Senior executives at General Motors (NYSE:GM) have talked a lot recently about projects intended to move the company past the traditional model of an individually owned car powered by gasoline.
CEO Mary Barra reiterated some of that during Wednesday's earnings conference call. GM is making a lot of money on traditional pickups and SUVs right now, but it's investing a good deal of that money in future-oriented research and development projects.
One big one: a new electric car.
A joint effort to develop an innovative new model
GM said this week that it has developed a wide-ranging partnership with Korean giant LG (NASDAQOTH:LGEAF) that is key to the upcoming Chevrolet Bolt EV, a battery-electric car with an expected 200 miles of range and a price near $30,000.
GM said that it's an "unprecedented supplier relationship" that "set aside traditional vehicle development." The Bolt turns out to be a joint project: LG is supplying many of the components of the car's battery-electric drivetrain, including the motor.
Traditionally, automakers have kept tight control over the engineering and production of their (gasoline) engines. But while GM designed the Bolt's electric motor, it will be built and supplied by LG -- as will the car's instrument cluster, infotainment system, and the key components that power the car. Engineers from both companies worked closely together to create the components.
We've known for a while that LG will supply the batteries for the Bolt, which is expected to go into production in Michigan late next year. LG's LG Chem subsidiary was the sole supplier of batteries for the original Chevy Volt, the pioneering plug-in hybrid that GM launched back in 2010.
But now we know that the partnership runs much deeper than that. It's a model for how GM -- and other automakers -- might approach high-tech vehicle development in the future.
Is GM sending a message to Sergio?
GM chose an interesting moment to make the details of its partnership with LG public. The CEO of rival Fiat Chrysler Automobiles (NYSE:FCAU), Sergio Marchionne, has talked bluntly of the need for consolidation and technology-sharing in the auto industry. He has suggested more than once that a merger of FCA with GM would make a lot of sense, and he has even hinted that FCA might find a way to force the issue.
It's an interesting moment because FCA has been occupied with the initial public offering of subsidiary Ferrari. That was completed on Wednesday. Will Marchionne now turn his attention back to GM?
Marchionne's overtures haven't been warmly received. Barra has flatly rejected the idea of a merger with FCA. She and other GM executives say that General Motors already has the scale to compete globally. In their view, a merger of FCA wouldn't offer GM any benefits to offset the cost and headache of consolidating the two rivals.
Choosing partnerships rather than mergers
GM's scale won't preclude it working together with other companies when it makes sense to do so. GM product chief Mark Reuss said recently that the company was open to partnerships with rivals and suppliers when there was a good working relationship and both sides had something to contribute.
Reuss cited a deep partnership with Mobileye (NASDAQOTH:MBBYF), which has developed advanced sensor technology that will be helpful to self-driving cars. GM was Mobileye's first customer and has a deep relationship with the small technology firm. Reuss also mentioned an ongoing partnership with Honda (NYSE:HMC) and alluded to several others. LG is clearly one, but there are certain to be more.
Like the partnership with LG, that might turn out to be a more effective and realistic model for the industry than Marchionne's hoped-for merger.