Howes: GM bid for investor respect dogged by history, perception
Mary Barra and the team are fighting back.
As shares in Tesla Inc. have soared in the past three months and signaled increasing investor confidence in the Silicon Valley automaker’s vision for an electrified future, the General Motors Co. CEO and her leadership team used their investor day at the New York Stock Exchange Wednesday to deliver a pitch to smart money.
It goes like this: The Detroit automaker, long considered the archetypal low-margin Auto 1.0 company mired in last-century industrialism, is a leading-edge transportation technology player. And that means it should be worth substantially more than the $33 a share of GM's initial public offering a decade ago — its $49.1 billion market cap a small fraction of Tesla's whopping value of $159.9 billion.
“No one can match our combination of advanced technology, flexibility and scale,” GM President Mark Reuss said in his presentation to investors. “And you will see this for yourselves as our program rolls out. Our EV program is what will help take us, and the world, to our stated vision of zero crashes, zero emissions and zero congestion.
"Our battery pack design, like our next-generation architecture, is extremely flexible, and together, the combination of the architecture and the pack will allow multi-brand, multi-segment applications. We can be both proactive and reactive. We can meet the market head on, wherever it is. We can adjust on the fly if we need to."
That, in a nutshell, is a fundamental point GM wants would-be investors to understand: It's not a sclerotic Old Detroit giant whose leadership presided nobly over decline, in the pithy telling of former Vice Chairman Bob Lutz. It's young — more than 50% of GM's product development group has been with the company five years or less. It's reduced complexity, eliminated 3,500 parts, targeted reductions in trim levels and engine variants.
It's technologically sharp. GM developed what it calls an "all-new global digital platform" that is expected to enable Tesla-like over-the-air software updates to GM vehicles. Said Reuss: "We've greatly increased our software, electrical and computer engineering hires and, as a result, our knowledge base and experience."
Do not fear, curmudgeonly skeptics. Ol' GM will still make real money building profit-rich pickups and SUVs. That's because it's the fuel that enables Barra & Co. to place large bets on an electrified future, to reorient engineering talent on software development long associated with Silicon Valley, to prove what Reuss says he "can guarantee ... no other company is doing ... because no other company can do what we're doing."
Bold, that, for a company seldom associated with the word. But that's the point they're trying (and trying) to make: GM is reckoning with its past by seizing the future, often unapologetically and sometimes at the cost of disruptive job cuts, plant closures and divestitures (see the closing of three U.S. plants, the sale of the Opel and Vauxhall brands in Western Europe, the exit from Russia, the restructuring of South Korean operations).
The real reckoning, however, is with the history of GM and of its hometown industry. Roughly two generations of investors know all too well the companies' dubious records for incinerating capital, enabling labor and underestimating foreign competition.
If there's a fundamental disconnect between today's GM brass and the investors it aims to woo, it's the chasm between perception and reality. Investors are betting big on Tesla and making Toyota Motor Corp. the most valued automaker in the world, because the former has demonstrated success building a premium all-EV brand and the latter has decades of proving it can execute, profitably, all over the world.
GM, so far, has done neither. Despite decades developing alternative-propulsion vehicles — from the EV1 of the mid-1990s to the Chevrolet Volt hybrid and the Bolt battery-electric — the automaker has yet to demonstrate it can produce, say, a gotta-have Cadillac EV to rival Tesla.
And memories of GM's epic bankruptcy, coupled with a long history of operational problems now mostly in the rearview mirror, will disappear only one of two ways: with a new, undeniable record of exceeding expectations or with churning actuarial tables that ensure no one who remembers is left.
The answer is probably both for a battle that's worth fighting.
"We are delivering on our commitments in terms of products ...setting ourselves up for the future, and with our financial performance." Barra told investors in her presentation. "We have work to do, no doubt, but I commit to you we will make the right decisions to continue to drive strong performance."
Daniel Howes’ column runs most Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN. Or listen to his Saturday podcasts at detroitnews.com or on Michigan Radio, 91.7 FM.