(Bloomberg Businessweek) —
As General Motors Co.’s chief financial officer, Paul Jacobson must make sure the company has the wherewithal to transition to an electric future, putting him at the center of everything from supply chain chaos to technology shifts.
Jacobson holds a bachelor’s degree in aviation management from Auburn University and an MBA from Vanderbilt University. After joining Delta Air Lines as a financial analyst in 1997, he served as senior vice president, treasurer, and CFO. He moved to GM in October 2020.
The automotive industry has been hit hard by supply chain shortages, especially in chips. How do you make sure that won’t happen again?
We’re doing lots of things to make sure that this becomes much, much easier to navigate in the future. In the short term, all the senior leaders of the company get together once a week to talk about what the forecast is, what we’re going to do to mitigate it, and how we’re going to respond. For the intermediate and longer term, we’re simplifying the chip structure and going to three chip families. That’s going to put us in a position where we’re not as beholden to hundreds and hundreds of chips, depending on which vehicle, where any one of them might hinder production.
The cost of raw materials for batteries continues to go up. How do you make sure you can get them at prices you can afford and that don’t force you to have rapid spikes in car prices?
We’re looking at a multifaceted approach—anything from traditional supply-chain-procurement-type functions, all the way to joint ventures or longer-term contracts—because what we want to do is put together a portfolio that is both resilient in times of challenges but also balances out the price implications. It’s not about capturing the best price today; it’s about capturing that consistency of the business model that we can plan around.
How radically will electrification change GM?
It’s fundamentally going to change the way we make money at General Motors. Because if you think about it, the overwhelming majority of our profits come from the time that we sell a vehicle to a dealer, right? And that vehicle enjoys a lot of revenue for very different companies over the life of it on the road. What the electric vehicle and what connected vehicles are going to do for us is increase the revenue opportunities over the life of that vehicle—second owner, third owner, fourth owner—because we’re going to be able to offer ways through over-the-air updates to customize it, subscriptions, various services, insurance packages, lots of different ways that we can interact with a customer that historically we haven’t been able to. So customer service becomes the focal point of what we can do in the future. The more we know our customers and the more they trust us, the better the profitability implications are over the longer term.
What are the financial implications for that transformation?
If you go back to our investor day last year, we talked about doubling our revenues while expanding our margins by 2030. The doubling of the revenues is coming both from growth in auto sales and because we’re getting new customers every day on electric vehicles—the ones that we’re taking reservations and orders for right now, as well as the Hummers that are we delivering. I think 60% to 70% of customers that are buying a Hummer are new to General Motors, and we’re getting a lot of good interest from the coasts where we’ve typically underperformed in share. So if you think about going forward, what that means is a whole suite of customers that are focused on subscriptions, and services, and what the vehicle can do for them, which changes our revenue portfolio. So what we talked about is $20 billion to $25 billion a year of revenue in 2030 around these services that we can provide. It’s a massive growth off of what we’ve experienced with OnStar historically, and I’m really excited about what that’s going to bring.
Are we headed to a world where we subscribe to a car rather than own a car?
There are some people that would prefer to depend on a subscription or a ride-share-type model. There are some that want to own multiple vehicles, and we’ve got to be there for them wherever the customer wants to be going forward. Whether it’s electric vehicles or autonomous vehicles or ride-share, we’ve got the capability of offering an entire suite of products to meet customers where they are.
GM has promised a lot to Wall Street as well as the American public. So you’re under a lot of pressure now to deliver on the new vehicles you’ve announced, right?
I’ve said to Mary [Barra, GM CEO] and to the leadership team that I want 100% of our risks to be in the execution bucket, because I believe in this team and I know what this team can do. They’re collaborative, they’re creative, and I’m comfortable with that execution risk. So if you don’t believe we can do it, I just say, “Just wait and see. We’re going to prove you wrong.”
This interview was edited for clarity and length.
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