Her peers in the car business can afford an unscripted moment but the head of General Motors, a company whose political risk every time its chief opens her mouth is comparable to the U.S. president's, can't.
From time to time, though, when a presidential election is looming and a labor strike is dominating the news, Mary Barra makes a point of emphasizing how much GM's profits depend on gas-powered pickup trucks, not the electric cars that Washington wants her to build.
She did so at this point in the cycle in 2019, touting in a way that was meant to be noticed the enduring "earnings power of our full-size truck business." On Wednesday, she did so again, ordering up a giant share buyback to underline the ability of gasoline-powered profits to keep covering GM's losses on government-mandated electric vehicles and shower cash on shareholders.
Luckily, the U.S. legal system allows a safe harbor for "puffery," or what courts have considered window-dressing predictions not meant to be taken seriously. Ms. Barra's reliable patter, ever since 2017, about GM's commitment to an "all-electric future" is an example. This continued on her Wednesday conference call. It's also a fantasy. Voters won't tolerate limits on their choice of vehicle; politicians won't ban gasoline cars however much they pretend otherwise, not least because the regulatory setup that politicians themselves long cultivated needs gasoline-powered profits to keep unionized auto workers employed.
Then why does GM's share price remain dramatically depressed in relation to its expected earnings? The $10 billion Ms. Barra committed on Wednesday to a share buyback represents a quarter of the company's entire value. Think about it. The most obvious explanation is that investors don't see an escape yet from the government's requirement that GM keep losing billions on electric vehicles the public doesn't want, which Biden administration regulators insist must account for 50% of new car sales in just six years.
A truism about things that are unsustainable still holds, and the Biden plan is certainly unsustainable. The one reliable empirical quantum on which the climate issue rests is the rising CO2 content of the atmosphere. At some point it stands to reason that EV policy will hit the rocks when the public realizes that trillions spent on subsidies for electric cars and other green technologies are having no impact on this quantum.
Ms. Barra's tenure has been a sorry one for shareholders despite the enormous reported profits, with shares still below their post-bankruptcy price of 13 years ago. But her political antennae are highly acute. With its recent settlement, GM has stabilized relations with the powerful auto workers union for another four years. Joe Biden is looking weaker by the day. The EV political bubble is demonstrably bursting amid stalled sales. For the first time ever, GM had the nerve this year to "just say no" to U.S. fuel-economy mandates and pay the obligatory fines as Mercedes and BMW have long done.
Ms. Barra's whopping buyback announcement this week sums up the impolitic signal: Investors should expect to rely on gasoline-powered profits for as far as the eye can see. Forget the whole idea of a forced march to an EV future.
If you haven't figured it out, I can only explain one more time that subsidizing electric vehicles and other green-energy technologies doesn't cause people to use less fossil fuels. Only taxing those fuels will do so, and there is little political appetite currently for this. In consequence, the U.S. auto companies have become only more captured by politicians looking to make gestures. From safety technology and labor costs to fuel-mileage rules, car-loan terms and trade policy, they already exist in deep entanglement with government. It's no exaggeration to say the $120 billion the Big Three have committed to invest in EVs was never driven by customer demand. It was driven by the need to support throwaway lines in Joe Biden (and before him, Barack Obama) speeches and press releases.
The markets are also beginning to understand something else: The 2009 bailout was a critical turning point. Until then, the domestic auto manufacturers had largely depended on hidden regulatory and trade favors to keep them afloat, with the galumphing exception of the 1979 Chrysler loan guarantees that were repaid early and in full.
Since then, the bailout has increasingly consisted of tax dollars distributed directly to the companies and their customers without any expectation that taxpayers will be repaid for much of it, hardly a propitious look for private, supposedly capitalist businesses. Ms. Barra's decade of operating in this world has been a wonder to behold as GM's large cash profits surely testify. The end is still likely to be bad for the company's shareholders, and the stock price knows it.