GM’s High-Profit Gas Guzzlers Can Be A Bridge To An Electric Future, Auto Industry Analyst Says

GM’s High-Profit Gas Guzzlers Can Be A Bridge To An Electric Future, Auto Industry Analyst Says

November 28, 2018

Amid this week’s news about General Motors slashing more than 14,000 jobs and closing several plants, some industry experts find a disconnect in the company’s forward-looking strategy: On the one hand, it is committed to growing sales of its big gas guzzlers — crossovers, trucks and SUVs — while on the other, it “intends to prioritize future vehicle investments in its next-generation battery-electric architectures.”

Puzzled? You’re not alone.

“I think GM and a lot of the companies know that electrification is the future,” David Reichmuth, a senior engineer with the Union of Concerned Scientists’ clean vehicles program, told Greentech Media. “But they’re prioritizing the short-term profits from some of these less efficient gasoline vehicles.”

The two paths may seem at odds, but Jeremy Acevedo, manager of industry analysis at Edmunds.com, believes there’s potential for them to converge. “It comes down to really leveraging the high-profit nature of the SUVs and trucks that are so popular today…so they can really focus on bridging over to the future that’s really autonomous and electric,” he said.

GM says it will double its spending on electric and autonomous vehicle development. Meanwhile, the restructuring and plant closures are expected to produce $6 billion in cost savings by 2020.

As Acevedo and others point out, one major hurdle GM faces in EV profits is the market itself. The company is discontinuing its flagship hybrid plug-in car, the Chevy Volt, amid tepid U.S. sales. It might be tempting to declare this a blow to electrification, but as Liam Denning of Bloomberg Opinion points out, it may just portend a shift toward all-electric alternatives.

It’s also important to note another fickle constituency GM must please: investors. While some institutional investors are concerned about climate change, it’s not their top concern, according to a recent report from US SIF: The Forum for Sustainable and Responsible Investment. But Mindy Lubber, CEO of nonprofit Ceres, says the overall attitude toward sustainability is changing for the better. “It’s a radically different discussion now. So I would say in the last 10 years, large publicly traded companies, large investors have realized that these issues — water risk, climate risk, human rights risk — that they run through the bottomline,” she told Yahoo Finance.