After the implementation of TARP in the wake of the financial crisis of 2008, GM emerged as one of the primary recipients and is a leader with great long term prospects in an industry which will only become more regulated. According to an automotive industry executive survey conducted by KPMG, “fuel efficiency remains the single biggest factor when buying a vehicle” . Additionally, KPMG reports that urbanization is becoming a prominent problem in megacities where parking space is scarce and pollution is rampant. States and international countries have begun to recognize this and influential organizations such as the California Air Resources Board (CARB) have placed laws to regulate the automotive industry.
Because of these regulations in the market, GM, a producer of consumer and commercial automobiles with a market cap of $38,835.7 million, is in a better position than Navistar, a producer of commercial and military vehicles and a market cap of $1,613.2 million. Due to the rising concerns over the environment and the nature of the automotive industry, there is a risk run by both companies that changing government policies will increase costs and decrease profits in the long term. However, GM is a company whose product group is more diversified than Navistar’s. While Navistar focuses on the heavier grade automobiles such as commercial fleets, RV’s, and military trucks which require fuel-hungry and polluting engines, GM offers automobiles in both the commercial and consumer space. This allows GM to focus on a mix of light and heavy engines, hedging its risk from future government regulation.
Additionally, GM understands the evolving markets and has been innovating and changing policies to reflect that. GM recycles 90% of all materials used and 52% of all facilities are landfill free . This already grants GM an advantage if future regulations become more stringent.