Speaker 1: The iconic American car company GM is in the midst
Speaker 1: of a dramatic transformation. We really feel General Motors is
Speaker 1: moved from being an automaker to really a platform innovator.
Speaker 1: The shift comes with ambitious goals to sell a million
Speaker 1: electric vehicles in the United States and China by the
Speaker 1: middle of this decade and to phase out production of
Speaker 1: all gas powered cars and trucks by With e V
Speaker 1: penetration still in single digits, it's a bold bet on
Speaker 1: the future of mobility. The shift to electrification and ultimately
Speaker 1: autonomous vehicles is probably the most transformative thing that's happened
Speaker 1: in the auto industry, maybe since Henry Ford's assembly line.
Speaker 1: It's monumental. We've got an industry that's it's really stayed
Speaker 1: about the same for about fifty years. The thing that's
Speaker 1: different now if you've got a confluence of what we
Speaker 1: call case connected, autonomous, shared, and electric that are really
Speaker 1: new things in a quantum way to the industry. GM
Speaker 1: plans to put thirty five billion dollars behind it's push
Speaker 1: into electric and autonomous vehicles. But the year that's where
Speaker 1: CFO Paul Jacobson comes in. I see the role of
Speaker 1: finances really being two fold. Number one is making sure
Speaker 1: that we're supplying the information on how we think those
Speaker 1: decisions in that transformation we're going to project out financially.
Speaker 1: And then number two is make sure that we get
Speaker 1: the right resources in the right place at the right time,
Speaker 1: which can be challenging with so many different directions and
Speaker 1: so many opportunities ahead of us. He's been a great
Speaker 1: partner with what we're doing. This is not a substitution
Speaker 1: business that we're in in the short term and long term,
Speaker 1: or rather an additive business. It's a company that's focused
Speaker 1: on tech. It's a focused company that's focused on revenue diversification,
Speaker 1: and with that there's a lot of margin expansion up
Speaker 1: the head. You've got to be optimistic about the future
Speaker 1: and making sure that we're allocating capital into the right
Speaker 1: places to fund the transformation. For ninety consecutive years, General
Speaker 1: Motors sold more vehicles in the United States than any
Speaker 1: other manufacturer. That streak ended in one when Japanese rival
Speaker 1: Toyota took the crown. Jim still recorded record profits in
Speaker 1: Paul Jacobson's first full year as CFO, and that's a
Speaker 1: good financial foundation for the task ahead. If you have
Speaker 1: a dashboard that you've ad a CFO and you're looking
Speaker 1: at the e V transformation right now? What's green, what's yellow?
Speaker 1: And are there any reds on that dashboard? Well, I
Speaker 1: think we live in a world that seems to be
Speaker 1: read for everybody right now, and that's been one of
Speaker 1: the one of the challenges. I mean, since I arrived
Speaker 1: here a year and a half ago, it's it's really
Speaker 1: been about the semiconductor challenges, the map for weekend, coomic challenges,
Speaker 1: supply chain, etcetera. But all of that is just part
Speaker 1: of transformation, right Not everything goes according to plan, and
Speaker 1: you've just got to make sure that you set your
Speaker 1: sights on the horizon and make sure that we continue
Speaker 1: to track to it. I think the team is doing
Speaker 1: an extraordinary job. There's a lot of uncertainty out there,
Speaker 1: and that's one of the things we have to manage.
Speaker 1: We're blessed with a tremendous balance sheet. The team has
Speaker 1: done an amazing job funding the pension, paying down debt, etcetera,
Speaker 1: which puts us in a position where I don't actually
Speaker 1: have an aversion to using the balance sheet to continue
Speaker 1: on our path. If we need to temporarily chip shortages
Speaker 1: and supply chain disruptions have driven global car sales volumes
Speaker 1: down from their peak, but it may have long term benefits,
Speaker 1: forcing companies like GM to tear down silos and bring
Speaker 1: teams together to find solutions. We actually, as a management team,
Speaker 1: all the senior leaders of the company get together once
Speaker 1: a week and we've been doing that for a year
Speaker 1: and a half to talk about here's what the forecast is,
Speaker 1: here's what we're going to do to mitigate it, and
Speaker 1: here's how we're going to respond. And it's been one
Speaker 1: of the most amazing examples of collaboration I've ever seen
Speaker 1: in my career. No longer do you have to look
Speaker 1: to uh, different functional leads or vice presidents that would
Speaker 1: lead product development or design or sales or marketing or
Speaker 1: whatever that is. You know, it's really it's really everybody's together.
Speaker 1: Our staff meetings are together. It's very very very much
Speaker 1: one team. And that's changed everything. We've already talked about
Speaker 1: how we are simplifying the chip structure, can going to
Speaker 1: three chip families. That's going to put us in a
Speaker 1: position where we're not as beholden to hundreds and hundreds
Speaker 1: of chips depending on which vehicle where any one of
Speaker 1: them might hinder production. So lots of things across the
Speaker 1: horizons that we're doing to make sure that this becomes
Speaker 1: much much easier to navigate. In the future, the transition
Speaker 1: to electric vehicles will bring a fresh set of challenges.
Speaker 1: Global demand from metals used in batteries is already putting
Speaker 1: pressure on supply chains and driving costs higher. Well right now,
Speaker 1: commodities prices for those commodities that are like lithium, like
Speaker 1: cobalt that are used in uh e V batteries have sword.
Speaker 1: Those materials also not are just expensive, they're generally in
Speaker 1: places that are have geopolitical issues. How do you address
Speaker 1: the row material issues between things like lifing um and
Speaker 1: things like nickel. There's gonna be a shortage of how
Speaker 1: do you make sure you have that at a price
Speaker 1: you can affords you don't have a rapid spike up
Speaker 1: in the price. We're really looking at a multifascined approach,
Speaker 1: anything from traditional supply chain procurement type functions all the
Speaker 1: way to joint ventures or longer term contracts. It's not
Speaker 1: about capturing the best price today. It's about capturing that
Speaker 1: consistency of the business model that we can plan around
Speaker 1: and anticipate going forward to make it easier to UH
Speaker 1: to fund this transformation. But while Jacobson takes steps to
Speaker 1: head off headaches, he's also aware that GM's electric future
Speaker 1: holds huge opportunities. I think the most exciting thing about
Speaker 1: the ev transformation is it's fundamentally going to change the
Speaker 1: way we make money at General Motors because if you
Speaker 1: think about it, the overwhelming majority of our profits come
Speaker 1: from the time that we sell a vehicle to a
Speaker 1: dealer right and um, and that vehicle enjoys a lot
Speaker 1: of revenue for very different companies over the life of
Speaker 1: of it on the road. What the electric vehicle and
Speaker 1: what connected vehicles are going to do for us and
Speaker 1: is increase the revenue opportunities for us over the life
Speaker 1: of that vehicle second owner, third owner, fourth owner, because
Speaker 1: we're gonna be able to offer ways through over the air,
Speaker 1: updates to customize its subscriptions, various services, insurance packages, lots
Speaker 1: of different ways that we can interact with the customer
Speaker 1: in ways that historically we haven't been able to. How
Speaker 1: much of your top line total going to come from
Speaker 1: selling vehicles as opposed to the services that you've just
Speaker 1: been describing. So if you go back to our investor
Speaker 1: day last year, we talked about doubling our revenues while
Speaker 1: expanding our margins by the doubling of the revenues are
Speaker 1: coming both from growth and auto sales because there's a
Speaker 1: big overlap and we're getting new customers every day on
Speaker 1: electric vehicles, the ones that we're taking reservations and orders
Speaker 1: for right now. So what we talked about is twenty
Speaker 1: billion dollars a year of revenue in around these services
Speaker 1: that we can provide going forward. So it's a massive
Speaker 1: growth off of what we've currently experienced with on Star
Speaker 1: historically and really excited about what that's going to bring.
Speaker 1: GM also expects significant growth to come from Cruise. It
Speaker 1: owns eight of this startup that's developing autonomous vehicles. Despite
Speaker 1: considerable investment in advanced technology, the company has resisted the
Speaker 1: temptation to spin off these units. So far. Is there
Speaker 1: a world can you envision, as the chief financial officer?
Speaker 1: A world in which you say, you know what, there's
Speaker 1: an old business is a new business we should trade separately. Well,
Speaker 1: there's a lot of commonalities between the businesses. Right, So
Speaker 1: about seventy of the vehicles are the same, right. They
Speaker 1: both need breaks, they need windows, they need features inside
Speaker 1: the vehicle seats, et cetera. So everything that we can
Speaker 1: do to make the ICE vehicles more efficient and more
Speaker 1: uh appealing to the customer is only going to help
Speaker 1: us with our e V transformation. And that's why that
Speaker 1: integrated approach is so critically important to fund that journey
Speaker 1: for us going forward. Investors have indicated that they're along
Speaker 1: for the journey as well. Since July, shares of North
Speaker 1: American automakers have significantly outperformed the SMP five hundred, even
Speaker 1: after broader economic and geopolitical turmoil dragged them down from
Speaker 1: their peak. The last two years. They have doubled their
Speaker 1: commitment to what they're going to spend in electrification across
Speaker 1: the industry, and a lot of that was rewarded by
Speaker 1: by Wall Street. Um the companies will now need to
Speaker 1: deliver on be prepared to deliver on that, you know,
Speaker 1: post supply chain strained world. Part of your job is
Speaker 1: to make sure that the Wall Street is getting the
Speaker 1: message that you want them to have about General Motors.
Speaker 1: Where are you in that right now? Where is General
Speaker 1: Motors in the perception on Wall Street of the extent
Speaker 1: to which it really is a tech company on the forefront.
Speaker 1: You know, I think the challenge with what we did
Speaker 1: is we put out ten year goals. That's something that
Speaker 1: was kind of unheard of in the industry as well
Speaker 1: as as here at GM. And now what we've got
Speaker 1: to do the next phases make sure that we're giving
Speaker 1: a roadmap to investors out there to say, here's what
Speaker 1: you can expect to see in the next two to
Speaker 1: three years. And as you see that, you should increase
Speaker 1: your confidence that we're on the journey to get where
Speaker 1: we need to be in UM. The Wall Street perception
Speaker 1: of this change is almost UM, you know, weekly or monthly,
Speaker 1: which is fine. Our goal is nothing more than execution
Speaker 1: at this point. As you produce and execute, the confidence
Speaker 1: will grow. UM. Nothing is going to take us off
Speaker 1: track from that execution. We know we have the right strategy,
Speaker 1: so that will come. This is about the long term.
Speaker 1: We're not running the company for the stock price today.
Speaker 1: We're running the company for value creation over the long term,
Speaker 1: and I feel like we've got a really really good
Speaker 1: hand to play. General Motors CEO Mary Barra and President
Speaker 1: Mark Royce are not only auto industry veterans, their second
Speaker 1: generation GM employees, following fathers who both worked at the company.
Speaker 1: Paul Jacobsen's new to the car business. He launched his
Speaker 1: professional career at Delta Airlines, including seven years as CFO,
Speaker 1: before joining GM in December. I started with Delta back
Speaker 1: in a financial analysts on a business school and UM
Speaker 1: just had an incredibly left career there to be able
Speaker 1: to see and do so much and got to be
Speaker 1: treasurer through the bankruptcy, which as a corporate finance person,
Speaker 1: bankruptcy is the best experience you never hoped to repeat UM.
Speaker 1: But it gave me a really good platform and how
Speaker 1: to make deals and how to think strategically across the board.
Speaker 1: Mark Royce appreciates what Jacobson brings to the mix, and
Speaker 1: there's some the airlines or the auto business. UM focusing
Speaker 1: on the customer and being best at UM satisfying our customers,
Speaker 1: whether to be designed, whether it be the actual vehicle
Speaker 1: and the entry itself, the experience in buying, the experience
Speaker 1: of the dealer, whatever that is. UM. You know, committing
Speaker 1: resources those places to grow that top line is what
Speaker 1: it's all about. And he's proven to be a perfect
Speaker 1: partner for that that delta. We're a company that is
Speaker 1: focused on customer service and I had, you know, the
Speaker 1: opportunity to learn from Richard Anderson and at Bastion on
Speaker 1: the finer arts of leadership and transformation through a company
Speaker 1: that went through a lot. Uh here, it is very,
Speaker 1: very different. Working for a manufacturing company is amazing. I
Speaker 1: tell my wife all the time, it's it's amazing to
Speaker 1: be around people who build things. GM's transition to an
Speaker 1: all electric future is built on a proprietary battery pack
Speaker 1: called Ultium. It's building four factories to produce the batteries
Speaker 1: while it retools for existing assembly plants to ramp up
Speaker 1: e V production. The objective to create a scalable platform
Speaker 1: that eventually drives down losts. Paul Jacobson took me to
Speaker 1: the laboratory where this technology is taking shape. So we're
Speaker 1: in the heart of one of our battery testing labs
Speaker 1: where we test all aspects of the battery resiliency, extreme temperatures, shaking, vibration, etcetera.
Speaker 1: How much you're investing in R and D for the
Speaker 1: battery at this point. So we are investing a ton
Speaker 1: into battery technology, but it's not all just us. So
Speaker 1: around us we've got the testing facilities. We're also building
Speaker 1: a new manufacturing cell manufacturing test facility where we're gonna
Speaker 1: test different ways of manufacturing cells. Because it's one thing
Speaker 1: to look at chemistry and say this is superior, but
Speaker 1: can you replicate it millions and millions of times across
Speaker 1: the entire portfolio. So we're in execution mode. We're producing
Speaker 1: cells uh now at Lordstown and we'll be rolling those
Speaker 1: out soon. We're already have these cells and Humor EV
Speaker 1: and the Cadillac lyric as well. But as far as
Speaker 1: technology and chemistry goes, I think we're just kind of
Speaker 1: the beginning of where where the might go over the
Speaker 1: long term. Do we go to solid state or or what.
Speaker 1: So we're looking really at a portfolio approach to make
Speaker 1: sure we capture the highest probability of being successful. So
Speaker 1: as you go to scale and you have those millions
Speaker 1: of millions of time the vehicle comes off the line,
Speaker 1: whatever that is in the future, right ten years down
Speaker 1: the road, what percentage of the cost of the vehicle
Speaker 1: will be just tied up in a battery like that, Well,
Speaker 1: the battery and the motor systems are sort of the
Speaker 1: equivalent of the engine and the transmission today it is
Speaker 1: it is costing more obviously for for those systems going forward,
Speaker 1: but we think that technology is going to come down
Speaker 1: over time as well, which is why we've said we
Speaker 1: think we can get an electric vehicle to parody profit parody,
Speaker 1: if you will, by the end of the decade. With
Speaker 1: their ICE counterparts, evs may also be more profitable on
Speaker 1: the labor side, at least in the manufacturing phase. If
Speaker 1: you just looked at the power train of the vehicle
Speaker 1: parts that are different in an ice versus above, there's
Speaker 1: forty percent less labor hours in the in the assembly
Speaker 1: of power train, so fundamentally there's less labor needed, but
Speaker 1: certain engineering skills are likely to command a premium. We're
Speaker 1: seeing auto companies on the engineering side UH out in
Speaker 1: the marketplace competing for engineers that they're competing with video
Speaker 1: game companies, UM, Silicon Valley companies, a different kind of
Speaker 1: engineering software engineers, Are you really needed, and so there's
Speaker 1: this big competition for that kind of UH employee and
Speaker 1: and attracting them to the auto industry, which is considered,
Speaker 1: you know, an old rust belt industry. We've been hiring
Speaker 1: UM really aggressively over the last couple of years, UH
Speaker 1: in software and chemistry and UH and just broad engineering
Speaker 1: across the board. And what we found is people are
Speaker 1: attracted to come the general motors. I think more and
Speaker 1: more today employees are focused on I want to work
Speaker 1: for a company that shares my values. And when you
Speaker 1: look at what GM is doing in our pivot to
Speaker 1: electric vehicles, we find a lot of people want to
Speaker 1: be a part of that. US car buyers are also
Speaker 1: getting with the program. Sales of fully electric vehicles group
Speaker 1: by from one, with Tesla accounting for three of the
Speaker 1: five top selling models. Yet hurdles remain, and the issue
Speaker 1: of charging might be the biggest. If you think of
Speaker 1: the reasons why people avoid an electric vehicle, now, four
Speaker 1: of the top five reasons are related to charge. US
Speaker 1: charging infrastructure is steadily improving, but consumers still worry about
Speaker 1: being stranded without power on road trips. Paul Jacobson assured
Speaker 1: me that when he takes the new Hummer e V
Speaker 1: on long journeys, it's not just fun to drive, it's
Speaker 1: equipped to go the distance. I hear so much about
Speaker 1: road trip anxiety that I wanted to experience it self.
Speaker 1: My family likes to drive a lot, so I brought
Speaker 1: my daughter home from college in this and uh and
Speaker 1: it was great. I mean, the computer system is all intuitive.
Speaker 1: It tells you how to keep track of the battery,
Speaker 1: It tells you where the charging stations are, tells you
Speaker 1: how much power you'll have when you get to the
Speaker 1: charging station. So it really puts a lot of your anxieties.
Speaker 1: But as far as driving it, it is it's a treat.
Speaker 1: So where are you on the charging stations? I know
Speaker 1: General Owners has made an investment in one company. How
Speaker 1: are we doing in this country generat and getting charging
Speaker 1: stations in so? I think this is this is an
Speaker 1: area where obviously we can we can continue to improve
Speaker 1: as a country in a society, we're doing our best.
Speaker 1: We've committed almost a billion dollars to e V charging,
Speaker 1: so we've we've taken that and looked at home charging solutions,
Speaker 1: local community solutions, and road trip charging solutions. What you know,
Speaker 1: with my daughter, what we would end up doing is
Speaker 1: probably stopping grabbing a bite to eat, plugging it into
Speaker 1: a charger, usually a high speed charger, to get as
Speaker 1: much charge as we can, and being there for twenty
Speaker 1: to thirty minutes um, get us a lot of range
Speaker 1: and by the time we've used that range, retired, ready
Speaker 1: to stop again, etcetera. So it was it was a
Speaker 1: really good experience for me, and it's taught me number one,
Speaker 1: you know what, what are the concerns of the consumer
Speaker 1: that are ultimately going to drive our vehicles? And then
Speaker 1: number two, where do we need to focus on addressing
Speaker 1: some of those anxious points for people. Despite COVID lockdowns
Speaker 1: and supply chain breakdowns, General Motors delivered nearly three million
Speaker 1: vehicles in China, and since China still tops the global
Speaker 1: market for electric vehicles, GM expects its foothold to be
Speaker 1: helpful as it introduces new EV models. China's role, frankly
Speaker 1: is is a big role in big volume for US
Speaker 1: and all of our brands. And as the landscape changes
Speaker 1: really rapidly to evs in China, you know we're ready.
Speaker 1: We've got great j V partners we do on the
Speaker 1: brands in China, and so we've got you know, good
Speaker 1: brand representation in the design of the vehicle. And then
Speaker 1: also we've got the flexibility and something like our ultium
Speaker 1: architecture for batteries and cells that is flexible enough to
Speaker 1: handle the requirements of a prismatic cell like c at
Speaker 1: L makes in China. Is it a challenge because China
Speaker 1: has shown a predilection to sort of intervene in the
Speaker 1: commercial markets. They favor some companies over other companies. Is
Speaker 1: that a risk potentially for GM because you have some
Speaker 1: Chinese native companies I can put that way like a
Speaker 1: B y D. We believe we're in a good position.
Speaker 1: At the end of the day. The world is competitive,
Speaker 1: right and and the world of electric vehicles is only
Speaker 1: going to get more competitive. It doesn't matter where you're
Speaker 1: operating in. So we need to focus on the quality
Speaker 1: and the customer offerings that we have UM and regardless
Speaker 1: of which market we might be going to, there's one
Speaker 1: thing everyone agrees on when it comes to selling vehicles
Speaker 1: in China. The future is extremely difficult to project. China
Speaker 1: has been interesting because you know, they had they had
Speaker 1: a goal for that's basically already achieved this year in
Speaker 1: terms of electric penetration. They share did incentives from being
Speaker 1: a consumer based incentive to being a stick on the
Speaker 1: industry with trading and such UM that's greatly favored the
Speaker 1: startups and it's been harder for the traditional automakers, both
Speaker 1: domestic and the Western automakers are foreign automakers, they're um
Speaker 1: in terms of the subsidy and the stick of carrot
Speaker 1: regime on electric vehicles. So it very much depends quite
Speaker 1: a bit on the regulatory environment going forward in China
Speaker 1: as to what China looks like in Paul Jacobson tends
Speaker 1: to view the future with a healthy blend of optimism
Speaker 1: and pragmatism. I asked him to look ahead at some
Speaker 1: big picture issues. What over the next ten years excites
Speaker 1: you the most about opportunities for general motors. I think
Speaker 1: the most exciting thing over the next ten years is
Speaker 1: we don't know about all the opportunities to generate revenue
Speaker 1: and serve the customers. So I'm really excited about that. Okay,
Speaker 1: one of the next ten years makes you most nervous.
Speaker 1: I'm not sure if it keeps you up at night,
Speaker 1: but heads in that direction. Yeah. I think the thing
Speaker 1: that keeps me up at night over the next ten
Speaker 1: years is just thinking about the macro landscape. The world
Speaker 1: is just changing so rapidly. We have a lot of
Speaker 1: competitors coming at us UH, and you know we're going
Speaker 1: to meet those challenges. But we don't know what the
Speaker 1: world's gonna throw at us, and we've got to make
Speaker 1: sure that we are very nimble. We've talked a lot
Speaker 1: about the changes coming for general motors. As you look
Speaker 1: at your job as CFO, how will that job have
Speaker 1: to change because of those changes? In the move to
Speaker 1: evis Well, I think as as you think about any
Speaker 1: CFO um not just the move to e VS, but
Speaker 1: just to move to technology and the changing consider we've
Speaker 1: got to be nimble, we've got to be quick, and
Speaker 1: we've got to make sure that we're operating in as
Speaker 1: close to real time as we can. We don't have
Speaker 1: time to look back over what happened last year or
Speaker 1: last quarter. It's what happened last week, what happened yesterday?
Speaker 1: How is the business performing? And how do we get
Speaker 1: real time information to the business leaders. Over the time
Speaker 1: that you've been a CFO, what has changed the most
Speaker 1: for you? What skills have you had to develop? Well?
Speaker 1: I think you know as as as all CFOs experience
Speaker 1: you get, you get much much more ingrained into the
Speaker 1: strategic side of the business. So today's CFO has to
Speaker 1: be much much more than a bookkeeper has to be
Speaker 1: a strategic business partner at the table, helping to see
Speaker 1: around corners and helping to prepare the organization for what
Speaker 1: could happen if somebody took the job of CFO as
Speaker 1: some company today, what would you advise them? Um? Number
Speaker 1: one is listen right? I think too often CFOs are
Speaker 1: are there and their viewed as the people are there
Speaker 1: to say no. Right. I like to challenge our team
Speaker 1: to how can we find a creative way to say yes?
Speaker 1: How can we find solutions and ways to make things
Speaker 1: more efficient not just forego them, uh in lieu of
Speaker 1: something else. Um. That can sometimes be hard for us.
Speaker 1: We're all naturally skeptics. That's what tends to attract people
Speaker 1: into the finance business. So how are you skeptical? With
Speaker 1: a good vent towards it to helping people accomplish their
Speaker 1: goal finding creative ways to say yes. If Paul Jacobson
Speaker 1: and his team can do that, GM will be well
Speaker 1: on the way to delivering on its grand vision of transformation.
Speaker 1: I'm David Weston. This is Bloomberg