GM’s Strategic Pivot

From Gas to Electric Vehicles — Easier Said Than Done

Last week, General Motors’ Chairman and CEO Mary Barra increased the company’s commitment to electric vehicles from $20 billion to $27 billion by 2025 and announced the company’s plan for an all-electric future. More than half of GM’s product development resources are focused on electric vehicles, a significant tipping point from the company’s deep heritage in gas-powered internal combustion engine cars and trucks.

“We are resolved as a management team to move even faster to expedite the transition to EVs. The all-electric future we are building integrates all the things we do better than anybody else — so we can put everyone in an EV, generate profitable growth and create shareholder value.”

This week General Motors sent another significant signal of this pivot by withdrawing from the Trump administration-led litigation against California’s tough fuel economy and emissions regulations.

Startups often pivot multiple times before settling on a winning business model. What GM is doing is much trickier.

In 1886, 25-year old high school dropout Billy Durant rode in a friend’s new spring-suspension horse drawn carriage and was so impressed that he tracked down the developer, bought the patent and manufacturing rights, and formed the Flint Road-Car Company. By 1900 the company (renamed Durant-Dort Carriage Company) was the leading manufacturer of horse-drawn carriages selling 50,000 per year.

At first, Billy was skeptical of the new horseless carriages, but in 1908 he formed General Motors as a holding company and acquired Buick Motor Company. Durant’s holding company rapidly completed twenty more acquisitions including Oldsmobile, Cadillac, Oakland (later renamed Pontiac), and Rapid Motor Vehicle Company (later renamed GMC). In 1910, the company tried to buy Ford, but the deal fell through and the next year Durant was forced out of the company. He co-founded Chevrolet and in 1918 Chevrolet acquired a controlling ownership in General Motors, putting Durant back in charge of an even bigger company.

GM passed Ford in sales in the late 1920s and was the world leader in car sales into the 1980s. Today, the most valuable automakers in the world include…