Barra Makes Case For GM to Lead the Future of Cars, But the Market Isn’t Buying


(Bloomberg) -- General Motors Co. started off Wednesday by saying it can sustain profit even as the global car market slumps. That briefly buoyed investors, who pushed shares up about 3% in early trading.

Then came the hard part: getting the market to buy in to GM’s case that it’s making a total transformation from car company to technology leader. Chief Executive Officer Mary Barra’s team spent the next four hours at GM’s Capital Markets Day event making a full-throated pitch that it’s prepared for the electric, self-driving era.

Barra Makes Case For GM to Lead the Future of Cars, But the Market Isn’t Buying

“We are investing heavily in the technology and innovation that will help us realize our vision,” Barra said in her opening comments in New York. “I truly believe that 2020 is the year when all of our work comes together and we move forward with integrated solutions that will be the groundwork for reinventing how we deliver mobility to our customers.”

GM’s investment and commitment is real, but investors shrugged. While Tesla Inc. has seen its stock soar as it ramps up production overseas, GM is down 11% in the past year. The brief gain after the morning’s earnings report waned as managers gave their technology report, and the stock eventually closed up 1.9% for the day.

The verdict for GM and other conventional carmakers is that must prove they can profit as the industry reinvents itself. Fiat Chrysler Automobiles NV is the next up, reporting earnings Thursday and elaborating on how the merger it’s pursuing with France’s PSA Group will enable it to thrive in the electric, autonomous age.

Tesla Rivalry

It’s a tough sell for any conventional carmaker, especially when it comes to electric vehicles. Right now, the top dog is Tesla, whose shares more than tripled in recent months as it showed two consecutive quarters of profit and opened a new China plant within a year. While GM and others are racing to put out models that can match Tesla’s lineup, Elon Musk’s company still has the iPhone of electric cars and no one has come up with the EV equivalent of an Android to defeat them.

GM is making its push, starting very soon. President Mark Reuss showed in his presentation how GM’s new electric-vehicle architecture can be easily scaled smaller or larger to make compact cars for China or big trucks and SUVs for the U.S. The first model, a Cadillac crossover, will be unveiled in April, Reuss said. He also said GM will reveal more about its EV program at a March 4 event outside Detroit.

Reuss showed slides that likened GM’s battery pack to a series of ice cube trays, in which sections of cells could be paired to make almost any kind of vehicle for any brand. “We have a complete lineup of EVs including the pickup truck,” he said.

The first electric vehicle that GM will build from its truck platform will be a Hummer pickup that the company teased in a commercial during the Super Bowl.

GM is also moving to compete with Tesla’s Autopilot feature driver assistance system. Cadillac’s Super Cruise can now change lanes largely on its own like Autopilot does. Next year, Reuss said, GM will add Super Cruise to other brands with seven more models and an additional 12 in the following two years. GM will have the technology in its fullsize pickups and SUVs. “We are rolling this out in a very big way,” he said.

Self-Driving Race

Dan Ammann, the former GM president who is now CEO of Cruise LLC, the self-driving car unit majority owned by automaker, also had some lofty ambitions to share. He said the San Francisco startup is getting closer to levels of safety performance beyond the reach of humans alone. Cruise is in a race with Alphabet Inc.’s Waymo, Ford Motor Co.-backed Argo AI and a host of others.

Still, Cruise isn’t committing to a date to start deploying its self-driving cars for public use and bringing in revenue. The company delayed plans to start a service late last year.

Assuming GM gets there and is a leader in autonomous ride hailing, Cruise has a crack at a potentially big market. Ammann said that at a price of $2 a mile, the market is $45 billion. If GM can reduce that price to 60 cents a mile, it will be battling for a $1 trillion market in the U.S. alone.

The opportunity arises when GM gets out its 4- to 6-passenger Cruise Origin that lets people share rides, but in more comfort and convenience than public transit. Said Ammann: “One of the things we really want to unlock with the Cruise Origin is to make shared rides not suck,” Amman said.

At the end of the presentation, Morgan Stanley analyst Adam Jonas praised Barra and her team, even suggesting that she should send a copy to Ford managers as a how-to video. Ford’s shares dropped the most since 2011 on Wednesday, one day after a disappointing earnings forecast that was weighed down in part by spending on electric vehicles.

Then he summed up the challenge for GM. “You are executing -- you’re clearly not getting the credit I know you deserve,” Jonas said. “Over time, if you keep doing this and you execute on even two-thirds of what you’re talking about, it’s going to happen.”

©2020 Bloomberg L.P.

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