General Motors Co. has watched with frustration and envy as the market value of electric-car maker Tesla Inc. has ballooned to about two and a half times GM’s size, but on Wednesday the Detroit automaker made the case that its EV and self-driving technology strategy deserves a higher value.
GM chief executive Mary Barra and her top executives held an investor conference in New York. They hope to convince potential shareholders GM is more than just a company in a cyclical industry, but a burgeoning technology firm at the forefront of tomorrow’s electric and self-driving cars.
“We believe we’re a compelling investment opportunity,” GM chief financial officer Dhivya Suryadevara told reporters after GM reported quarterly results, when asked about the run-up in Tesla’s stock. She added GM is very happy with its position in the development of electric and self-driving vehicles.
“From a share-price standpoint, we’re very bullish on the future,” she added.
Ms. Barra has been restructuring GM’s operations and stressing her goals of readying GM for a future of “zero emissions and zero accidents” for several years.
“Our goal today is to leave you with a clear understanding of our vision and our strategy for the future,” Ms. Barra told investors in New York. “We hope that you believe as we do that General Motors is uniquely positioned to take the industry forward.”
Still, GM shares trade just above the US$33 share price of its November, 2010, initial public offering. That has left it with a market capitalization of about US$49-billion, compared with Tesla’s valuation of about US$139-billion.
“The market’s got it wrong,” said Chris Susanin, co-portfolio manager with Levin Easterly Partners, which owns shares in GM but not Tesla. “GM should be the $150 billion market cap, not Tesla.”
Morgan Stanley analyst Adam Jonas on Monday captured GM’s conundrum in a research note titled, “GM’s Investor Day: What More Can They Do?”
The bulk of GM’s profits is still derived from the fuel-hungry pickup trucks and SUVs sold in the United States. The Chinese market has been the source of a steady US$2-billion in profits a year, but that is threatened by a market slowdown, rising costs for electrification and now the disruption caused by the coronavirus outbreak.
While China will deliver lower equity income to GM in the near term, its remains a solid contributor that is profitable and dividend paying, and will play a key role in the development of EVs globally, officials said. GM also sees growth for its Cadillac brand in both volume and profits in China.
MAKING THE LEAP
Ms. Barra’s challenge now is to assure investors that GM can make the leap across the gap separating its profitable internal combustion present and an uncertain electric future. As one slide emphasizes, using the profile of a pickup truck, “Our electric future is now.”
While gasoline-powered vehicles will make up a large portion of U.S. sales into the 2030s, GM will spend more on developing electric vehicles than those with internal combustion engines over the next five years, Ms. Barra said in October.
GM will lay out a more detailed plan for the development of EVs and self-driving vehicles at the investor day, including its Cruise self-driving unit, according to slides posted on the company’s investor relations website.
Some analysts have suggested GM should spin off Cruise, but Ms. Suryadevara said GM has no plans to do that. She added that spending in 2020 on that business will roughly match last year’s US$800-million expenditure. “The business opportunity is phenomenal.”
GM said in a slide the self-driving market opportunity totals US$8-trillion.
One of the audiences for the investor day is potential employees as GM competes with Tesla and other automakers globally to hire top engineers and software developers outside of Detroit, highlighting technical centres in Ontario and Israel. One slide boasted “GM is where the talent is.”
Also on the agenda was the company’s plans for its Supercruise partially automated driving system, which GM will offer on 22 models by the end of 2022, including its full-size pickups and SUVs, GM President Mark Reuss said.
GM also laid out its plan to reduce manufacturing complexity this year by eliminating 25 per cent of the parts used in its plants. Ms. Barra also said GM is targeting sourcing all of its global electricity from renewable sources by 2040, a decade sooner than previously promised.
In December, GM and South Korea’s LG Chem said they would invest US$2.3-billion to build an EV battery cell joint venture plant in Ohio, creating one of the world’s largest battery facilities.
That same month, GM’s Cadillac chief said most if not all of the vehicles offered by the luxury brand would be electric by 2030.
GM said last week it would invest US$2.2-billion in its Detroit-Hamtramck assembly plant to build electric trucks and SUVs, including the Cruise Origin, a driverless vehicle for ride-sharing service. GM plans to offer electric trucks, including a premium electric GMC Hummer pickup truck in fall 2021.