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Should GM Split into two Companies?


David

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Detroit Free Press covered the annual GM Analysts call this week and with the second quarter results it showed that GM has lost $800 million in the quarter but over all North American Earnings were breakeven and this was with 8 weeks of shutdown. Over all the Stock beat wall streets estimates and yet still sold off in large numbers during the pandemic closure.

Analysts had plenty of questions for GM with a major question of will GM consider spinning off their technology arm which would include electric vehicles operations into a stand alone company?

The idea of a stand alone GM Tech company is to recognize the advanced tech GM has over other auto companies and to unlock what Analysts see as considerable shareholder value. This new entity would allow access to cheap new capital to keep the old GM going till the new GM would replace it as a cutting edge tech auto company with what is seen as future strong growth.

GM has reinforced it's future of all electric auto's, self driving auto's and what it expects to become a zero emission company with 20 new EV auto's on the market by 2023, the first being out in Q1 of 2021.

The group of Analysts has suggested the new company be called Ultium based on GM's new battery tech.

The CEO responded that GM is evaluating many scenarios for the future of GM. She had nothing further to say other than the board and executive team will consider all options for what is best for driving long-term shareholder value. Quote: "Nothing is off the table."

Analysts have since added notes to their research suggesting that GM could already be considering this since so many start ups are valued more than GM such as Tesla, Nikola, Rivian, etc. The Billions of cheap dollars that could help drive GM long term into the future is hard to ignore.

Some analysts say that to split the company would kill off the baby, meaning the EV side would die after the money was harvested from the stock sale as you only have the Chevrolet Bolt and the new company would have to follow Tesla in going back to the market for more and more money. This is based on what some analysts see as only a US/Canada interest in EVs compared to the rest of the world needing ICE.

That being said it does show a clear line between those Analysts that see Europe and China leading in new tech with a change to EV's versus those Analysts that are more inline with the oil industry and imply that there is little to no interest in EV's.

End result is WHAT WILL GM DO?

I suspect GM will stay the course of using ICE auto's to fund the change to an all EV world. 50 years from now, people will be wondering why it took so long to dump ICE auto's in favor of EV's.

What are your thoughts on this?

https://www.freep.com/story/money/cars/general-motors/2020/08/01/gm-electric-vehicles-mary-barra/5549426002/

 

 

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  • 5 months later...

No, they should not split into 2 companies.  

Tesla is over inflated, maybe they will be able to monetize data collected from their drivers/owners, maybe they will be able to produce self driving cars that generate money for the company like an Uber driver would, but with no driver and the money going to Tesla.  But maybe also the Germans squash them in the EV market.  A lot of maybes but I think Tesla is over valued.  And other car companies should not try to be like Tesla because they aren't.

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