DETROIT -- General Motors is pondering a provocative move based on a predicament it has faced for years: Pure plays on electric vehicles are all the rage, while old-school auto manufacturing can’t get any love.
The idea -- to spin off GM’s electric-vehicle operations as a standalone entity -- was raised by analysts with CEO Mary Barra during the automaker’s earnings call last week. It’s no wonder she voiced openness to the concept. People familiar with the matter say it was floated internally in 2018.
GM now is war-gaming the idea as the company ponders different ways to get credit for its EV plans, though a spinoff isn’t actively being prepared, said the people, who asked not to be identified discussing internal deliberations. Barra was publicly asked about it in light of Tesla Inc.’s soaring valuation and the easy access to capital that unproven EV startups such as Nikola Corp. have pulled off by merging with blank-check companies.
“Investors are telling us every day that they are willing to invest in electric vehicles,” said Emmanuel Rosner, the Deutsche Bank analyst who asked Barra about the idea of a spinoff on July 29. “But they are doing it with electric-vehicle companies, not legacy companies.”
A GM spokesman declined to comment beyond referring to the remarks Barra made during the carmaker’s earnings call.
“We are open to looking at and evaluate anything that we think is going to drive long-term shareholder value,” she said, adding that “nothing is off the table.”
Investors have poured into Tesla shares this year, bidding up its market capitalization to as high as $304.8 billion -- more than eight times what GM is worth. Nikola, which isn’t expecting any meaningful revenue until next year, had a higher valuation than Ford Motor Co. in June and early July, athough its stock price has settled back down.
Aspiring EV makers are now trying to replicate Nikola’s strategy to combine with a special-purpose acquisition company and publicly list their shares. They include Fisker Inc., whose founder failed to get his first EV venture off the ground, and Lordstown Motors Corp., which is making a long-shot bid to salvage an Ohio plant that GM closed last year. None of the companies have sold a single vehicle.
The view within GM is that the startups attracting billions of dollars of investment have a fraction of the capabilities Barra touted back in February and March.
First, she tried to sell investors on the idea GM had transformed from a car manufacturer to a technology leader that could sustain profits even when global auto sales slump. She followed up that pitch with another on a battery system called Ultium that will power EV models for each of the carmaker’s brands starting next year.