By on February 5, 2020

General Motors Renaissance Center

General Motors CEO Mary Barra went to New York on Wednesday to hold an investor conference. The day’s theme was: convincing everyone that GM deserves a higher valuation because, like Tesla, it’s supposed to be more than a car company.

While it seems slightly presumptuous for GM to expect the same overblown share price when Tesla probably doesn’t deserve it, either, the Good Book is supposed to say something about getting what you ask for. Still, having not read it in a while, I sincerely doubt it was referencing giant corporations or huge amounts of money.

Barra and company are attempting to show that GM hasn’t sat back on electrification and the same kind of advanced automotive technologies that wooed Tesla investors. Nobody said the rival automaker’s name during their speech, of course. Of course, they wouldn’t really need to, either. 

“Our goal today is to leave you with a clear understanding of our vision and our strategy for the future,” Barra told investors. “We hope that you believe as we do that General Motors is uniquely positioned to take the industry forward.”

Hopefully, the future looks a little better than the present. General Motors just lost $194 million in its fourth quarter, resulting in a net profit of $6.7 billion for 2019 that takes into account the substantial  amount of money lost due to the prolonged UAW strike (about $2.6 billion). Adjusted earnings before interest and taxes fell 96 percent in Q4 from a year earlier, to $105 million. The company’s profit margin declined 7 points to 0.3 percent as revenue dipped 20 percent to $30.8 billion.

GM currently trades fairly close to the $33 share price debuted in the IPO from 2010. That has left it with a market cap nearing $50 billion, whereas Tesla’s valuation is closer to $140 billion. However, it’s not all roses for the American EV brand. After peaking hard on February 4th, Tesla’s stock fell nearly 18 percent with losses continuing throughout the day. Wednesday will definitely end as the worst percentage decline the stock has endured in years. That’s leading many to believe that Tesla’s valuation is about much more than simply delivering technology — an issue we discussed earlier in the week.

While GM’s battery tech still seems to be a step or two behind what Elon Musk’s team has managed to offer, its autonomous program is likely years ahead. Despite plenty of developmental hiccups, General Motors is still presumed to be the legacy automaker leading the self-driving charge. And it’s that commitment to technology Barra is hoping to make investors see. Some have already.

“The market’s got it wrong,” Chris Susanin, co-portfolio manager with Levin Easterly Partners, told Reuters at the meeting, “GM should be the $150 billion market cap, not Tesla.”

From Reuters:

The bulk of GM’s profits is still derived from the fuel-hungry pickup trucks and SUVs sold in the United States. The Chinese market has been the source of a steady $2 billion in profits a year, but that is threatened by a market slowdown, rising costs for electrification and now the disruption caused by the coronavirus outbreak.

While China will deliver lower equity income to GM in the near term, its remains a solid contributor that is profitable and dividend paying, and will play a key role in the development of EVs globally, officials said. GM also sees growth for its Cadillac brand in both volume and profits in China.

Cadillac has already announced plans to make most (potentially all) models sold under its banner electric by 2030. North America will presumably be less eager to scoop up alternative-energy vehicles than, say, Europeans, but GM says it anticipates the self-driving market to eventually be worth over $8 trillion. If those numbers turn out to be correct, and the company takes a commanding lead, then that should more than make up for the United States’ slow EV adoption rate and those extravagant development costs.

The General currently has plans with South Korea’s LG Chem to construct a multi-billion-dollar battery factory in Ohio to provide cells for EVs coming out of the retooled (to the tune of $2.2 billion) Detroit-Hamtramck assembly plant — including the electrified Hummer that’s slated for 2021.

During the investor meeting, Barra ramped up the automaker’s timeline to source all electricity from renewable sources by 2040. She also reminded everyone that GM intends to reduce manufacturing complexities for 2020, by eliminating 1/4 of the parts currently required for assembly, and that Super Cruise would become more broadly available over the next two years.

While the business is doing just about everything it can to position itself favorably, that doesn’t ensure the future is as GM sees it. The public’s interest in AVs seems to be on the wane; meanwhile, battery-powered vehicles aren’t being adopted quite as quickly as everyone hoped. But we don’t have an sound alternative strategy. You either drive through tech like a pile of cardboard boxes in a 1970s cop drama, hoping it will pay off before you’re broke, or you hold off and save yourself a bunch of cash at the risk of falling behind the rest of the industry. Having the same cachet as Tesla won’t change that, even if it’s worth striving for.

“We believe we’re a compelling investment opportunity,” said GM CFO Dhivya Suryadevara, “From a share-price standpoint, we’re very bullish on the future.”

[Image: General Motors]

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34 Comments on “Can General Motors Talk Its Way to a Higher Market Value?...”


  • avatar
    cprescott

    Higher market value? For what. It’s IPO should have been in the low teens to begin with. The company is still over valued by half and that Tesla company should be no more than $30 per share right now. It is a gimmick stock.

  • avatar
    Fred

    Pump and dump!

  • avatar
    Victor

    Tesla is the future. GM is living a rather nice afterlife. That’s it.

    • 0 avatar
      Peter Gazis

      Victor

      Tesla is not the future. When everyone who wants a Tesla already owns a Tesla it becomes just another car company.

      • 0 avatar
        Victor

        Tesla is the future, their tech is the future. Others are playing catch-up right now. They are years ahead of everyone else in battery technology and its supply chain. They’ve also managed to hack the entire automobile commercial chain by not having dealers.

        And most people want a Tesla. Maybe not you, or me, but most people do.

        • 0 avatar
          conundrum

          You mean you didn’t read the article the other day here on EV range in cold weather from Norway? The Model 3 was not that great.

          If Tesla is ahead on LiON battery cell technology, then they can blame it all on Panasonic who actually manufacture them.

          But you knew that, right? Before we got the Tesla fanboi buzz all over again for the millionth time.

        • 0 avatar
          Right_Click_Refresh

          Holy over the top shilling Batman.

  • avatar
    dal20402

    Wrong thread, again.

  • avatar
    ToolGuy

    Mary Barra: ““We hope that you believe as we do that General Motors is uniquely positioned to take the industry forward.”

    • Hope is not a strategy.
    • “Unique” means unique – one and only – do you really mean this?

    Dhivya Suryadevara: “We believe we’re a compelling investment opportunity…”

    • Essentially dead money for the past 10 years, but NOW your stock is going to come alive? Based on what?

    “Barra, asked whether [redacted]’s eventual electric pickup offering could squeeze GM’s margins, said her company understands that business. “I think we can have our cake and eat it too,” she said.”

    • And we’ll have unicorns and sprinkles and cupcakes and it will never rain in GM fairytale land.

    https://www.reuters.com/article/us-gm-investors/with-tesla-stock-envy-gm-hopes-to-sell-investors-on-its-ev-tech-future-idUSKBN1ZZ1GT

    • 0 avatar
      highdesertcat

      Correctly pointed out, especially the dead money part.

      There’s no way GM can ‘talk’ its way to higher valuation.

      The way to higher valuation is through more product sales in order to become a self-sustaining, profitable and viable on-going concern.

      I believe that’s not going to happen because of the missed opportunities in GM’s past. Clearly, GM died on its own merits, or lack of merits, in 2009, regardless of contributing factors like UAW demands for unending higher wages and greater benefits and perks.

      So the question then becomes, “How does GM get more real-world buyers to buy a GM product instead of the excellent products already available in the market?”

      This whole exercise goes to show that bailing out a dead company does not guarantee a successful resuscitation but only slows down the death spiral toward inevitable demise and dissolution.

  • avatar
    Snooder

    Hahahahaha.

    I mean, I’m not entirely sure that Tesla’s current valuation is sustainable long term, but GM is smoking the reefer if they think they can compare their bean counting, innovation killing ways.

    Tesla is riding high because theres hope that they will grow enough in the future to justify it. GM has little room to grow, and plenty of historical evidence that they would fuck it up even if they did stumble on an opportunity to do so.

  • avatar
    thornmark

    GM will spend the most and get the least for it

    If EVs do take off, GM won’t be a winner, sorta like Kodak w/ digital photography

  • avatar
    Robbie

    GM, may I suggest you hire an engineer or two and build a halfway decent vehicle in order to achieve a higher valuation…?

    • 0 avatar
      EGSE

      Yes, this. And it has to be better than halfway decent, it has to be great. Shock and awe great. Humiliates Honda and Toyota great. They need a reset of public perception via top-shelf product to wipe away the stigma of their failings. And then they have to market that product right.

      Otherwise (for one example among many) it will be reminiscent of the Cobalt that Bob Lutz tried to defend as “competitive” which in corporate-utterance meant “Generally Mediocre”.

      Alas, they still don’t get it.

      • 0 avatar
        ttiguy

        Shock and awe? Yeah what they should do is introduce a mid-engine supercar that can perform at levels of cars costing 3x as much. That’ll shut up the bitter, never accomplished anything, losers on this site! Oh wait.

        Carry on trolls…..

        • 0 avatar
          EGSE

          Yeah, you don’t get it either. Think the ‘vette can carry GM? None of the marques (Chevrolet, Buick, Cadillac et.al. if you don’t understand) are considered leaders. You should work on reading comprehension, then you could tease out of the article where GM sits WRT the financial situation they find themselves in. Ponder why GM has consistently lost market share and maybe you can get it too.

        • 0 avatar
          dukeisduke

          @ttiguy

          With the same Chinesium content as their other products.

    • 0 avatar

      My Cadillac experience showed me that the engineering and design are very good, but the car fails because it is built with “genuine GM parts”. I replaced a lot of parts at 60-75k that should have made 120k at least or the life of the car. My CTS was actually an excellent car…made of tissue paper.

  • avatar

    10 years of failure does not inspire confidence in the future.

    if management can’t sell Pontiacs, you don’t get rid of Pontiac

    you get rid of management.

    Buickman
    Founder
    GeneralWatch.com

  • avatar
    dont.fit.in.cars

    There’s no bow tie value when rear hub on my Impala squeal at 60k

    Paint inside the lug wrench not allowing lug nut removal until it’s scraped out.

    Wrapped and Cracked cast iron exhaust manifolds

    Valve springs breaking at 12k miles.

    Non of these problems occurred on my 02 Camry.

  • avatar
    DenverMike

    Can a homeless crackhead talk his/her way to a higher credit score? GM isn’t fixable, they’ve proven that.

  • avatar

    As they say talk is cheap.

    The electric hummer maybe the most idiotic idea in the company’s history. The last people interested in electric vehicles are potential truck and SUV buyers. They tend to be very conservative customers with little interest in environmental issues.

    Toyota is taking a more measured approach to EVs. They are still producing traditional cars and trucks while carefully watching how the public responds to EVs. Toyota is not taking the putting all your eggs in one basket approach.

    • 0 avatar

      spot on.

    • 0 avatar
      Victor

      May I add that the electric hummer also looks like a concept car from the 90’s.

    • 0 avatar
      tomLU86

      Toyota will be the top selling company in 2030. I mean, in the US.

    • 0 avatar
      SCE to AUX

      “Toyota is not taking the putting all your eggs in one basket approach.”

      So is every other mfr, which is one reason why Tesla is the distant EV leader. Half-hearted EV development is really just a plan to fail.

      But it doesn’t matter as long as the EV market is small and you’re not interested in having any of it.

      • 0 avatar
        tomLU86

        Toyota is conservative in the better sense of the word. The take prudent, measured risks. Where they have been ‘innovators’, they have been smart about it.

        For example, Toyota did not create a new BRAND New category, like the Mustang, or the minivan. Or did they: their RX300 and original RAV-4

        Toyota does have a lot of firsts we take for granted:

        First popular-priced car with a 5-speed (73ish Corolla); first 4-spd auto in a small car (original Camry); first 16-valve in a base version of a mass car (2nd gen Camry);

        They took a measured chance with the Prius Hybrid. It was a manageable risk/bet. They’ve refined it. They are ahead of everyone here. It may be a good lead-in one day …trade your old hybrid for a new Toyota EV…”

        Once Toyota identifies a segment or product they are not playing in, they carefully study the offerings and diligently one-up them (Lexus LS400)

        If EVs really catch on, Tesla may become to EVs what Mercedes was to cars in the 70s and 80s: the high-end luxury maker.

        Toyota will move to refine the mass EVs and make them better, LEARNING from the mistakes of others.

        GM, I think, is taking a big risk of being the guinea pig of EV/AV, in the hope that as the segment mass pioneer, it will become the leader, and profit as a result.

        In autonomous cars especiallay, IMO, there are a lot of expensive lessons to be learned.

        Toyota is steering clear of that…for now. That’s a lot of resources saved. While many of their cars are boring, they are relentless competitors. And as manual trans are phased out, and BMWs and Audis stand out less–Toyota/Lexus looks less boring, and more “quality/reliable”. Also, Toyota has a ‘safe’ home base (Japan) and is already huge here in the US (and as American as anything).

        Slow and steady

        • 0 avatar
          Johnster

          Toyota has had its share of failures over the years (Daihatsu and Scion come to mind), and for the most part they’ve never been particularly innovative (with the notable exception of the Prius). But they’ve never put all of their eggs in one basket and they’ve always been ready to pivot to where the market is going. When sales of full-sized pickups and SUVs crater, they’ll be ready to ramp up production of their excellent small cars. GM, not so much anymore. GM’s got nothing.

  • avatar
    dukeisduke

    DeadWeight, DeadWeight, wherefore art thou, DeadWeight?

  • avatar
    Jeff S

    Yes where is Deadweight? Time for Geely to step in and buy GM. Hecho en China is where GM is heading.

  • avatar
    Michael S6

    Car stocks are generally in the dog house as far as wall street is concerned and even toyota that makes gazillion dollars has a PE ratio of 8.79. Only exception is Tesla which has Ludicrous evaluation that makes zero sense even if they will be a big fish in future. GM can grovel all it wants but it’s products have been mediocre and it’s fuel economy/green credence is one of lowest in industry. We have heard the GM trademark call “wait until you see what is coming next year” for the last 40 years.

  • avatar
    abitolder

    Maybe just get rid of overpaid people like Carlisle (cadillac ) and Barra and there will be money left over to build real vehicles.

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