GM: The Drive to Profitability, Part 2

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GM: The Drive to Profitability, Part 2

February 9, 2016

In a previous post we looked at some of the reasons behind the 2015 GM record $10.8-billion earnings before interest and tax (EBIT). It is worth noting that the company is fairly confident that 2016 will be good as well, reaffirming its expectation that its earnings per share-adjusted will be “between $5.25 and $5.75.”

It probably isn’t wishful thinking.

It probably isn’t wholly predicated on something like cheap gas prices.

Because during the announcement of the earnings, both chairman and CEO Mary Barra and executive vice president and CFO Chuck Stevens made remarks that indicate that GM is on a more sustainable path.

Stevens said, “We plan to improve our results in 2016, driven by a significant vehicle launch cadence, continued emphasis on growing our adjacent businesses and an unrelenting focus on driving efficiencies into our core operations.”

Lots of new vehicles. That’s certainly good for sales. Driving efficiencies in building those cars and trucks, as well as dealing with the administrative activities associated with a giant corporation. That’s certainly good for cost savings.

But there is that “continued emphasis on growing our adjacent businesses” that is most intriguing.

Barra said, “We continue to strengthen our core business, which is laying the foundation for the company to lead in the transformation of personal mobility. We believe the opportunities this will create in connectivity, autonomous, car-sharing and electrification will set the stage for driving value for our owners for years to come.”

And there it is.

The “transformation of personal mobility.”

GM has announced its $500-million investment in ride-sharing company Lyft. It has acquired assets from former ride-sharing company Sidecar. It has established its own ride-sharing company Maven.

It is working toward higher autonomy for its vehicles, which will begin to roll out in 2017 model Cadillacs in the form of Super Cruise self-driving technology.

It has a growing portfolio of electrified vehicles.

OnStar has been connecting cars (arguably vehicle-to-infrastructure) since 1995.

And clearly GM is going to pursue all of these things with greater vigor going forward.

Because the auto industry 10 years from now is not going to be wholly predicated on what used to be GM’s mantra: “Building great cars and trucks.”

They are a part of it.

But only a part of it.