The iconic American car company GM is in the midst of a dramatic transformation. We really feel General Motors is moved from being an automaker to really a platform innovator. The shift comes with ambitious goals to sell a million electric vehicles in the United States and China by the middle of this decade and to phase out production of all gas powered cars and trucks by With e V penetration still in single digits, it's a bold bet on
the future of mobility. The shift to electrification and ultimately autonomous vehicles is probably the most transformative thing that's happened in the auto industry, maybe since Henry Ford's assembly line. It's monumental. We've got an industry that's it's really stayed about the same for about fifty years. The thing that's different now if you've got a confluence of what we call case connected, autonomous, shared, and electric that are really
new things in a quantum way to the industry. GM plans to put thirty five billion dollars behind it's push into electric and autonomous vehicles. But the year that's where CFO Paul Jacobson comes in. I see the role of finances really being two fold. Number one is making sure that we're supplying the information on how we think those decisions in that transformation we're going to project out financially.
And then number two is make sure that we get the right resources in the right place at the right time, which can be challenging with so many different directions and so many opportunities ahead of us. He's been a great partner with what we're doing. This is not a substitution business that we're in in the short term and long term, or rather an additive business. It's a company that's focused
on tech. It's a focused company that's focused on revenue diversification, and with that there's a lot of margin expansion up the head. You've got to be optimistic about the future and making sure that we're allocating capital into the right places to fund the transformation. For ninety consecutive years, General Motors sold more vehicles in the United States than any other manufacturer. That streak ended in one when Japanese rival
Toyota took the crown. Jim still recorded record profits in Paul Jacobson's first full year as CFO, and that's a good financial foundation for the task ahead. If you have a dashboard that you've ad a CFO and you're looking at the e V transformation right now? What's green, what's yellow? And are there any reds on that dashboard? Well, I think we live in a world that seems to be read for everybody right now, and that's been one of
the one of the challenges. I mean, since I arrived here a year and a half ago, it's it's really been about the semiconductor challenges, the map for weekend, coomic challenges, supply chain, etcetera. But all of that is just part of transformation, right Not everything goes according to plan, and you've just got to make sure that you set your sights on the horizon and make sure that we continue to track to it. I think the team is doing
an extraordinary job. There's a lot of uncertainty out there, and that's one of the things we have to manage. We're blessed with a tremendous balance sheet. The team has done an amazing job funding the pension, paying down debt, etcetera, which puts us in a position where I don't actually have an aversion to using the balance sheet to continue
on our path. If we need to temporarily chip shortages and supply chain disruptions have driven global car sales volumes down from their peak, but it may have long term benefits, forcing companies like GM to tear down silos and bring
teams together to find solutions. We actually, as a management team, all the senior leaders of the company get together once a week and we've been doing that for a year and a half to talk about here's what the forecast is, here's what we're going to do to mitigate it, and here's how we're going to respond. And it's been one of the most amazing examples of collaboration I've ever seen
in my career. No longer do you have to look to uh, different functional leads or vice presidents that would lead product development or design or sales or marketing or whatever that is. You know, it's really it's really everybody's together. Our staff meetings are together. It's very very very much one team. And that's changed everything. We've already talked about how we are simplifying the chip structure, can going to
three chip families. That's going to put us in a position where we're not as beholden to hundreds and hundreds of chips depending on which vehicle where any one of them might hinder production. So lots of things across the horizons that we're doing to make sure that this becomes much much easier to navigate. In the future, the transition to electric vehicles will bring a fresh set of challenges. Global demand from metals used in batteries is already putting
pressure on supply chains and driving costs higher. Well right now, commodities prices for those commodities that are like lithium, like cobalt that are used in uh e V batteries have sword. Those materials also not are just expensive, they're generally in places that are have geopolitical issues. How do you address the row material issues between things like lifing um and
things like nickel. There's gonna be a shortage of how do you make sure you have that at a price you can affords you don't have a rapid spike up in the price. We're really looking at a multifascined approach, anything from traditional supply chain procurement type functions all the way to joint ventures or longer term contracts. It's not
about capturing the best price today. It's about capturing that consistency of the business model that we can plan around and anticipate going forward to make it easier to UH to fund this transformation. But while Jacobson takes steps to head off headaches, he's also aware that GM's electric future
holds huge opportunities. I think the most exciting thing about the ev transformation is it's fundamentally going to change the way we make money at General Motors because if you think about it, the overwhelming majority of our profits come from the time that we sell a vehicle to a dealer right and um, and that vehicle enjoys a lot of revenue for very different companies over the life of
of it on the road. What the electric vehicle and what connected vehicles are going to do for us and is increase the revenue opportunities for us over the life of that vehicle second owner, third owner, fourth owner, because we're gonna be able to offer ways through over the air, updates to customize its subscriptions, various services, insurance packages, lots of different ways that we can interact with the customer
in ways that historically we haven't been able to. How much of your top line total going to come from selling vehicles as opposed to the services that you've just
been describing. So if you go back to our investor day last year, we talked about doubling our revenues while expanding our margins by the doubling of the revenues are coming both from growth and auto sales because there's a big overlap and we're getting new customers every day on electric vehicles, the ones that we're taking reservations and orders for right now. So what we talked about is twenty billion dollars a year of revenue in around these services
that we can provide going forward. So it's a massive growth off of what we've currently experienced with on Star historically and really excited about what that's going to bring. GM also expects significant growth to come from Cruise. It owns eight of this startup that's developing autonomous vehicles. Despite considerable investment in advanced technology, the company has resisted the temptation to spin off these units. So far. Is there a world can you envision, as the chief financial officer?
A world in which you say, you know what, there's an old business is a new business we should trade separately. Well, there's a lot of commonalities between the businesses. Right, So about seventy of the vehicles are the same, right. They both need breaks, they need windows, they need features inside the vehicle seats, et cetera. So everything that we can do to make the ICE vehicles more efficient and more uh appealing to the customer is only going to help
us with our e V transformation. And that's why that integrated approach is so critically important to fund that journey for us going forward. Investors have indicated that they're along for the journey as well. Since July, shares of North American automakers have significantly outperformed the SMP five hundred, even after broader economic and geopolitical turmoil dragged them down from
their peak. The last two years. They have doubled their commitment to what they're going to spend in electrification across the industry, and a lot of that was rewarded by by Wall Street. Um the companies will now need to deliver on be prepared to deliver on that, you know, post supply chain strained world. Part of your job is to make sure that the Wall Street is getting the message that you want them to have about General Motors.
Where are you in that right now? Where is General Motors in the perception on Wall Street of the extent to which it really is a tech company on the forefront. You know, I think the challenge with what we did is we put out ten year goals. That's something that was kind of unheard of in the industry as well as as here at GM. And now what we've got to do the next phases make sure that we're giving a roadmap to investors out there to say, here's what you can expect to see in the next two to
three years. And as you see that, you should increase your confidence that we're on the journey to get where we need to be in UM. The Wall Street perception of this change is almost UM, you know, weekly or monthly, which is fine. Our goal is nothing more than execution at this point. As you produce and execute, the confidence will grow. UM. Nothing is going to take us off track from that execution. We know we have the right strategy, so that will come. This is about the long term.
We're not running the company for the stock price today. We're running the company for value creation over the long term, and I feel like we've got a really really good hand to play. General Motors CEO Mary Barra and President Mark Royce are not only auto industry veterans, their second generation GM employees, following fathers who both worked at the company. Paul Jacobsen's new to the car business. He launched his professional career at Delta Airlines, including seven years as CFO,
before joining GM in December. I started with Delta back in a financial analysts on a business school and UM just had an incredibly left career there to be able to see and do so much and got to be treasurer through the bankruptcy, which as a corporate finance person, bankruptcy is the best experience you never hoped to repeat UM. But it gave me a really good platform and how to make deals and how to think strategically across the board. Mark Royce appreciates what Jacobson brings to the mix, and
there's some the airlines or the auto business. UM focusing on the customer and being best at UM satisfying our customers, whether to be designed, whether it be the actual vehicle and the entry itself, the experience in buying, the experience of the dealer, whatever that is. UM. You know, committing resources those places to grow that top line is what it's all about. And he's proven to be a perfect
partner for that that delta. We're a company that is focused on customer service and I had, you know, the opportunity to learn from Richard Anderson and at Bastion on the finer arts of leadership and transformation through a company that went through a lot. Uh here, it is very, very different. Working for a manufacturing company is amazing. I tell my wife all the time, it's it's amazing to
be around people who build things. GM's transition to an all electric future is built on a proprietary battery pack called Ultium. It's building four factories to produce the batteries while it retools for existing assembly plants to ramp up e V production. The objective to create a scalable platform that eventually drives down losts. Paul Jacobson took me to
the laboratory where this technology is taking shape. So we're in the heart of one of our battery testing labs where we test all aspects of the battery resiliency, extreme temperatures, shaking, vibration, etcetera. How much you're investing in R and D for the battery at this point. So we are investing a ton into battery technology, but it's not all just us. So around us we've got the testing facilities. We're also building a new manufacturing cell manufacturing test facility where we're gonna
test different ways of manufacturing cells. Because it's one thing to look at chemistry and say this is superior, but can you replicate it millions and millions of times across the entire portfolio. So we're in execution mode. We're producing cells uh now at Lordstown and we'll be rolling those out soon. We're already have these cells and Humor EV
and the Cadillac lyric as well. But as far as technology and chemistry goes, I think we're just kind of the beginning of where where the might go over the long term. Do we go to solid state or or what. So we're looking really at a portfolio approach to make
sure we capture the highest probability of being successful. So as you go to scale and you have those millions of millions of time the vehicle comes off the line, whatever that is in the future, right ten years down the road, what percentage of the cost of the vehicle will be just tied up in a battery like that, Well, the battery and the motor systems are sort of the equivalent of the engine and the transmission today it is it is costing more obviously for for those systems going forward,
but we think that technology is going to come down over time as well, which is why we've said we think we can get an electric vehicle to parody profit parody, if you will, by the end of the decade. With their ICE counterparts, evs may also be more profitable on
the labor side, at least in the manufacturing phase. If you just looked at the power train of the vehicle parts that are different in an ice versus above, there's forty percent less labor hours in the in the assembly of power train, so fundamentally there's less labor needed, but
certain engineering skills are likely to command a premium. We're seeing auto companies on the engineering side UH out in the marketplace competing for engineers that they're competing with video game companies, UM, Silicon Valley companies, a different kind of engineering software engineers, Are you really needed, and so there's this big competition for that kind of UH employee and and attracting them to the auto industry, which is considered,
you know, an old rust belt industry. We've been hiring UM really aggressively over the last couple of years, UH in software and chemistry and UH and just broad engineering across the board. And what we found is people are attracted to come the general motors. I think more and more today employees are focused on I want to work for a company that shares my values. And when you look at what GM is doing in our pivot to electric vehicles, we find a lot of people want to
be a part of that. US car buyers are also getting with the program. Sales of fully electric vehicles group by from one, with Tesla accounting for three of the five top selling models. Yet hurdles remain, and the issue of charging might be the biggest. If you think of the reasons why people avoid an electric vehicle, now, four of the top five reasons are related to charge. US charging infrastructure is steadily improving, but consumers still worry about
being stranded without power on road trips. Paul Jacobson assured me that when he takes the new Hummer e V on long journeys, it's not just fun to drive, it's equipped to go the distance. I hear so much about road trip anxiety that I wanted to experience it self. My family likes to drive a lot, so I brought my daughter home from college in this and uh and it was great. I mean, the computer system is all intuitive.
It tells you how to keep track of the battery, It tells you where the charging stations are, tells you how much power you'll have when you get to the charging station. So it really puts a lot of your anxieties. But as far as driving it, it is it's a treat. So where are you on the charging stations? I know General Owners has made an investment in one company. How are we doing in this country generat and getting charging
stations in so? I think this is this is an area where obviously we can we can continue to improve as a country in a society, we're doing our best. We've committed almost a billion dollars to e V charging, so we've we've taken that and looked at home charging solutions,
local community solutions, and road trip charging solutions. What you know, with my daughter, what we would end up doing is probably stopping grabbing a bite to eat, plugging it into a charger, usually a high speed charger, to get as much charge as we can, and being there for twenty to thirty minutes um, get us a lot of range and by the time we've used that range, retired, ready
to stop again, etcetera. So it was it was a really good experience for me, and it's taught me number one, you know what, what are the concerns of the consumer that are ultimately going to drive our vehicles? And then number two, where do we need to focus on addressing
some of those anxious points for people. Despite COVID lockdowns and supply chain breakdowns, General Motors delivered nearly three million vehicles in China, and since China still tops the global market for electric vehicles, GM expects its foothold to be helpful as it introduces new EV models. China's role, frankly is is a big role in big volume for US and all of our brands. And as the landscape changes really rapidly to evs in China, you know we're ready.
We've got great j V partners we do on the brands in China, and so we've got you know, good brand representation in the design of the vehicle. And then also we've got the flexibility and something like our ultium architecture for batteries and cells that is flexible enough to handle the requirements of a prismatic cell like c at L makes in China. Is it a challenge because China has shown a predilection to sort of intervene in the
commercial markets. They favor some companies over other companies. Is that a risk potentially for GM because you have some Chinese native companies I can put that way like a B y D. We believe we're in a good position. At the end of the day. The world is competitive, right and and the world of electric vehicles is only going to get more competitive. It doesn't matter where you're
operating in. So we need to focus on the quality and the customer offerings that we have UM and regardless of which market we might be going to, there's one thing everyone agrees on when it comes to selling vehicles in China. The future is extremely difficult to project. China has been interesting because you know, they had they had a goal for that's basically already achieved this year in
terms of electric penetration. They share did incentives from being a consumer based incentive to being a stick on the industry with trading and such UM that's greatly favored the startups and it's been harder for the traditional automakers, both domestic and the Western automakers are foreign automakers, they're um in terms of the subsidy and the stick of carrot
regime on electric vehicles. So it very much depends quite a bit on the regulatory environment going forward in China as to what China looks like in Paul Jacobson tends to view the future with a healthy blend of optimism and pragmatism. I asked him to look ahead at some big picture issues. What over the next ten years excites
you the most about opportunities for general motors. I think the most exciting thing over the next ten years is we don't know about all the opportunities to generate revenue and serve the customers. So I'm really excited about that. Okay, one of the next ten years makes you most nervous. I'm not sure if it keeps you up at night, but heads in that direction. Yeah. I think the thing that keeps me up at night over the next ten years is just thinking about the macro landscape. The world
is just changing so rapidly. We have a lot of competitors coming at us UH, and you know we're going to meet those challenges. But we don't know what the world's gonna throw at us, and we've got to make sure that we are very nimble. We've talked a lot about the changes coming for general motors. As you look at your job as CFO, how will that job have
to change because of those changes? In the move to evis Well, I think as as you think about any CFO um not just the move to e VS, but just to move to technology and the changing consider we've got to be nimble, we've got to be quick, and we've got to make sure that we're operating in as close to real time as we can. We don't have time to look back over what happened last year or last quarter. It's what happened last week, what happened yesterday? How is the business performing? And how do we get
real time information to the business leaders. Over the time that you've been a CFO, what has changed the most for you? What skills have you had to develop? Well? I think you know as as as all CFOs experience you get, you get much much more ingrained into the
strategic side of the business. So today's CFO has to be much much more than a bookkeeper has to be a strategic business partner at the table, helping to see around corners and helping to prepare the organization for what could happen if somebody took the job of CFO as some company today, what would you advise them? Um? Number one is listen right? I think too often CFOs are are there and their viewed as the people are there
to say no. Right. I like to challenge our team to how can we find a creative way to say yes? How can we find solutions and ways to make things more efficient not just forego them, uh in lieu of something else. Um. That can sometimes be hard for us. We're all naturally skeptics. That's what tends to attract people into the finance business. So how are you skeptical? With a good vent towards it to helping people accomplish their
goal finding creative ways to say yes. If Paul Jacobson and his team can do that, GM will be well on the way to delivering on its grand vision of transformation. I'm David Weston. This is Bloomberg