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GM is poised for progress as automaker targets trillions in new markets

Mary Barra, GM CEO, speaks to the media ahead of General Motors Company’s 2017 annual general meeting on Tuesday, June 6, 2017 at GM Global Headquarters in Detroit, Michigan.

Photo by John F. Martin for GM

DETROIT – Since assuming the helm of General Motors in 2014, CEO Mary Barra has meticulously cut costs, shed around 64,000 jobs, left unprofitable overseas markets and boldly committed to becoming an all-electric auto company by 2035.

Although these decisions were controversial at times, they brought GM one step closer to where it is today: ready for growth in new markets.

Barras GM looks very different from the one it inherited from the financial crisis. GM is leveraging its core business and targeting trillions in future markets that go well beyond just selling cars and trucks.

“This is just the beginning for the next generation of General Motors,” Barra told investors on Wednesday during GM’s earnings call for the first quarter. “We are well on the way with our plans to transform our company and lead the industry into the future.”

At the forefront of the expansion is GM’s global growth and innovation team. The team’s new businesses include electric trucks, auto insurance, military defense and expanding the services of the affiliated OnStar brand with other new ventures.

$ 1.3 trillion

The Detroit automaker’s innovation division has identified $ 1.3 trillion in new market opportunities that it believes will complement its core business and have the right to “win,” executives told CNBC. That doesn’t include GM’s majority autonomous Autonomous Vehicle Unit Cruise, which could be a $ 8 trillion market in the future, or urban air mobility, which is expected to be its own market of more than $ 1 trillion.

“Our overall goal is that [total addressable market] By leveraging existing GM assets, expertise and IP where we have existing skills to solve new problems for customers we have now, possibly customers we don’t have now, “said Pam Fletcher, GM Vice President for Global Innovation during a video interview.

The successful expansion plans would change the way the company made money and could help soften the boom and bust cycles in the automotive industry. GM would rely more on recurring revenue from software and services than just making and selling vehicles.

According to Alan Wexler, GM’s senior vice president of innovation and growth, GM’s innovation team has around 20 initiatives in the pipeline that target $ 1.3 trillion in potential new markets.

Wexler said the team is looking at urban air mobility, thinking of flying cars and taxis for the mid-2030s, as well as more sustainable businesses like recycling batteries for electric vehicles as power generators.

GM renderings of the “Cadillac Halo Portfolio,” which includes concepts of an autonomous shuttle (right) and an electric vertical take-off and landing aircraft (eVTOL), also known as a flying vehicle.

Screenshot via GM

The mission is for the innovation unit created in 2018 to serve as a start-up incubator within the automaker so that every company can move faster than GM has traditionally done. Wexler describes the ultimate goal as creating a company that is fundamentally different from what it is today.

“I think the most exciting thing, and the reason I’m here, is that we’re creating a company that doesn’t exist in the world and, frankly, we’re creating an industry that doesn’t exist in the world, and we are ‘I do it for the people on the planet,’ he said during a video interview.

Global growth strategy

Both Wexler, former CEO of consulting firm Publicis Sapient, and Fletcher, a GM veteran, have been hired by Barra to lead the automaker’s growth into new segments.

To date, the innovation division has launched a military defense unit, a new commercial EV business called BrightDrop, and expanded GM’s decade-old OnStar Connectivity brand to include insurance, vehicle logistics and security services.

“We’re focusing here on setting the context for everything we do,” said Wexler. “We’re not looking at the side view or the rearview mirror when I can use an automatic analogy. We’re really looking to the future.”

Barra announced to investors this week that despite the coronavirus pandemic and the ongoing global shortage of semiconductor chips, GM remains committed to investing in its new businesses and electric vehicles.

“The challenges we currently have with semiconductors are temporary,” she said. “We’ll work through that and go beyond, and it won’t affect our transformation and growth strategy.”

Barra’s intentions to redefine the company began largely publicly in 2017 when the company acquired Cruise and launched mobility initiatives such as the now-defunct mobility brand Maven. It did so while operations were being cut significantly, including exits from Europe, Russia and other markets.

“If you look at our core business, it really is the foundation for the transformational opportunities that are right before us,” Barra told investors during a Barclays conference in November 2017. He later added, “Make no mistake, we do are here for victory. “

This desire to “win” is a guiding principle, according to Fletcher, along with the company’s “Triple Zero” vision to avoid crashes, emissions and overloads with products developed by its innovation team.

“We always want to go faster, but I think we have a lot of great things going on and that is going to be a change for people,” she said.

“A lot of upside potential”

The new initiatives tied to GM’s plan to become an all-electric vehicle company by 2035 have pushed the company’s shares to recent record highs.

“I like all of the industries they pursue,” Morningstar analyst David Whiston told CNBC. “I don’t think they’re frivolous science projects or anything like that.”

He said many of the companies could have “a lot of upside potential” that is unlikely to be priced into their stock because it’s early stage and unclear how big they could get.

General Motors plans to launch a new all-electric van called the EV600 by the end of this year. The first 500 vehicles are sold to FedEx.

GM

Morgan Stanley analyst Adam Jonas referred to GM as “SPACtopus” because its new businesses target many sectors of an influx of start-ups that are publicly traded through reverse mergers with purpose-acquisition companies, also known as SPACs walk.

In an investor note, Jonas called the companies “hidden gems,” including some more traditional business operations like Corvette, Cadillac, and its finance branch.

John Murphy, an analyst for Bank of America Global Research, described the new businesses, particularly BrightDrop, in a release earlier this year as evidence that GM “has world-class technology internally to compete with SPACs.” He told investors that the new industries “could become segregated and monetized over time”.

GM’s stock is up more than 160% over the past year. Shares are trading above $ 57, up 38% this year. The market capitalization is around $ 84 billion. Barra said Wednesday the company will host a meeting this fall that will focus on its futuristic growth initiatives.

“We will use this event to take a closer look at our growth strategy, our financial capabilities and everything that drives it, including software, hardware and services, and our strong brands,” said Barra.

– CNBC’s Michael Bloom contributed to this report.

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