Venture Capital

GM Plots a New Route to New Technology


Research and development budgets at General Motors took a hit during the company's bankruptcy. Now, as GM begins to rebuild, it's looking to outside entrepreneurs for help in developing new technologies. The Detroit automaker has invested $100 million in its new General Motors Ventures fund, aimed primarily at finding and backing clean, green startups.

Vice-Chairman Stephen J. Girsky, who joined GM's board of directors last July, says some company engineers and researchers floated the idea of a venture capital fund a few years ago, but management didn't show much enthusiasm. Girsky, 48, a former automotive analyst with Morgan Stanley (MS) who later oversaw industrial investments for private equity firm Centerbridge Partners, says that when the suggestion was revived, GM Chairman and Chief Executive Officer Edward E. Whitacre Jr. didn't need to be convinced: "I brought it to Ed, and within about five minutes he said, 'Go with it.'"

Some large corporations, including Google (GOOG), Intel (INTC), and AT&T (T), use venture capital to tap into outside innovation, although company-owned venture capital funds have been on the wane for a decade. In 2000, U.S. corporate venture-capital funds did $16.2 billion in deals, about 16 percent of American VC investments. Last year that figure was just $1.3 billion, or 7 percent of the total, according to the National Venture Capital Assn. GM's fund is unique in the automobile industry and instantly turns the company, now 61 percent owned by U.S. taxpayers, into a midsize venture-capital player.

Jon J. Lauckner, president of the fund, says he's interested in technologies that can boost the capacity of batteries and get them to charge faster. Lauckner, a 31-year GM veteran, was on the development team of the Chevrolet Volt, a gasoline-electric hybrid car set to go on sale in November. The Volt's battery can take it about 40 miles before a gas-powered engine kicks in to recharge it. Short battery life is the primary reason so few electric cars are on the road.

Lauckner, 52, sees potential in silicon nanowires, clusters of silicon "hairs" placed in the anode of a battery, where lithium atoms are stored. Since silicon can store more energy than carbon, used in today's lithium ion batteries, the technology could increase the energy stored by several times, he says. He's also keeping an eye out for companies with expertise in lightweight materials and other methods for raising fuel economy and lowering emissions in conventional gasoline engines. David E. Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich., sees General Motors Ventures as a cost-effective way to bring in original ideas. "You can't be at the forefront doing everything yourself," he says.

GM has the luxury of being less concerned than pure VC firms with return on investment. "We won't be looking for the next Google," says Lauckner. "We'll be looking for technologies for our core business."

The bottom line: A venture-capital fund could be a cost-effective way for General Motors to acquire new green technologies.

LUNAR ROVERS, TRAINS, AND AUTOMOBILES: GM TECHNOLOGY

1912

Cadillac introduces a vehicle with the first electric self-starter, freeing drivers from having to crank their cars to get them running.

1934

General Motors' two-cycle engine runs the first diesel-powered train. It's the beginning of the end for coal-fired locomotives.

1952

With a Detroit-area doctor, GM engineers co-develop the first mechanical heart, used to keep patients' blood pumping during surgery.

1962

The Oldsmobile F85 Cutlass Jetfire and Chevrolet Corvair Monza Spyder are powered by the first mass-produced turbocharged engines.

1971

The Lunar Roving Vehicle, used during the Apollo 15 mission, features GM-built wheels and chassis.

1996

Leasing begins for the EV1, the first fully modern electric car since the 1930s. The program was discontinued in 1999.

David_welch
Welch is a reporter for Bloomberg News and Bloomberg Businessweek in Detroit.

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