The EconomistJanuary 27th 2018 53For daily coverage of business, visit
Economist.com/business-finance1G
ENERAL MOTORS reveals barn-sized
truck at Detroit motor show. What else
is new, you might now ask. But the launch
on January 20th of the Chevrolet Silve-
rado, a pickup that will go on sale at the
end of the year, highlights a surprising tur-
naround for America’s largest carmaker.
The good news isnot justthe Silve-
rado’s outsized margins, which are impor-
tant for a firm that relies heavily on trucks—
after Mary Barra, GM’s boss, gave an ebul-
lient performance at an investors’
conference that coincided with the motor
show, the release ofGM’s quarterly results
on February 6th are likely to include record
profits. It is also that the money thrown off
by vehicles such as the Silverado will help
the firm navigate the tricky terrain that lies
ahead of all the world’s big carmakers.
One task is to ensure that their current
business of selling vehicles with internal-
combustion engines stays healthy. At the
same time, theymust prepare for a future
of electric and autonomous cars (EVsand
AVs), which threaten to up-end business
models that have endured for a century.
Not so long ago, GMand its peers
seemed to be on a path to extinction. Tech-
nology firms such asAlphabet, Uber and
otherpushy newcomers had started a race
to develop software that would control
driverless cars and to offer ride-hailing and
ride-sharing services that are expected to
thrive at the expense of car ownership. Ingenerated by the Silverado and a range of
new pickups will help pay for big invest-
ments in EVsand AVs. It does not hurt GM’s
case that Ford, its main rival in Detroit, is
struggling (see chart). Jim Hackett, a new
boss brought in because of his technology
know-how, oversaw a lacklustre relaunch
in October that was sketchy on Ford’s vi-
sion for the future of transport services. On
January 24th the firm reported disappoint-
ing quarterly results, dashing hopes for
quick improvement.
In contrast, GMis already well on the
way to reshaping itself. For starters, it has
diverted resources to where it is a market
leader. It has got rid of unprofitable busi-
nesses around the world, a process that
culminated in a decision last March to sell
Opel, its loss-making European carmaker,
to France’sPSA. At the same time, GMhas
invested heavily in new pickups, such as
the Silverado.
Cadillac, GM’s premium brand, may
look like an exception to this happy rule.
Sales ofjust 350,000 cars in 2017 puts it far
behind its German rivals. Yet sales have
doubled since 2010 and it has grown faster
than any of them in recent years. Although
the firm does not disclose the information,
analysts at Morgan Stanley reckon that
Cadillac could be worth $13bn, around
20% ofGM’s current value. Johan de Nyss-
chen, Cadillac’s boss, admits he runs a
“challenger brand”, but sniffs an opportu-
nity. The upheaval created as carmakers
grapple with new business models means
that “everyone has to start again”.
The most important reason forGM’s
comeback, though, is its success in con-
vincing investors that it is a leader not just
among established carmakers, but among
tech firms, too. It has rapidly accelerated
from the position of an also-ran in the field
of autonomous vehicles to apparentApril 2017 GM’s market value was over-
hauled by Tesla’s, a firm that makes just
tens of thousands of flashyEVs a year, com-
pared with the millions of vehicles rolling
offGM’s production lines.
Sentiment has changed dramatically.
Since April GM’s share price has surged by
28%, giving the firm back the lead. By con-
trast, Tesla has struggled with the nuts-and-
bolts of carmaking. Production-line pro-
blems have hampered a big roll out of its
mass-market Model 3. Analysts at Barclays,
a bank, say thatGMis more “evolving
mammal than...dyingdinosaur”.
One reason for the reversal of fortunes
is thatGM has convinced investors that its
current business is in fine fettle. The cashThe car industryGeneral Uber-Motors
DETROIT
The carmaker takes an unexpected lead in the race to develop autonomous vehiclesBusiness
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57 Mandatory arbitration in America
58 Schumpeter: GE’s foggy financesSelf-drivingSource: Thomson ReutersShare prices, January 1st 2017=100J FMAM J J A S O ND
2017J
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