General Motors Share prices Soar Due to Job Cuts in Europe

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When a company announces job cuts it usually implies that the business is struggling and, consequently, share prices begin dropping quickly. Investors lose confidence in the company’s ability to make profits and so may begin selling their shares, meaning that their value rapidly starts to fall. However, General Motors saw their share prices soar at the end of October after announcing over 2,000 job cuts.

General Motors is an interesting company to currently watch on the stock market. The job cuts are the result of consistent profit loss throughout Europe; this year, they lost a staggering $478 million in the continent. However, throughout the rest of the world they have performed much better than expected. In South America, they reported a $114 million profit, which is especially impressive when compared with last year’s loss of $44 million. The reason for this turnaround is thought to be the implementation of new models, which they intend to roll out globally as part of their strategy over the next few years.

General Motors Share prices Soar
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The job cuts are also being seen by many analysts as a strategic move, as the estimated $300 million in costs which it should save could significantly help to improve their finances. A further $500 million is expected to be saved between 2013 and 2015. The announcement of these cuts and the unprecedented financial gains caused a spike in share prices. The stock rose by 9.5% on October 31st to close at $25.50. They made 93 cents a share, which was 33 cents more than analysts had predicted.

Brokers may see a lucrative opportunity for spread betting with cases such as these. If investors predict that General Motors will profit from the job cuts, then money could be won for every point that the company rises. Similarly, if brokers instead consider the fact that profits in North America fell by 17% in July and thus decided to bet on share prices soon falling, then they could win an extraordinary amount for going against the trend. The reason that spread betting is so risky, however, is that if the bet is lost then a lot of money can quickly be lost. Often the loss can far exceed the original stake, which is why the method is not advisable for novices.

General Motors’ development as its new strategy comes into effect will be interesting to watch, and brokers will certainly be keeping an eye on the market to determine how they think the company is likely to perform.

Adam Barley
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Author - Adam Barley has been writing articles for a number of years now on various subjects

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