3 min read.Updated: 20 Oct 2021, 06:12 PM ISTNINA TRENTMANN, The Wall Street Journal
The car manufacturer earlier this month presented long-term targets that go beyond its usual annual and five-year plans
General Motors Co.’s finance chief is working to build out the company’s forecasting and planning capabilities to help the car maker achieve its long-term goals and better explain its business transformation to investors.
The Detroit-based company earlier this month presented ambitions for 2030 that go beyond its usual annual and five-year plans, which are typical for the automotive industry. GM in recent quarters has been trying to showcase to investors its transition into a technology company that builds cars but also offers other things like car insurance and subscription services, adding revenue streams to its business.
“We’re no longer just a company whose main…or only profit driver is the sale of a wholesale vehicle," Chief Financial Officer Paul Jacobson said this week.
The company during its investor event Oct. 6 said it is aiming for operating margins of 12% to 14% by 2030, up from 7.9% last year. The company also said it expects annual revenue to double to $280 billion, up from a five-year average of about $140 billion. GM wants to achieve these goals with the help of new battery-driven electric vehicles, auto-related services and other, adjacent businesses.
“We felt like it was prudent to look at the business on a 10-year trajectory," Mr. Jacobson said this week. “Without that, you really don’t tell the full story of where we’re going from today to the future," he said.
Historically, the company’s business planning was focused on its car business and driven by the cyclical nature of customer demand, commodity prices and regulation, alongside other factors, it said.
GM still uses shorter time frames as reference points, for example when stating that it plans to launch 30 plug-in vehicle models globally by 2025. By 2030, the company wants electric vehicles to generate up to 50% of its sales and start winding down its business with internal combustion engines, Mr. Jacobson said. The transition, which is expected to cost billions, is supposed to be financed with internally generated funds, he said. GM has said it intends to spend $35 billion on electric and autonomous technology through 2025.
Mr. Jacobson, who joined GM last December after more than 15 years at Delta Air Lines Inc.—including eight as CFO—is assessing new ways to measure the company’s performance. “We are thinking about the business, both in terms of what we track, and also how we will report," Mr. Jacobson said.
The goal is to build credibility among investors, Mr. Jacobson said, adding that they would receive a “reporting package" illustrating the company’s progress against its goals.
Investors have rewarded GM’s efforts in recent months, driving up its share price by about 40% since January. But, its market capitalization—at $82.59 billion—remains significantly lower than that of electric rival Tesla Inc., whose market capitalization stands at $861.42 billion. GM’s shares closed at $56.85 on Tuesday, largely unchanged from Monday’s close.
Mr. Jacobson said he intends to make greater use of data analytics, artificial intelligence, predictive forecasting and software bots to automate processes and journal entries in the finance function. “A lot of the analytics, a lot of the automation of processes will free up time for our individual finance team to be more strategic and more forward looking," he said.
The company, which has more than 4,000 people working in finance roles around the world, plans to train its employees in using these tools.
“I don’t see any material changes in the finance staff, or head count, as a result of this, but…the work that we’ll be doing in the future will be different than what it is today," he said.
Having long-range targets could result in disappointments due to uncertainty around whether consumers will buy electric vehicles as well as cyclical risks, said David Whiston, an equity analyst at Morningstar Inc.’s research division. “All forecasting is very difficult. There is a lot that can happen between now and then, and a lot of it isn’t even in GM’s control," Mr. Whiston said.
Missing its target could expose GM’s stock to volatility, said Bill Selesky, a senior analyst at Argus Research Co. “The targets they put out there were very aggressive and long ranging. This is a very big step for them," Mr. Selesky said.
This story has been published from a wire agency feed without modifications to the text
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