DETROIT — Shares in General Motors Co. reached their highest mark Monday since the automaker emerged from bankruptcy 11 years ago — apparent investor ratification of the company's pledged pivot from gas engines to electric vehicles. GM shares closed Monday at $56.88, and traded at $56.29 midday Tuesday.
A series of high-profile commitments in next-generation electrification, and evidence the legacy automaker can operate successfully through a pandemic-induced slowdown, are building investor confidence in GM's narrative about managing the present and investing in the future.
And GM's pledge to kill gas and diesel engines in its light-duty vehicles by 2035, a signpost on the road to becoming carbon-neutral five years later, amounts to a bold commitment by the management of a century-old automaker that aims to prove it can reckon with the coming electrification of the auto industry from Detroit and Berlin to Beijing and Tokyo.
The recent run-up in GM shares appears to have been sparked by CEO Mary Barra's comments to the virtual CES electronics show in January, gaining momentum after the automaker committed to abandoning internal-combustion engines within just 14 years and pledged to work with the Biden administration to reform emissions rules and bolster EV charging infrastructure.
GM doesn't generally comment on movements of its share price. But on Monday spokesman Jim Cain said: "There's a powerful growth story driven by our EV and AV investments, and it's getting greater visibility."
GM's pledge to exit the gas-engine business followed touts at CES of its new Ultium battery technology, of a new business called Brightdrop that is making electric products for the growing delivery industry, and of a new relationship formed with a semi-truck manufacturer to power new units with GM's hydrogen fuel-cell technology.
It's GM's new electric, autonomous and new technology side of the business — not the sales performance of its full-size, profit-rich pickups and SUVs — that has intrigued investors and sent the stock price soaring. Experts say they don't expect GM to ditch its roots and spin off the more valuable side of the business, especially not after it pledged to strip emissions-emitting metal from its lineup in 14 years.
That news put a symbolic "nail in that coffin" on any spin-off of the EV business potential, says Dan Ives, an auto analyst for Wedbush Securities. For now, the legacy gas and diesel-powered vehicle side of the business is fueling GM's bets on an electrified future.
"You got to give a lot of credit to Mary because communication on this strategy is half the battle," Ives said. "And I think they've done an A-plus job, not going half step. It's almost like talking the talking but walking the walking. And that's what the street wants to see."
As the world grappled with a once-in-a-hundred-years pandemic, GM pushed its EV game plan forward. It accelerated product development, increasing spending on EVs to $27 billion from $20 billion through 2025. It also said that instead of fielding 20 EVs by 2023, it would offer 30 globally by 2025.
GM upped its EV commitments despite being forced to close down for eight weeks earlier in 2020 amid the COVID-19 pandemic and despite financial adjustments to buffer the blow it felt from the pandemic, including halting the cash dividend on its common stock.
GM showed resilience in the pandemic, though, answering a fundamental question that has dogged the automaker since emerging from bankruptcy in 2009 and offering shares a year later: can the company successfully navigate a downturn? During the third quarter, the automaker said it booked profits of $4 billion on strong sales of crossovers, pickups and SUVs. GM reports its earnings for the fourth quarter and full year Wednesday.
The comparatively swift pandemic rebound, coupled with growing evidence its pivot to electrification is for real, gave skeptical investors another reason to believe this was a new GM that could at the same time manage economic adversity and invest for the future.
"For a long, long time there was an overhang on the stock of fear of peak auto for this current economic cycle," Morningstar analyst David Whiston said. "Then when the coronavirus recession happened that fear of when is the recession going to come was abated because it came last year. And then GM showed we could get through it and showed that their break-even point is a lot lower than it was under old GM."
And its new technology, for investors looking to back the next new thing in autos, is believed to show promise. At CES in early January, GM showcased its Ultium battery system. The large-format pouch-style cells in Ultium can be stacked vertically or horizontally inside the battery pack, GM says, allowing designers to optimize battery storage and layout for each vehicle's design.
They can be used in many GM vehicles — from the Chevrolet Corvette to the GMC Hummer EV truck. And vehicles running on Ultium will get an anticipated 450 miles on a charge. The new technology's capabilities, and GM's move to develop a battery cell manufacturing plant in northeast Ohio, are expected to help decrease the cost of production and the overall vehicle.
GM's rising share price eases pressure for GM to consider spinning off the new EV business, Whiston said. He agrees discussion should be dead by now with GM's recent pledge to make all of its light-duty products emission-free by 2035.
"To me, that means the spin-off idea is no longer a discussion because you can't say that and then go spin off the EV company because then you're dooming the stub ... which is the rest of the company," he said.
Exceeding the $50-per-share mark and then rising further suggests GM is getting more respect and gaining more credibility at arguably any time since shares in the new GM opened trading at $33 in November 2010, Whiston said: "They just need to continue showing that they're a different company than they were under the old GM."
There's more work to do. GM currently sells just one electric vehicle in the United States, the Chevrolet Bolt. The automaker is set to reveal a new Bolt and its larger sibling, the Bolt EUV, on Sunday. Later this year, GM will start production of the GMC Hummer EV. Next year, Cadillac's first electric vehicle, the Lyriq, a crossover will hit the market.
"The Bolt was just the beginning. The Hummer and the Lyric is just the beginning, too," Whiston said. "I'm really excited to see what else they unveil because they've unveiled some pretty nice products recently."
