General Motors to Expand Truck Production to Help Fund the Development of New Electric Vehicles
As U.S automaker General Motors prepares to electrify its model lineup over the next few years, the company plans to boost capital spending over the next three years to speed development of electric vehicles, CEO Mary Barra said on Thursday during the company's Q3 earnings call.
GM announced better than expected Q3 profits on the strong sales of pickup trucks and sport utility vehicles in North America. Selling more gas-guzzling trucks and SUVs will help support GM's push to develop new electric vehicles.
Acting Chief Financial Officer John Stapleton said GM will boost annual capital spending through at least 2023 to above the $7 billion rate previously outlined to fund its accelerated EV plans.
"We're going to go hard at EVs...and the North America performance allows us to do that," Barra told analysts on a call.
GM said it would generate cash flow of $7 billion to $9 billion during the second half of the year, as sales in its two largest markets recovered more quickly than anticipated during the global coronavirus pandemic.
Barra told reporters in an earlier call that third-quarter results were driven by "the faster and stronger-than-expected industry recovery in the U.S. and China."
As part of this effort, the company announced on Thursday that its investing C$1 billion to overhaul an idle plant in Oshawa, Ontario, to expand pickup production, under a tentative agreement with its Canadian union.
The General Motors Oshawa facility was once one of the world's largest auto assembly plants. However GM announced it was closing the plant in Nov 2018 as part of a company wide restructuring plan to cut costs and focus on more profitable vehicle segments.
At the time, the plant produced the Chevy Impala sedan, as well as the final assembly of some Chevy Silverado and GMC Sierra pickup models. Ahead of the plant's closure, GM shifted production of the Impala to its Detroit-Hamtramck assembly plant in Michigan in 2019.
The Detroit-Hamtramck factory is now being retooled to become GM's premier electric vehicle plant, where the automaker will build many of its future EVs. The automaker is investing $2.2 billion to convert the factory to build electric vehicles. The plant will be the launchpad for the automaker's future EV strategy, GM said.
The Detroit-Hamtramck facility is also getting a new name that aligns with GM's corporate mission of zero crashes, zero emissions and zero congestion and will now be called "Factory ZERO."
Barra also said on Thursday that GM was in talks with automakers about partnerships to develop more vehicles using GM's battery technology. GM also said its open to the idea of licensing its battery cells to other companies, including for energy storage systems like the ones produced by rival Tesla.
GM unveiled its new Utium Battery technology in March. The batteries will power a variety of electric models. The Ultium batteries range from 50 to 200 kWh, which could enable an estimated EV range up to 400 miles or more on a full charge with 0 to 60 mph acceleration as low as 3 seconds.
Also in March, GM announced it's making a $20 billion investment by 2025 in electrification, including EV architecture development, battery cell development and investments in EV charging infrastructure. Now we know that some of this investment will be funded by the profits of GM's full-size trucks and SUVs.
GM reported net income of $4 billion, or $2.78 a share in the third quarter, compared with $2.35 billion, or $1.60 a share, a year earlier.
The company's third-quarter EBIT-adjusted margin in North America jumped 6.5 points to 14.9% in the quarter, reflecting the strength of its high-margin pickups and SUVs. Excluding one-time items, GM earned $2.83 a share, above the $1.38 a share analysts had expected.
GM has committed to introducing up to 20 new electric vehicles by 2023.
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