GM And CEO Mary Barra Need To Quickly Master BEV Production Just As They Did With Ventilators
I had the opportunity today to listen to GM’s CEO Mary Barra on a Zoom call with members of my alumni group, Duke NY. Mary is a two-times-over proud Duke parent and a member of the Duke Board of Trustees.
It was a private call, so I will limit the scope of this article to comments she has previously made publicly and my takeaways. As the call progressed today, I noticed that GM stock was trading at $35/share, almost to the penny where it was trading five years ago. Elon Musk and the associated Cult of Tesla TSLA have shown that an auto company can reach a $400 billion valuation versus the $50 billion valuation currently afforded to GM. So, as Duke’s basketball coach Mike Krzyzewski would say, the most important play is the next play.
Ms. Barra’s comments—echoing those she made in this 60 Minutes interview—show the speed and technical prowess of GM when applied to a problem, in this case producing ventilators (with Ventec) at a GM facility in Kokomo, Indiana. The speed and engineering ingenuity—-Ms. Barra noted that 50% of the 600 existing parts utilized by Ventec needed to be re-engineered—that GM showed in going from 0 to a 10,000 unit/month production rate in the space of a week is extraordinary.
GM NEEDS TO SHOW THE SAME SPEED AND INGENUITY IN PRODUCING ATTRACTIVE, AFFORDABLE ELECTRIC VEHICLES.
It’s that simple. As someone who has followed the auto industry in some capacity for the 28 years since I graduated Duke (including 11 as a sell-side analyst) I know full-well the challenges of producing change in an industry in which it can be glacial. But just as Ms. Barra noted that she is a walking example of GM’s commitment to diversity, it is important that GM’s technical processes change as quickly as their human resources policies.
GM needs to produce attractive EVs (the Chevy Bolt has never sold well, and I would classify it as “not world class”) not because Musk is making robotaxis in Silicon Valley, but because VW is churning out BEVs in the old East Germany (in Zwickau) and, as of today, also in Shanghai’s auto alley in Anting. That’s the hurdle here. Tesla is always going to be viewed as a different entity (in terms of both valuation and corporate governance) to other automakers, but VW has raised the bar with its entry into the global markets with an EV that is attractive, cheap (it is subject to all government incentives, including the $7,500 federal EV credit here in the U.S.) and looks cool.
In Europe VW’s MEB electric vehicle platform is being used to produce the ID.3 in hatchback form, but in the US and China that platform will be shaped into the ID.4 SUV, the type of body style that consumers are increasingly demanding. So, GM needs to bring it.
The upcoming Hummer EV has drawn consumer interest—even at a price-point north of $112,000—and the Cadillac Lyriq has drawn early raves for its styling. Ms. Barra highlighted the Lyriq on today’s call, but that vehicle is listed on most websites with a “2023” model-year designation. THAT’S NOT FAST ENOUGH!
GM needs to show ventilator speed in automotive applications. I am a huge believer in fuel-cell EVs—which also have a fully-electric architecture—as a future transportation winner at the expense of pure BEVs, but GM’s partnership with Nikola on the Badger FCEV pickup seems to be in doubt owing to possible corporate malfeasance at Nikola.
GM can’t slow down now. The resources of the global engineering team, especially at GM China, which has 58,000 employees, need to be applied to producing EVs. It’s time. Musk may have sped up the clock, but it is actually VW’s Herbert Diess who is now proving in the marketplace that “legacy” automakers can produce BEVs that consumers want to buy. Mary needs to put GM at the head of that line. She did it in ventilators, but GM shareholders would be happier if she could do it in cars.