General Motors CEO Mary Barra spent a large chunk of her week calmly discussing quarterly results that left investors relatively unimpressed. Shocking.
GM’s shares enjoyed a small bump this week — $1.32 since Oct. 30 – but the company ended the week worth less than Tesla. Billions less. The market values GM at $51.45 billion, while Tesla ended the week worth $51.73 billion (all figures in US dollars).
I’m not going to dwell on Tesla, however. Instead, however, let’s consider GM.
I understand that the “Government Motors” tag remains embedded in the minds of many, and that many others believe an old, legacy car company like GM is doomed to failure in a fast-paced world of technological disruptors like Tesla.
Those are people who haven’t quite grasped what has been happening at GM.
Yes, GM remains a car and light truck company first, with the vast bulk of its profits coming from the sale of pickups and sport-utility vehicles (SUVs) in North America. And as long as Canadians and Americans remain willing and happy to buy gas-guzzling rigs like the Chevrolet Silverado pickup, GM will keep selling them and earning thousands on each one.
But dig a bit deeper into how GM has been transforming its business for the past few years and you will find more than an automotive dinosaur.
GM is a bank, for instance. In the last quarter, GM Financial earned a $500 million profit and in the fourth quarter GM Financial will pay a $375 million dividend.
Then there is GM’s China business. Despite the rocky year carmakers are having in China, GM reported $500 million in income in China. How important is China to GM? Barra went there twice in October, no doubt in part to deal with fallout from President Trump’s trade war antics.
But the most interesting part of the GM story is Cruise, which recently put the finishing touches on an announced partnership with Honda. GM Cruise is the company’s unit charged with developing and commercializing autonomous vehicles.
The short-term goal is to sell a purpose-built, autonomous ride-share vehicle for a 2019 launch. GM expects to deliver something that would be viable in a place like San Francisco, where the company is doing most of its on-the-ground testing. Naturally, there is an electrification component to this effort. And, indeed, GM has been quite outspoken in its support for electrification.
The point I want to make is that GM is not one car business, but four:
- GM Cruise, which many think is worth about $15 billion or so of market cap. Honda and SoftBank’s Vision Fund certainly have faith in GM Cruise, judging by the billions both have invested.
- Then there is GM’s China business. By the end of this year, GM is on track to deliver 10 new or significantly refreshed models in China, most of them in the upper end of the market where profits are richer and volatility in less pronounced and subject to the vagaries of an unhinged U.S. president.
- GM’s North American business, the third piece, is booming. GM has a strong lineup of pickups and SUVs. At the same time, GM is controlling its inventory and managing costly incentives. The GM of 2009 over-produced its mediocre products, which meant that profit-killing incentives were needed to move the metal. That is not the GM of 2018.
- And finally, not to be overlooked is the banking side of GM. It makes a lot of money and is poised to make more next year.
I am most interested in GM Cruise because it amounts to a start-up inside a legacy automaker. Some will say that GM will somehow manage to botch this initiative, that GM’s leadership is hidebound, trapped in the past and unwilling to foster a modern, high-tech, entrepreneurial company within the parent. Perhaps.
But I know Mary Barra a little bit and I would argue that she leads a GM leadership team that is stronger than anyone has seen in decades, if ever. Barra is not flashy and she’s not a shameless, self-promoting Twitter fiend.
She is, however, very smart and determined, and perhaps she even has a bit of a chip on her shoulder. I am certain she would very much like to show the world that a woman can successfully run a global car company in the most challenging time in the history of the car business.
Don’t bet against her. And don’t look for her to tweet about it, either.