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By Joseph White, Global Automotive Correspondent

Greetings from the Motor City!

Stressed by rising interest rates and Tesla’s price-chopping, the big names of the legacy auto industry are veering out of the fast lane on their journey to an electric vehicle future.

That’s one way to read the strategy reboot General Motors Chief Executive Mary Barra outlined on Tuesday, as well as Honda’s related decision to abandon a plan to develop EVs with GM, and downbeat forecasts from battery maker LG Energy Solution and Porsche.  

Is this a turning point for the legacy auto industry’s race to catch Tesla and BYD in the EV market? It sure looks like one.

But wait! There’s more – including a big setback for GM’s Cruise robo-taxi operation and another expensive strike by the United Auto Workers – also at GM.

Today –

• • GM’s EV U-turn

  • The UAW shuts down GM’s Escalade factory

  • California yanks Cruise’s driver’s license

A Hummer EV: We won’t be needing so many of these. REUTERS/Jonathan Ernst

GM CEO Mary Barra did a high-speed, EV strategy U-turn on Tuesday, joining Tesla’s Elon Musk and Ford’s Jim Farley in conceding that rising interest rates and stubbornly high EV battery costs are putting the brakes on mass market EV demand.

Barra’s strategy reboot is striking, given how determined she had been about going all-in on EVs.

In November 2020, Barra told investors the No. 1 Detroit automaker was speeding up an “all out pursuit of global EV leadership.” The company would invest more than $35 billion to develop a fleet of EVs and a network of EV battery plants with the goal of outselling Tesla, she said.

To expand its EV portfolio, Barra forged an alliance with Honda to develop a line of small, more affordable EVs.

She stuck to that strategy through the pandemic, and Barra and CFO Paul Jacobson doubled down in February 2022, telling Wall Street GM would give accelerating EV launches priority over near-term profits.

That’s all over now. Instead, Barra told analysts Tuesday that GM will match its EV production to customer demand – an effort to dodge Tesla’s volume-over-profit price chopping and deliver “low to mid-single digit margins” on EVs by 2025. Tesla has profit margins to give away in a market share war. GM does not.

Barra said some of GM’s future EV programs will be delayed so engineers can figure out how to cut vehicle costs – borrowing Tesla technology ideas such as the use of giga-castings to replace dozens of metal parts with just one big piece.

The EV alliance with Honda will be scrapped. Instead, GM will invest far less to reboot the aging Chevy Bolt EV using low-cost, Chinese lithium-iron batteries.

The retooling of a giant assembly plant north of Detroit to build electric Silverado pickup trucks will be delayed, saving $1.5 billion in capital spending next year.  

GM’s new EV strategy, as of Tuesday, is to pull back on EV investment, put EV profits ahead of matching Tesla’s sales, and tell Washington and Sacramento to back off on proposed mandates to phase out the combustion vehicles that generate all the company’s profits.

Wall Street’s response: Push GM’s share price to its lowest level in three years.

GM is no longer the world’s largest automaker. But when it moves, it creates waves.

GM’s main battery partner, South Korea’s LG Energy Solution, rattled investors Wednesday by warning of an EV market slowdown that would dent its profits.

The EV strategy retrenchments, combined with China’s ropey economy, have socked prices for battery materials including lithium.

Volatile battery materials markets appear to have cost Volkswagen heavily for wrong bets on prices. VW had already scrapped plans for a new, EV giga-factory. More losses could force more retrenchment.

Next up: More pressure on climate policy makers to put aside ambitious green technology goals.

If you build it, they will come is a wonderful movie premise. It’s not working so well for legacy automakers’ EVs.

UAW President Shwn Fain (left) and UAW Ford chief negotiator Chuck Browning REUTERS/Rebecca Cook

UAW President Shawn Fain struck again Tuesday, ordering a walkout at GM’s Arlington, TX assembly plant, the home of the ultra-profitable Cadillac Escalade, Chevy Suburban and other large GM SUVs.

The move was not a surprise. For weeks, Fain has telegraphed plans to take down the Arlington plant unless GM sped up the pace of meeting UAW contract demands.

Still, the impact of this operation is eye-opening. GM said the Arlington walkout could add $200 million a week to its overall strike costs – doubling the costs of the previous UAW walkouts at a mid-size truck factory, a large crossover factory in Lansing and parts depots.

The UAW has now shut down three of the most profitable assembly plants in the world, but fewer than half of the 150,000 Detroit Three-UAW workers are on strike. The union’s strategy has forced GM, Ford and Stellantis to more than double their initial wage offers to 23% – and potentially more.

UAW Region 8 director Tim Smith, whose territory includes Arlington and the Ford Kentucky Truck plant, said a resolution will come down to wages and restoration of cost-of-living allowances, or COLA. “COLA is number one,” he said.

The Arlington move stoked speculation that the end game of the contract dispute is at hand. But until Fain shakes the hands of CEOs and then gets contracts ratified, the picket lines will hold.

Cruise CEO Kyle Vogt. REUTERS Stephen Lam.

California regulators suspended Cruise’s license to operate driverless cabs in San Francisco, dealing a blow to GM’s increasingly costly bet on automated vehicle ride services.

California regulators were scathing, calling Cruise’s vehicles a threat to safety and accusing Cruise officials of misrepresenting the safety of the company’s driverless car technology after an accident in which a Cruise robo-vehicle hit a pedestrian.

The state’s action piles on top of investigations by federal safety regulators. Critics of the proliferation of robo-taxis on San Francisco streets cheered.

Cruise said it would pause operations in San Francisco.

The California action came just hours after GM CEO Mary Barra told investors Cruise vehicles were safer than human drivers, and the unit was on track to expand to Japan as well as 15 U.S. cities.

Barra has told Wall Street Cruise and automated driving services could generate $50 billion in revenue by 2030. Right now, Cruise is losing $723 million a quarter – a pace of cash incineration that could more than offset the $2 billion cost-cutting program Barra has ordered for GM as a whole.

Porsche’s CFO warned investors that luxury brands are not immune from the pressure created by rising interest rates.

Porsche joined other European luxury brands that have told investors that even the world’s richest 0.1% are feeling the pinch from the end of cheap money.

The downbeat outlook sent Porsche shares to a one-year low. Porsche management’s tune has shifted to a darker, minor key compared to the confidence expressed ahead of the brand’s IPO last September.

Looking ahead, all eyes will be on Ferrari, which reports results Nov. 2.

Stellantis is working on a deal to buy 20% of Chinese EV maker Leapmotor. Stellantis could use Leapmotor’s designs to develop EVs for markets outside China, Bloomberg reported.

Renault will spend $3.2 billion to develop models for what executives called a “global relaunch.” The French automaker has become more dependent on the European market – where Chinese EV makers are gobbling up sales. Renault will get help from Japanese partner Mitsubishi, which is exiting China and will invest in Renault’s Ampere EV unit.

Lexus aims to offer an EV with a 1,000-km (620-mile) range by 2026, brand executives said at a Tokyo Mobility Show event.

Afeela,  the EV joint venture of Honda and Sony, could buy batteries from a U.S. producer – the better to qualify for U.S. EV subsidies.

Tesla engineers knew of a steering defect affecting Autopilot assisted driving systems and used the term “incorrect steering command” in internal communications about the problem, a lawyer for a victim told a court hearing the first civil trial involving an Autopilot-related death. Tesla has denied responsibility and said the driver in the fatal crash had been drinking.

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