017). “GM: Macro, Structural, and Political Risks Mitigate Confidence”, DB Analyst Report. [Online].
Available at Thomson Research Database (Accessed 1 March 2017)
Durbin, D. (2017). “How a Trump tariff could sideswipe US auto industry”, The Big Story. [Online]. Available at:
http://bigstory.ap.org/article/99ca7ca82ae34016ae72bd81f256ef41/how-trump-tariff-could-sideswipe-us-auto-industry (Accessed
13 April 2017)
Felton, R. (2017). What is NAFTA and What Could Happen If Trump Dismantles It?, Jalopnik. Available at:
http://jalopnik.com/what-is-nafta-and-what-could-happen-if-trump-dismantles-1791313097, (Accessed: 7 February 2017)
Fleming, S. (2017). “Fed officials think Trump tax cuts could lead to higher rates”, The FT. [Online]. Available at:
https://www.ft.com/content/0b7aebdc-d29c-11e6-9341-7393bb2e1b51 (Accessed 22 February 2017)
Gandel,S.(2016). “Donald Trump Says NAFTA was the Worst Trade Deal the US Ever Signed”, Fortune. [Online]. Available at:
http://fortune.com/2016/09/27/presidential-debate-nafta-agreement/ (Accessed 20 February 2017)
Global Data. (2017). General Motors Company (GM) - Financial and Strategic SWOT Analysis, Global Data. [Online].
Available at Thomson Research Database (Accessed 13 April 2017)
GM. (2017). “Corporate Strategy”. Available at: https://www.gm.com/investors/corporate-strategy.html (Accessed 29 March
2017)
GM.(2017). “Form 10-K”, GM. [Online]. Available at:
https://www.gm.com/content/dam/gm/en_us/english/Group4/InvestorsPDFDocuments/10-K.pdf (Accessed 1 April 2017)
GM Corporate Newsroom. (2016). “GM increases Earnings Outlook for 2016; Announces Increased Returns to Shareholders”,
GM. [Online]. Available at: http://media.gm.com/media/us/en/gm/home.detail.html/content/Pages/news/us/en/2016/Jan/0113-
earnings-outlook.html (Accessed 7 April 2017)

29 | P a g e
GM Green. (2017). “GM Suppliers See Business Value in Reduced Emissions”, GM. [Online]. Available at:
http://www.generalmotors.green/product/public/us/en/GMGreen/home.detail.html/content/Pages/news/us/en/gm_green/2017/012
4-CDP-supplier-climate-list.html (Accessed 1 March 2017)
GM Green.(2016). “GM Details its 100% Renewable Energy Goal”, GM. [Online]. Available at:
http://www.autonews.com/article/20170116/OEM01/170119817/gm-to-invest-$1-billion-in-u.s.-manufacturing-move-axle-work-
from (Accessed 21 March 2017)
GM Website. (2017). “GMC Wins Most Refined Brand for Fourth Consecutive Year”, GM. [Online]. Available at:
https://www.gm.com/mol/m-2017-apr-0411-gmc.html (Accessed 12 April 2017)
GM Website. (2017). “GM Honours Suppliers for Innovation, Quality and Dedication”, GM. [Online]. Available at:
https://www.gm.com/mol/m-2017-apr-0403-supplier.html (Accessed 5 April 2017)
IHS Markit. (2017). “Loyalty Reigns – GM Named Top Manufacturer in Auto Loyalty Awards Presented by IHS Markit”, IHS
Markit. Available at: http://news.ihsmarkit.com/press-release/loyalty-reigns-general-motors-named-top-manufacturer-
automotive-loyalty-awards-present (Accessed 4 March 2017)
Isidore, C. (2016). “GM posts biggest profit margin in 107-year history”, CNN Money. [Online]. Available at:
http://money.cnn.com/2016/02/03/investing/gm-profit/ (Accessed 12 April 2017)
Kenny, C. (2016). Political Prediction Market: Clinton’s odds rise again, CNN politics. Available at:
http://edition.cnn.com/2016/11/07/politics/political-prediction-market-hillary-clinton-donald-trump/ (Accessed: 16 February
2017)
Kirk, A., Scott, P., Graham, C. (2016). US election results: The maps and analysis that explain Donald Trump’s shock victory to
become President, The Telegraph. Available at: http://www.telegraph.co.uk/news/0/us-election-results-and-state-by-state-maps/
(Accessed: 16 February 2017)
Lambert,F.(2017). “Automakers will now be forced to mass produce electric vehicles unless Trump can undo EPA’s new fuel
consumption rules”, Electrek. [Online]. Available at: https://electrek.co/2017/01/16/automakers-mass-electric-vehicles-trump-
epa-fuel-consumption/ (Accessed 23 February 2017)
MarketLine Research (2017). “MarketLine Strategy, SWOT and Corporate Finance Report on GM”, Thomson Research.
[Online]. Available at: Thomson Research (Accessed: 28 March 2017).
Mody, S. (2016). Trump’s China tariff idea could hit some US industries especially hard, CNBC. Available at:
http://www.cnbc.com/2016/12/07/trump-and-china-tariff-on-imports-would-hurt-many-us-companies.html (Accessed: 18
February 2017)
Molla,R.,Denning,L. (2017). “Trump Can’t Kill the Electric Car”, Bloomberg. [Online]. Available at:
https://www.bloomberg.com/gadfly/articles/2016-11-16/donald-trump-and-fuel-efficiency-electric-cars-will-survive (Accessed 1
April 2017)
Monga, V., Gillers, H. (2017). “Pension Funds Hope to Close the Gap Through Trump Tax Policies”, The Wall Street
Journal.[Online]. Available at: https://www.wsj.com/articles/pension-funds-hope-to-close-the-gap-through-trump-tax-policies-
1487878613#_=_ (Accessed 22 March 2017)
Morrison, M., W. (2017). “China-US Trade Issues”, Congressional Research Service. Available at:
https://fas.org/sgp/crs/row/RL33536.pdf (Accessed: 3 March 2017).
Muller, J. (2017). “How Trump’s Protectionism Would Destroy Auto Industry Jobs, Not Create Them, Forbes”. Available at:
https://www.forbes.com/sites/joannmuller/2017/01/20/how-trumps-protectionism-would-destroy-auto-industry-jobs-not-create-
them/#4fd5af549b32, (Accessed: 8 February 2017)
Nussbaum, A. (2017). “Peugeot Maker PSA Agrees to Buy GM’s European Brands in $2.3 billion Deal, Bloomberg. [Online].
Available at: https://www.bloomberg.com/news/articles/2017-03-06/gm-said-poised-to-sell-opel-vauxhall-to-psa-for-2-billion
(Accessed 7 March 2017)
Palepu, K. and Healy, P. (2008). Business Analysis and Valuation using Financial Statements. 4th edn. Mason, Thomson South-
Western.
Parkin, R., Wilk, R., Hirsh, E., Singh, A. (2017). 2017 Automotive Trends, PwC. [Online]. Available at:
http://www.strategyand.pwc.com/media/file/2017-Automotive-Industry-Trends.pdf, (Accessed: 25 March 2017)
Parker,J.(2016).”GM Financial’s Strong Performance: What It Means to Investors”, Market Realist. [Online]. Available at:
http://marketrealist.com/2016/04/gm-financials-strong-performance-means-investors/ (Accessed 28 April 2017)
Perkowski, J. (2017). “China and the US Supercharge The Growing Global Electric Vehicle Industry”, Forbes. Available at:
https://www.forbes.com/sites/jackperkowski/2017/02/28/china-and-the-u-s-supercharge-the-growing-global-electric-vehicle-
industry/#570f7fa24545 (Accessed 1 March 2017)
Plumer,B. (2017). “Trump’s plan to roll back Obama’s fuel economy rules for cars, explained”, Vox. [Online]. Available at:
https://www.vox.com/energy-and-environment/2017/3/15/14828070/trump-fuel-economy-standards (Accessed 1 April 2017)
Pramuk, J. (2017). “GM fires back at Trump: Most of our Chevy Cruzes ARE built in the US”, CNBC. [Online]. Available at:
http://www.cnbc.com/2017/01/03/gm-fires-back-at-trump-most-of-our-chevy-cruzes-are-built-in-the-us.html (Accessed 14 April
2017)
Pramuk, J. (2017). ‘Trump blasts General Motors: Make Chevy Cruze model in US or pay big border tax’, CNBC. [Online].
Available at: http://www.cnbc.com/2017/01/03/trump-blasts-general-motors-make-chevy-cruze-model-in-us-or-pay-big-border-
tax.html (Accessed: 12 March 2017)
PwC Cyprus. (2017). “Tax Facts and Figures 2017 – Cyprus”, PwC. [Online]. Available at:
https://www.pwc.com.cy/en/publications/assets/tax-facts-figures-2017-english.pdf (Accessed 1 May 2017)

30 | P a g e
Rantapuska, E.(no date.). “Lecture 5 Forecasting Income Statement and Balance Sheet”, Aalto University. [Online]. Available at:
https://mycourses.aalto.fi/pluginfile.php/144740/mod_resource/content/2/20160304_Valuation_Rantapuska_Lecture5.pdf
(Accessed 1 May 2017)
Reklaitis, V. (2017). ‘GM’s Stock Falls After Trump Tweet on Mexico Production’, Fox Business. [Online]. Available at:
http://www.foxbusiness.com/markets/2017/01/03/gm-stock-falls-after-trump-tweet-on-mexico-production.html (Accessed: 15
March 2017)
Revesz, R. (2017). Toyota loses $1.2bn in value in 5 mins after Donald Trump’s tweet, The Independent. Available at:
http://www.independent.co.uk/news/world/americas/toyota-12bn-value-plummet-shares-stock-market-donald-trump-tweet-move-
mexico-tax-a7512096.html, (Accessed: 20 February 2017)
Rotkowski, A., Clough, E. (2013). “How to Estimate the LT-Growth Rate in the DCF Method”, Forensic Analysis Insights.
[Online]. Available at: http://www.willamette.com/insights_journal/13/spring_2013_2.pdf (Accessed 24 April 2017)
The Daily Mail. (2017). Trump slams NAFTA as a ‘catastrophe’. Available at: http://www.dailymail.co.uk/wires/afp/article-
4185294/Trump-slams-NAFTA-catastrophe.html, (Accessed: 10 February 2017)
The Japan Times. (2017). GM has no change of plans despite Trump threats, will import China-made Cadillac hybrid. Available
at: http://www.japantimes.co.jp/news/2017/01/11/business/corporate-business/gm-no-change-plans-despite-trump-threats-will-
import-china-made-cadillac-hybrid/#.WLzMWlXyhaQ, (Accessed: 22 February 2017).
The Whittier Daily News. (2017). “Why Chevrolet Bolt, 238-mile all-electric car, isn’t selling well”, The Mercury News.
[Online]. Available at: http://www.mercurynews.com/2017/04/03/why-the-chevrolet-bolt-238-mile-all-electric-car-is-off-to-a-
sluggish-sales-start-2/ (Accessed 12 April 2017)
Tulsian, Dr. M. (2014). “Profitability Analysis”, IOSR Journal of Economics and Finance. [Online]. Available at:
http://www.iosrjournals.org/iosr-jef/papers/vol3-issue2/Version-1/C03211922.pdf (Accessed 14 April 2017)
Vlasic, B. (2015). “GM to Buy Back $5 Billion of Its Stock”, The New York Times. [Online]. Available at:
https://www.nytimes.com/2015/03/10/business/dealbook/gm-to-buy-back-5-billion-in-company-stock-and-avert-proxy-fight.html
(Accessed 9 April 2017)
Walker, K. (2017). Trump to Sign Executive Order on Plan to Renegotiate NAFTA With Mexico, Canada, CNBC. Available at:
http://www.cnbc.com/2017/01/23/trump-to-sign-executive-order-to-renegotiate-nafta-and-intent-to-leave-tpp.html, (Accessed: 6
February 2017)
Welch, D., Butters, J.(2016). “GM and Fiat Chrysler Cut Jobs as Sales Pendulum Swings to SUVs”, Bloomberg. [Online].
Available at: https://www.bloomberg.com/news/articles/2016-12-19/gm-to-idle-shifts-in-five-plants-next-month-as-car-sales-
slow (Accessed 23 March 2017)
Woodall, B., Shepardson, D. (2017). Trump assails GM over car production in Mexico, threatens tax, Reuters. [Online].
Available at: http://www.reuters.com/article/us-usa-trump-gm-idUSKBN14N11K (Accessed 15 April 2017)
Worland, J. (2017). “President Trump Wants to Kill This Clean Energy Program Even Though It Has Bipartisan Support”, TIME.
[Online]. Available at: http://time.com/4703638/donald-trump-budget-energy-arpa-epa/ (Accessed 22 March 2017)
Wright, R. (2015). “GM predicts higher core profit margins in 2015 on increased sales”, The FT. [Online]. Available at:
https://www.ft.com/content/74c4155e-9bef-11e4-b6cc-00144feabdc0 (Accessed 11 April 2017)
Yuk, K., P. (2017). “GM shares wobble Trump import tax threat”, The FT. [Online]. Available at:
https://www.ft.com/content/088e10dd-05de-3666-87c0-2b591d6fdf00 (Accessed 15 April 2017)
Young, A. (2016). “Made in China: Will Donald Trump’s ‘strong border’ tax on American companies manufacturing overseas
reach General Motors?”, Salon. [Online]. Available at: http://www.salon.com/2016/12/06/made-in-china-will-donald-trumps-
strong-border-tax-against-imports-include-general-motors/ (Accessed 12 April 2017

Political risk analysis_essay.docx

Political risk analysis_essay.docx

Recommended

Recommended

More Related Content

What's hot

What's hot (17)

Similar to Political risk analysis_essay.docx

Similar to Political risk analysis_essay.docx (10)

Recently uploaded

Recently uploaded (17)

Political risk analysis_essay.docx