General Motors Creating Shareholder Value Through Diversification in Electric Vehicles: Can a Legacy Company Win?

Abstract

General Motors Company (GM), led by Mary T. Barra, set out to be a major player in the US electric vehicle (EV) market. However, experts believed that a legacy company such as GM could not compete against agile newcomers such as Tesla, the market leader in EVs. Moreover, Barra experienced several challenges as GM diversified to EVs. These included labor strikes to protest against lay-off decisions as GM invested more in EVs. Then GM’s JV (joint venture) partnership with LG Chem, a significant lithium-ion battery supplier, also posed challenges. Between December 2020 and August 2021, GM had to issue three recalls of its Chevrolet Bolt EVs due to fire issues with LG Chem-manufactured lithium-ion batteries.

In contrast to GM, its traditional competitors—that is, long-established automobile companies—continued to invest in conventional automobile research and development and did not completely shift to EV-related innovation. This occurred as mass consumers were skeptical about buying EVs due to high pricing and vehicle range (i.e., distance covered on a single charge). n September 2021, Barra also announced that GM was to become a zero-emission automobile manufacturer and, by 2035, focus on EVs only. According to industry experts, GM was venturing into EVs aggressively to please Wall Street (the Financial District of Lower Manhattan in New York City)and get a valuation similar to Tesla. Tesla’s market value was more than five times that of GM, Ford Motors, and Fiat Chrysler Automobiles combined, despite its sales being much smaller. However, the competencies that companies required in manufacturing EVs were different from those needed in manufacturing conventional gasoline engines. Was Barra becoming hypercompetitive while diversifying to EVs to enhance shareholder value? What strategies can Barra deploy to compete against modern automobile companies such as Tesla? How can she develop competency in developing affordable EVs for the mass segment?