Pam Fletcher wants to change the way General Motors Co makes money.
The veteran GM engineer’s Global Innovation team is looking for new enterprises to expand the automaker’s sources of revenue well beyond vehicle sales and is incubating ventures from commercial delivery services to vehicle insurance, to address future markets worth an estimated $1.3 trillion. That doesn’t include flying cars, a market sector that alone could be worth $1.3 trillion, Fletcher told Reuters.
On a recent video chat, Fletcher counted silently before answering how many ventures her team is shepherding. “Just under 20,” she said.
The fact that GM is now incubating its own startups — with its corporate venture arm investing in dozens more — underscores Chief Executive Mary Barra’s sweeping effort to remake the largest U.S. carmaker. The goal is to become a diversified purveyor of mobility services - the automotive equivalent of Apple, with revenue that rolls in monthly or quarterly from software and services long after the initial product is sold.
For legacy automakers such as GM, Volkswagen and others attempting to overhaul and transform their businesses, that task is daunting, according to Evangelos Simoudis, author and adviser on corporate innovation strategy.
“The technologies incorporated in the software-defined vehicle will require areas of expertise that one routinely finds in technology companies rather than in automakers,” he said.
Barra’s push to transform GM’s century-old business model is already having a significant impact - even though the first of a new generation of electric vehicles she has promised is still months from launch.
GM returned $24 billion to shareholders in dividends and stock buybacks between 2014, when Barra took over, and early 2020. But those buybacks were suspended indefinitely when the pandemic hit last spring.
Now, Barra told Reuters, the company has more productive uses for its money: Investing in electric vehicles and expansion of business lines that promise recurring revenue streams.
GM’s new ventures could add tens of billions to the future revenue, Barra said, and push operating profit margins above the current 8% it achieved in 2020, and the 10% it has targeted long term.
“We have very significant growth opportunities and different margin opportunity initiatives to invest in,” she said in a video interview.