GM considers electric vehicle spin-off
Could General Motors spin-off a stand-alone electric vehicle business?
According to Bloomberg News the concept has been considered inside the US automotive giant as far back as 2018.
It became a public discussion point recently when CEO Mary Barra was asked about an EV spin-off during an earnings call with investment analysts.
“We are open to looking at and evaluate anything that we think is going to drive long-term shareholder value,” she said, adding that “nothing is off the table”.
Speculation is rising about the spin-off just as GM reveals the Cadillac Lyriq, the first of more than 20 electric vehicles it will launch by 2023 using its latest modular EV architecture and Ultium battery developed with LG Chem.
It has also teased the GMC Hummer battery electric off-roader that will soon be launched.
Why would GM spin-off its EV operations? Capital investment is the answer.
The rise and rise of Tesla to topple Toyota as the world’s most valuable car company has not gone unnoticed, nor the ability of start-ups that have never made a vehicle such as Nikola, Fisker and Lordstown to attract billions in backing.
In fact, GM is already invested the pick-up maker Lordstown.
Frustratingly for GM, Barra has hit the hustings hard selling the company’s transition to EVs and autonomy without getting any market response. Tesla’s market cap is now about eight times more than GM.
“Investors are telling us every day that they are willing to invest in electric vehicles,” said Emmanuel Rosner, the Deutsche Bank analyst who asked Barra about the idea of a spinoff on July 29.
“But they are doing it with electric-vehicle companies, not legacy companies,” he told Bloomberg.
The challenge for GM is spinning off the bit of its business that’s fashionable to the market leaves the legacy business – the one that makes all those Chevrolet and GMC ICE trucks and SUVs that actually make all the money at the moment – even less attractive to investors.
Another possibility is that GM stay as one entity but change its name to Ultium to give it some 21st century zing.
An argument in favour of the spin-off is GM has shown it is willing to reconstruct its investments in the new-tech space.
It acquired the autonomous-vehicle company Cruise Automation in 2016 and has since sold minority stakes to SoftBank Vision Fund, Honda and T. Rowe Price Associates, bringing in billions of dollars that have helped fund development and reduced its investment risk.
GM’s EV operations include an advanced battery lab that creates proprietary cell chemistry, the partnership with LG Chem that just broken ground on a factory in Ohio and two assembly plants in Michigan that are dedicated to making EVs
