In the face of inflation and rising commodity costs General Motors is lining up strategic partnerships with suppliers to keep its electric vehicle launches on schedule.
GM CFO Paul Jacobson said the automaker will continue to form partnerships or invest in raw material suppliers to ensure GM has the parts it needs to hit a production target of 400,000 EVs in North America by the end of next year.
“Everything is on the table when it comes to the way we have to be thinking about some of these commodities that might be in tighter supply in the future,” Jacobson said Wednesday during the Deutsche Bank Global Auto Industry Conference webcast.
That means GM is willing to invest money and equity in suppliers, partner with them or finance some startups, he said. Jacobson did not specify which commodities might be in short supply, but GM has lined up deals for the supply of cobalt and lithium — which are key to EV battery production — and, most recently, wind energy.
“We’re thinking really creatively because what we can’t do is limit ourselves to the way business has always been done with some of these trends in the future,” Jacobson said.
Prepare for the worst
The trends he is referring to are various supply chain issues in recent months as well as inflation.
GM, like all automakers, has struggled to produce enough vehicles to meet demand since early last year when a global shortage of semiconductor chips crippled new-vehicle production across the industry.
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Jacobson said that as of mid-June GM is “several hundred thousand” vehicles short of what it traditionally would have held in inventory due to the chip shortage and other supply issues. But supply is improving and he stands by GM’s projection that it will build 25% to 30% more new cars this year compared with last year.
Jacobson regularly checks GM metrics to watch for impacts on consumer demand for GM vehicles from inflation. So far, he said, demand remains strong and prices are holding high.
He also watches rising commodity costs to keep GM well supplied and able to mitigate any shortages beyond chips that might impact EV production.
“We have to make sure we prepare for a world where maybe inflation persists a little longer,” Jacobson said. “That’s our job as a finance team. We just have to make sure we’re very nimble and very practical in how we think of it.”
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More deals to come
GM is making a big bet on EVs where it can’t afford a mistake in a launch. The automaker is investing $35 billion through 2025 in EV and autonomous driving technology. It will launch 30 new EVs by then.
To make sure all that can happen, GM has made strategic investments in key raw material suppliers and will do more, Jacobson said.
In March, GM partnered with lithium metal battery developer SolidEnergy Systems, which is based in Singapore. As part of its joint venture with SolidEnergy, GM will build a manufacturing prototyping line in Woburn, Massachusetts, for a high-capacity, pre-production EV battery by 2023.
In April, GM and Glencore entered into a multiyear sourcing agreement. Glencore, which is headquartered in Baar, Switzerland, will supply GM with cobalt from its Murrin Murrin operation in Australia. Cobalt is a metal used in the production of EV batteries. It gives the batteries energy, density and longevity.
“When you look at the strides we’ve made with lithium and other raw materials, I think we’re in a really, really good position” to build 400,000 EVs by 2023, Jacobson said.
Wind Catching
Earlier on Wednesday, GM announced that its investment arm, GM Ventures, has invested $10 million in Wind Catching Systems, a Norway-based developer of floating, offshore wind energy production.
GM will support the design, engineering and supply chain formation that will help Wind Catching Systems develop its technology.
The idea is to enable offshore wind operators and developers to produce electricity at a cost that competes with other energy sources. GM said the technology will increase efficiency significantly in comparison to conventional floating offshore wind farms.
“As GM continues to move towards an all-electric future, it’s critical that we simultaneously drive the transition of the grid to low-carbon energy sources,” says Kristen Siemen, GM’s chief sustainability officer.
Contact Jamie L. LaReau at 313-222-2149 or jlareau@freepress.com. Follow her on Twitter @jlareauan. Read more on General Motors and sign up for our autos newsletter. Become a subscriber.