GM changes the money making policy to target $1.3 trillion markets

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The carmaker giant General Motors announced changes in its strategic priorities that will allow the company to explore new possibilities not related to the production of vehicles, Reuters reported. GM is planning new 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, veteran engineer Pam Fletcher told Reuters.

GM returned $24 billion to shareholders in dividends and stock buybacks between 2014 and early 2020. But those buybacks were suspended indefinitely when the pandemic hit last spring. Now Chief Executive Mary 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.

Barra’s shift from stock buybacks to investing in recurring revenue services, coupled with a drive to make GM an all-EV company by 2035, has achieved in one year what a decade of cost cuts and cash returns to shareholders could not.

A new venture that combines several aspects of GM’s approach is BrightDrop, a unit that will provide electric vans and related hardware to commercial delivery firms, starting with FedEx, along with support services from fleet management to predictive analytics. GM rival Ford Motor is introducing its own electric delivery van and expanding support services to defend its leading share of the US commercial vehicle market of more than 40%.

Insurance, a new arena for GM, is led by outside hire Andrew Rose, who previously worked for auto insurance powers Progressive and Britain’s Admiral Group. Rose says GM dealers could offer policies to owners when they buy or lease a vehicle. OnStar could offer discounts to better drivers, as well as quicker claims service after an accident, and eventually could offer home insurance as part of the package.

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