GM drops major electrification interim-target

General Motors is further scaling back its electric ambitions. The interim goal of producing 400,000 electric vehicles in North America, which had already been postponed by half a year to mid-2024, is being abandoned altogether. The background has only marginally to do with electric mobility.

The original goal of producing 400,000 electric cars in North America by the end of 2023 was announced by GM CEO Mary Barra in February 2022. In October of the same year, however, the achievement of this goal was postponed until mid-2024 because battery production could not be ramped up as quickly as planned. GM builds the battery cells for its Ultium platform through a joint venture with LG Energy Solution called Ultium Cells.

Finance chief Paul Jacobson, in announcing the latest quarterly results, said GM wanted to focus on “producing one million electric vehicles by the end of 2025 while meeting our margin targets”. Group CEO Mary Barra said the company’s future EV strategy is to match production to demand to avoid deep discounting. This suggests, by implication, that top management believes the 400,000 target can only be achieved in eight months with heavy discounting.

GM is also abandoning an earlier plan to spend five billion US dollars on several new entry-level electric cars. In addition, the decision to postpone retooling the Orion Township plant to build electric pickup trucks will save US$1.5 billion in capital investment in 2024, it said. General Motors plans to save billions more with the redesign of the Chevrolet Bolt, which will be offered with lower-cost LFP batteries.

However, there is another important factor in the decision on eMobility investments: The United Auto Workers (UAW) union strike has cost GM about $800 million so far. Each additional week could add $200 million to that total. In the near future, the UAW apparently also wants to strike the profitable SUV plants.

For this reason, General Motors has also withdrawn its profit forecast for 2023. Since the conflict with the UAW is squeezing profits, the company will adjust its investments, Barra told investors – this also applies to eMobility investments.

Even if an agreement is reached in the collective bargaining dispute, the company will probably have to cut back on investments. A wage increase of 23 per cent over 4.5 years is on the table. As Barra indicated to analysts, a factory worker in the US could earn up to $84,000 a year. “We will not agree to any contract that is not accountable to our employees and our shareholders,” she said – and already afterwards that this will also force the company to look for further cost savings.

In further news, General Motors and Honda are ending their collaboration, which the two companies had signed last year to develop a range of affordable electric cars due to hit the North American market from 2027. “GM and Honda will search for a solution separately. This project itself has been canceled,” Honda CEO Toshihiro Mibe said. He cited cost and range challenges as reasons for cancelling the collaborative plan with GM.

insideevs.com, reuters.com, bnnbloomberg.com (Honda)