CEO Mary Barra bets GM could grow beyond cars and trucks

(Reuters) – Pam Fletcher wants to change the way General Motors Co makes money.

The veteran GM engineer’s Global Innovation team is looking for new ventures to further increase the carmaker’s revenue than vehicle sales, and is cultivating commercial delivery services to vehicle insurance ventures to meet future markets. value of about $ 1.3 billion. That does not include flying cars, a market sector that could be worth $ 1.3 billion, Fletcher told Reuters.

On a recent video chat, Fletcher counted silently before answering how many businesses her team keeps. “Just under 20,” she said.

The fact that GM is now incubating its own startups – with its venture capital investing in dozens more – underscores the CEO of Mary Barra to recreate the largest American carmaker. The goal is to become a diversified provider of mobility services – Apple’s car equivalent, with revenue rolling in from software and services on a monthly or quarterly basis long after the original product was sold.

According to legendary automakers such as GM, Volkswagen and others who are trying to revamp and transform their businesses, Evangelos Simoudis, author and consultant on corporate innovation strategy, is discouraged.

“The technologies incorporated in the software-defined vehicle require areas of expertise that one regularly finds in technology companies, rather than in automakers,” he said.

Barra’s pressure to transform GM’s age-old business model has already had a significant impact – although the first of a new generation of electric vehicles she promised is still months after launch.

GM returned $ 24 billion to shareholders with dividends and share buybacks between 2014, when Barra took over, and early 2020. But the buyback was suspended indefinitely when the pandemic hit last spring.

Now, Barra told Reuters the company has more productive uses for its money: investing in electric vehicles and expanding business lines that promise recurring revenue streams.

GM’s new ventures could add ten billion to future revenue, Barra said, raising operating profit margins above the current 8% it achieved in 2020, and the 10% it envisages in the long run.

“We have very important growth opportunities and different initiatives to invest margin,” she said in a video interview.

Barra’s shift from repurchasing shares to investing in recurring revenue services, coupled with the goal of making GM an all-EV company by 2035, has reached a decade of cost cuts and cash returns to shareholders in one year be not.

GM’s share price over the past six months has broken outside the range it has been stuck in since the IPO following the bankruptcy in 2010. GM shares peaked at $ 62.23 after 2010 on March 18, up 50 % higher for the year. .

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GM’s $ 90 billion market value still holds a large valuation of Tesla Inc.’s $ 600 billion value, reflecting doubts among investors that a 113-year-old Detroit manufacturer could keep up with an 18-year-old Silicon Valley company that has no technology or workforce. legacy burdens to strike through.

“I understand why people may be skeptical (towards GM), because this is a business where revolutions have been announced over the past half century and for some reason were not authentic,” said Jeffrey Sonnenfeld, dean of leadership programs at Yale Business School.

Barra, he said, “has the authenticity and legitimacy to pull it off in a way that many other people would not want to do.”

Barra’s effort to rebuild GM’s business is based on an executive corps that mixes GM drivers like her for years – Barra has been with the company for 40 years – and recent recruits from outside the automotive industry.

“We marry people who really understand the automotive industry with people who understand these other businesses that we think are growth opportunities,” Barra said.

A new venture that combines several aspects of GM’s approach is BrightDrop, a unit that will supply electric vans and related hardware to commercial delivery companies, starting with FedEx, along with support services from fleet management to predictive analytics.

GM rival Ford Motor Co. launches its own electric delivery van and expands their support services to defend its largest share in the US commercial vehicle market of more than 40%.

BrightDrop, one of the first ‘graduates’ of Fletcher’s innovation incubator, started its life less than two years ago as an idea initially called Smart Cargo.

Fletcher’s team began incubating Smart Cargo in September 2019, about the same time another GM group was working on the future portfolio of electric vehicles. The ‘big idea’ – to marry the software and data-driven service delivery industry in an electric van – was hatched in February 2020.

The company gained extra traction at the end of 2020 when GM appointed longtime tech entrepreneur Travis Katz to become president and CEO of BrightDrop.

Ultimately, GM’s leadership wants BrightDrop to function independently and ‘cultivate ideas and new ways of thinking’, Katz told Reuters.

“We expect BrightDrop to be a very large and very profitable business,” he added. Eventually, much of the BrightDrop experience will return to GM. ‘

Barra is also building GM’s longtime OnStar telematics industry into a platform for selling insurance and other services that can be delivered over the air.

Santiago Chamorro, head of global connected services, has expanded OnStar’s security and safety portfolio with new products and services incubated internally, including OnStar Insurance, the Guardian mobile security app Guardian and Vehicle Insights, a data analytics platform for commercial fleet managers.

Insurance, a new arena for GM, is led by the hiring of outside Andrew Rose, who previously worked for the car insurance force Progressive and the British Admiral Group.

Rose says GM dealers can offer policies to owners when they buy or rent a vehicle. OnStar can offer discounts to better drivers, as well as faster damage service after an accident, and can eventually offer home insurance as part of the package.

GM has never broken the financial results of OnStar, and Barra will not say whether the company will do so.

“OnStar is already a very important business,” she said. “We think there are opportunities to grow it even outside our vehicles.”