Two recent moves by General Motors' top management signal a new strategy for accelerating the acquisition and development of new technology.
In early June GM announced the formation of a $100 million venture capital subsidiary for discovering and developing technologies to be used in the mobility industry. General Motors Ventures LLC will be headed by Jon Lauckner, the former Vice President of Global Product Planning and the engineer credited with the original Volt extended-range EV concept. Lauckner will report to Vice Chairman Stephen Girsky.
Formation of the GM Ventures group coincides with a broad realignment of the automaker’s product development ranks involving dozens of engineering managers. The shakeup included creation of a new position, Vice President of Global Strategic Alliances, to which Dan Hancock was appointed.
Hancock had been Vice President of Global Powertrain Engineering since 2005. In his new role he will focus on joint ventures, reporting to Tom Stephens, Vice Chairman of Global Product Operations who also oversees engineering, design, and purchasing. Hancock and Stephens are longtime SAE International members.
Venture capital (VC) arms are an alien concept to most automakers but are common at companies such as Intel and AT&T, the former employer of GM CEO Ed Whitaker. Their potential benefit to large organizations also is quite familiar to Girsky, the ex-Wall-Streeter who is GM’s finance vice chairman.
One of the latest VC startups in the tech sector, Google Ventures, was launched in 2009. Google plans to spend up to $100 million annually and invest in 10 companies during its first year of operation.
"We are constantly looking for ways to deliver the best technology for our customers," Girsky said in a prepared statement. "Our goal is to nurture these innovative technologies to help bring them to market and to ensure our customers have access to the best technology available."
For most of its first century, GM was almost unrivaled in its R&D, number of patents filed, and its advanced product development activities. GM veteran engineers lament, however, that much of the most promising forward-looking work was put on the shelf, compromised by inter-company politics, or underutilized. Development was often slow compared with that of smaller, leaner organizations.
By contrast, GM Ventures takes an entrepreneurial approach, by searching for opportunities to invest in mobility-related technologies and business models. GM is looking to invest in start-up companies with the option to take an ownership stake in the technologies. The investments are expected to vary in amount and type.
Possible investments could include battery and electronic-control technology that would further GM's EV development; alternative fuels development; advanced lightweight materials; or infotainment technology that could boost the capabilities and value of OnStar.
Creating the Ventures group “is a hell of a good idea,” observed Phil Gott, Managing Director of the Automotive Science and Technology practice at IHS Global Insight.
Gott told AEI that GM’s moves echo those of other automotive OEMs, including Toyota's and Daimler's separate investments in start-up EV maker Tesla. He said large companies tend to get caught up in their own inertia, and promising ideas can suffer from "group think" and slow implementation.
“Big organizations would like to have more of the out-of-the-box, entrepreneurial thinking and agility that occurs in smaller organizations like Tesla,” Gott noted. “With this new organization, GM appears to be building a way to better access promising new technologies and gain control if needed of the small entrepreneurial ventures that are developing them.”
He said GM’s new Global Strategic Alliance group headed by Hancock follows the same strategy.
“Reaching out to other organizations to form alliances will allow GM to access and perhaps control new technologies—and move quickly in doing it as VC organizations often do," Gott said. “It probably will allow GM to move at a faster pace.”