GM Investing $650M in Lithium Miner, Targeting $2B in Cost Cuts
General Motors Corp. executives said Jan. 31 they are beefing up their electric vehicle supply chain by investing $650 million in the company mining the largest U.S. source of lithium and are looking to cut $2 billion in costs from their automotive operations this year and next.
GM’s agreement with Lithium Americas Corp. calls for two tranches of investment, with the first $320 million piece expected later this year, and will give the auto titan exclusive access to first-phase production from Lithium Americas’ work at the Thacker Pass mine in Nevada for at least 10 years. GM also will get dibs on production’s second phase; Lithium Americas leaders say their planned Thacker Pass volume will be enough to support the manufacturing of up to 1 million EV batteries annually.
“Our future production will increasingly draw from domestic resources like the site in Nevada,” GM Chair and CEO Mary Barra said in a statement. “Direct sourcing critical EV raw materials and components from suppliers in North America and free-trade-agreement countries helps make our supply chain more secure, helps us manage cell costs, and creates jobs.”
Shares of Vancouver-based Lithium Americas (Ticker: LAC) jumped 13% in Jan. 31 trading. GM’s $320 first investment tranche will give it a 10% stake in the miner; the second will be finalized after Lithium Americas separates its U.S. and Argentine businesses.
On cost cuts—which were announced as part of GM’s fourth-quarter earnings report—Barra and CFO Paul Jacobson said they are focused on becoming more efficient across GM’s automotive operations but aren’t planning layoffs. Any job losses, Barra said, will come through attrition while hiring will be limited to “only the most strategically important roles.”
Barra and Jacobson are targeting for two-thirds of the $2 billion in savings to be realized this year, with the rest coming in 2024, as they look to lift GM’s profit margin to between 8% and 10% in 2025 and then to between 12% and 14% in 2030.
“We're being prudent about what we see out in the macro environment,” Jacobson said. “We want to make sure that we're driving efficiency where we can and felt like this was the right time to be able to do that. […] We’re not doing anything to prepare for a price war [and] we’re not doing anything in anticipation of a recession.”
Potentially complicating efforts to cut costs, GM will renegotiate its union contracts with both the UAW in the United States and Unifor in Canada in September of this year, the first year since 1989 the labor groups have bargained concurrently. In a statement, the director of the UAW’s GM Department, Mike Booth, noted that union-represented GM employees will receive up to $12,750 in profit sharing.
“UAW members have earned their share of the company’s prosperity, and this negotiated benefit reflects that contribution,” Booth said.
Detroit-based GM reported a fourth-quarter profit of $2.0 billion on sales of $43.1 billion, numbers that were up 15% and 28%, respectively, from the last three months of 2021. The company’s adjusted EBIT margin, which excludes nearly $1.2 billion in costs from exiting Russia and the restructuring of the Buick dealer network, ticked up to 8.8% from 8.5% in the prior-year quarter. GM sold 729,000 in North America during the quarter—up from 511,000 a year earlier and growing its full-year market share to 16%—but sales in the Asia/Pacific, Middle East and Africa regions fell 18% to 696,000.
Looking to the rest of this year, Barra said her team is aiming for adjusted EBIT to be between $10.5 billion and $12.5 billion, down from $14.5 billion in 2022 (in part because of lower expected pension income and lower earnings at GM Financial) but above what analysts had been forecasting.
Shares of GM (Ticker: GM) popped about 8% on the report and Lithium Americas news and were changing hands at about $39.10 in late-morning trading. The move took the stock back above where it was trading six months ago.
