The U.S. battery maker that could, and the U.S. auto company that wouldn’t

Ovshinsky and Stempel

The planet is burning. The climate crisis is real. Our planet and the 8.3 billion people who call it home need a transportation-power revolution from fossil fuels to electricity.

Rechargeable batteries are fundamental to the electric-vehicle (EV) transition. There is no major U.S. company producing them. The companies that dominate EV battery production are all in Asia.

In our recent Institute for New Economic Thinking working paper, “The Asian Battery Companies Charging the Global EV Transition”, we provide analyses of how four of these companies—China’s CATL and BYD, South Korea’s LG Chem (now LG Energy Solution), and Japan’s Panasonic—became global leaders in EV battery manufacturing. In the 1990s and 2000s, each of these companies made innovative investments in rechargeable batteries for the rapidly evolving revolution in portable electronics. As a result, each company was, with additional investments in innovation, well-positioned to compete as an EV battery maker when, in the 2010s, EVs began to transform the global auto industry.

In the year 1994, there was a 234-person company, based in the United States, that possessed unique capabilities in battery chemistry. Its mission was to contribute to a clean-technology revolution through battery innovation. To develop high-quality, low-cost EV batteries, this “little company that could” needed a large established automobile manufacturer, committed to mass producing EVs. The formation of a joint venture called GM Ovonic in 1994 promised to supercharge the world’s first EV transition.

In 1960, with his future wife Iris Miroy Dibner, Stanford Ovshinsky founded Energy Conversion Labs in Detroit to be close to the automobile industry. They changed its name to Energy Conversion Devices (ECD) in 1964 and moved the company to larger premises in Troy, Michigan, a Detroit suburb, in 1965. In 1982, Ovshinsky filed a foundational patent for the disordered, hydrogen-storing materials that made the rechargeable nickel-metal hydride (NiMH) battery a commercial possibility, securing U.S. Patent No. 4,623,597 in 1986.

With the filing of the patent, ECD formed the Ovonic Battery Company as a joint venture with the American Natural Resources Company for the purpose of commercializing NiMH batteries. By the late 1980s, and early 1990s, ECD was licensing its NiMH battery technology to electronic device makers to generate revenue. In 1992, Ovonic received a $25.4 million grant from the United States Advanced Battery Consortium (USABC), formed by the “Big Three” automakers to fund, with Department of Energy support, EV battery R&D. Subsequently, Ovonic succeeded in making its NiMH batteries viable for use in EVs.

In 1994, ECD’s 234 employees generated $19.4 million in revenues. ECD needed a customer that would demand the batteries for mass-produced EVs. This relation would allow ECD to engage in learning to improve the performance of the battery while, through economies of scale, driving down unit cost.

For ECD, that partner in battery innovation was General Motors (GM)—the biggest car company on the planet since 1931. On Earth Day, April 22, 1990, GM CEO Roger Smith had formally launched project “Impact” with the stated goal of mass producing 25,000 EVs per year by the beginning of the 21st century. In September 1990, the California Air Resources Board (CARB) invoked GM’s optimism of a pending EV transition to justify establishing a mandate that required leading car manufacturers to include zero-emission vehicles (ZEV) as at least two percent of their car units sold in the State by 1998, with the target increasing to five percent in 2001 and ten percent in 2003.

Robert Stempel, Smith’s successor as GM CEO as of August 1990, was an ardent champion of the Impact project. An engineer, he was the first genuine “car guy” to lead GM since the 1950s. In 1973-1975, Stempel made his mark in mid-career by overseeing GM’s transition to catalytic converters on all its cars, a technological advance that reduced air pollution while also requiring the use of unleaded gas. Stempel’s game plan for the Impact project was to reinvest billions of dollars of profits from GM’s internal combustion engine (ICE) vehicles to fund the company’s EV transition.

In the recessionary conditions of 1990-1992, however, GM suffered huge losses. In October 1992, Stempel’s time as CEO was cut short when the GM board forced him to resign for not slashing employment rapidly enough. GM’s new CEO was a finance guy named Jack Smith, who reluctantly kept the EV project alive to comply with the CARB ZEV mandate—while also campaigning with other auto companies to get the mandate reversed. By the end of 1992, GM’s new senior management had substantially cut back the company’s commitment to the Impact project. As meticulously documented in the 1996 book The Car that Could, GM’s top executives now viewed the Impact program as a research project, not a unit engaged in product development slated for mass production.

Though ousted by GM’s board in 1992, Stempel was not done with EVs. He stayed on at GM as a technical advisor, using his influence to support the Impact project as he contemplated starting an EV company from scratch. After meeting Stanford Ovshinsky in 1993, Stempel became convinced of the potential of ECD’s NiMH battery for EVs. Ovshinsky was delighted to have a former GM CEO and accomplished engineer as his ally.

As a technical advisor to both GM and ECD, in June 1994 Stempel negotiated an agreement with GM’s management to form GM Ovonic. Ovonic Battery Company would supply the intellectual property, and the production equipment for the NiMH battery, while GM would provide the manufacturing facilities and the management personnel for mass production. GM insisted on having ultimate decision-making power by owning 60 percent of the joint venture. Stempel and Ovshinsky held two board seats representing ECD, while GM held three seats, populated by employees from GM’s AC Delco Systems, which was producing parts for the EV1. In 1995, Stempel became chairman of ECD, a position he held until he retired in 2007.

Why GM destroyed the EV1

With the caption “Teamwork in Action”, the cover of GM’s 1995 Annual Report displays, front and back, a picture of about 400 GM employees in a semicircle around their shiny red EV1 sports car. Between 1996 and 1999, GM produced 1,117 EV1s. The first 660 EV1s produced in 1996 to 1998 utilized lead-acid batteries. In 1999, some of the remaining 457 EV1s used GM Ovonic NiMH batteries that doubled the EV’s range.

Bearing the GM badge, the EV1s were leased by the company to select, often high-profile, customers, who praised the performance of the car. Unfortunately, GM did not produce a single additional EV1 car after November 1999. The reason: GM had made the decision to terminate the EV1 project, as it became increasingly clear that its campaign against CARB’s ZEV mandate was succeeding, resulting in greatly reduced compliance standards that served to mitigate any requirement that they mass produce EVs.

In its February 2000 quarterly earnings press release, ECD reported a substantial reduction in revenues because of “the successful conclusion of programs with GM to develop batteries for electric and hybrid electric applications.” In stating that the EV1 program had come to a “successful” conclusion, ECD was clearly misleading shareholders and analysts; with its 60 percent ownership of GM Ovonic, the big auto company had decided it wouldn’t continue investing in EVs, leaving the little company that could looking for other ways to contribute to alternative energy solutions that addressed climate change.

In May 2000, ECD, which was always looking for partners to develop its technologies, sold 20 percent of its shares to the oil giant Texaco for $67.3 million, giving Texaco two ECD board seats. In September 2000, ECD and Texaco formed a 50:50 JV, with Texaco committing $40 million to commercialize ECD’s hydrogen fuel cells.

ECD’s relationship with Texaco provided GM with a buyer for its 60 percent share of GM Ovonic, which it had been looking to unload throughout 2000 now that it was out of the EV1 business. On October 10, 2000, ECD signed an agreement with Texaco to convert GM’s 60 percent share and ECD’s 40 percent share of GM Ovonic into a new 50:50 JV called Texaco Ovonic, for an undisclosed sum. Just four days later, Texaco announced it was merging with Chevron, the merger completing in 2001.

Regardless of Texaco’s original strategic intentions when it acquired its stake in ECD, once Chevron had gained control over the NiMH battery patents, the oil company obstructed further development of the technology.

Nevertheless, through a partnership with Panasonic, Toyota was already using NiMH batteries in its highly successful gas-burning Prius hybrid EV, which entered the U.S. auto market in 2000. In 2004, Panasonic and Toyota settled a NiMH patent infringement suit with ECD and “Cobasys”, the name given to the Texaco Ovonic JV set up in 2000, whose predecessor was GM Ovonic. For Panasonic and Toyota, the $20 million paid to Cobasys and the $10 million paid to ECD was well worth it, given the profits and positive corporate image that the Prius had generated.

Recall that, as GM CEO, Stempel’s strategy was to use GM’s profits from its ICE vehicles to invest in its EV transition. With the ousting of Stempel in 1992, GM took a critical step toward embracing the new ideology to “maximize shareholder value” (MSV), a toxic approach to corporate governance that became dominant and ubiquitous in U.S. boardrooms in the 1990s. Under Jack Smith, GM became profitable from 1993 as, with oil prices relatively low throughout the rest of the 1990s, the company focused on producing high-margin gas-guzzling SUVs and trucks for U.S. customers.

With its embrace of MSV, GM was not nearly as incentivized to invest in its products, whether ICE or EV, as it was to use its profits to jack up its stock price. The tool for manipulating its stock price was the open-market share repurchase, aka stock buyback. In 1997, a year in which GM had $6.7 billion in profits, it did $4.4 billion in stock buybacks as open-market repurchases, equal to 66 percent of its net income. The same year, GM paid another $1.7 billion to shareholders as dividends. With buybacks and dividends combined, GM’s payout ratio to shareholders was equal to 91 percent of its net income. In 1998, there was another $3.1 billion in buybacks (105 percent of net income), in 1999, $3.9 billion (65 percent), and in 2000—the year it sold off GM Ovonic for an undisclosed sum—$1.6 billion (36 percent).

As GM did stock buybacks, in the name of MSV, it sold off its capabilities and control over EV components that it had built up over the course of the Impact program. The components included high voltage power inverters, inductive charging systems, AC motors, and power electronics. The process was completed when GM spun off its components division Delphi in May 1999. Even as GM was beginning to use Ovonic’s NiMH batteries in 1999, it was giving up control over critical component technologies developed for the EV1. GM then crashed the EV1 into the MSV wall, completing the destruction of the highly innovative Impact project that it had begun in April 1990 by selling its 60 percent share of GM Ovonic to Texaco in October 2000.

The MSV wall was GM top management’s commitment to lavish shareholders with corporate cash by doing stock buybacks. Altogether, from 1997 to 2000, during which GM produced most of its 1,117 EV1s, the company did $13.0 billion in buybacks, equal to 64 percent of net income. Add to that $6.0 billion in dividends, and GM’s total shareholder payouts hit 94 percent of net income. GM’s top management was far more interested in extracting value for shareholders than in creating value by leading the world’s first EV transition.

It is estimated that GM spent $1 billion on EVs while completing the EV1 program. Even if it had taken an additional investment of $5 billion to continue to produce the EV1 while developing and manufacturing a plug-in hybrid using GM Ovonic NiMH batteries, that amount would have been less than 40 percent of the money that GM threw away to manipulate its stock price. By the early 2000s, GM could have been generating profits from a pioneering plug-in hybrid—like Toyota was doing with its non-plug-in Prius—realizing returns from its value-creating investment in the GM Ovonic partnership. ECD’s Ovonic Battery would have had a chance at becoming a major U.S.-based battery manufacturer.

The GM CEO who made the consequential decision to sell GM Ovonic was Rick Wagoner who, in June 2000, took over the top spot from Jack Smith. Wagoner remained GM’s CEO until 2009, when the company went bankrupt. He was a Harvard Business School MBA, who had been CFO of GM from 1992-1994, as part of Jack Smith’s management team when the company adopted MSV as its ideology of corporate governance. Wagoner was president of GM and chief operating officer (COO) from 1998 to 2000, years during which GM was doing massive stock buybacks, preparing Wagoner to be the company’s CEO.

In 2006, responding to the release of the documentary Who Killed the Electric Car?, Wagoner admitted that the worst decision that he had made as CEO was “axing the EV1 electric-car program and not putting the right resources into hybrids,” adding “it didn’t affect profitability, but it did affect image”. Excuse us, but Wagoner’s decisions as a senior executive profoundly affected the company’s profitability, as would be borne out over the next few years as GM spiraled toward bankruptcy in 2009.

As president of GM, Wagoner was involved in the decision to do stock buybacks in the late 1990s. As COO he oversaw spinning off Delphi to rid GM of its legacy pension and healthcare obligations, and he made the decision to halt production of the EV1 after November 1999. As CEO in 2000, he divested GM of one of the world’s foremost EV battery companies—and one that, in a corporate-governance regime unburdened by MSV, could have powered GM’s continued leadership in the EV transition.

Who killed the electric car? Maximizing shareholder value, as implemented by Jack Smith and Rick Wagoner from 1992, killed the EV1. With the decision to sell GM Ovonic to Texaco, GM ensured that the United States lagged, rather than led in EV batteries.

GM’s bungles to bankruptcy

On the way to bankruptcy, GM’s business was weakening as its U.S. market share declined to 25.9 percent in 2005, its lowest level in almost 80 years. During Q1 2005, GM booked a loss of $1.1 billion. On May 4, 2005, after acquiring 4.0 percent of the automaker’s shares on the open market, corporate predator Kirk Kerkorian, the 87-year-old head of Tracinda Corporation, launched an attack on GM. By September, Tracinda had increased its stake to 9.5 percent of GM’s outstanding shares.

Unlike his raid on Chrysler in the 1990s, which Chrysler’s management fought off by doing stock buybacks, Kerkorian knew that GM’s fragile financial condition precluded that form of predatory value extraction. His objective was to compel GM to pump up its cash holdings so that its stock price would rise. At that point, Kerkorian could dump his shares at a profit.

In combination with demanding that GM cut its dividend, Kerkorian’s strategy was to force a spin-off of GMAC, GM’s profitable financial arm set up in 1919 to provide auto loans to GM’s customers. In April 2006, Wagoner obliged, selling a 51 percent stake in GMAC to private equity firm Cerberus for $14 billion. By December 2006, Kerkorian had dumped his GM shares, netting a tidy gain of about $100 million.

As Wagoner dealt with Kerkorian, GM’s financial condition went from bad to worse. In 2007, GM disclosed a whopping $38.7 billion loss, followed by a $30.8 billion loss in 2008. As GM’s finances were crumbling, GM also faced a deeply sullied reputation as an automaker. Like his vice chairman of product development, Bob Lutz, Wagoner was well-aware that GM needed an EV to boost the company’s public image.

Lutz claims that in 2005 he pushed GM’s top management to build a prototype battery electric vehicle (BEV), its production outsourced to a startup company. But Lutz agreed that any investment in a BEV would undermine GM’s lobbying to put an end to regulations that required the production of EVs. As Lutz put it: “How could [GM] fight the [ZEV] mandate and dangle an EV in front of the public at the same time?” Wagoner and Lutz opted for a middle path—investing GM’s money in a plug-in hybrid EV (PHEV) that was more efficient than a Toyota Prius, but still dependent on gas for locomotion; not “zero emission”, but still an EV. In March 2006, the GM Auto Strategy Board gave Lutz the greenlight.

GM showed a prototype of its first plug-in hybrid, the Chevrolet Volt, in January 2007. With Chevron-controlled NiMH batteries no longer an option and having failed to invest in rechargeable Li-ion batteries itself, GM needed a battery supplier. As GM developed the Volt, it lobbied Congress for new tax credits that would defray some of the new EV’s high cost, which was about $40,000. They got their way; the Energy Improvement and Extension Act of 2008 provided a maximum of $7,500 in tax credits for the first 250,000 EVs sold. The maximum tax credit applied to EVs with battery packs of up to 16 kWh, conveniently the exact size of the battery pack GM was putting inside the new Volt.

In January 2009, LG Chem, which in 2005 had moved its U.S. EV battery R&D operations from Colorado to Troy, Michigan, succeeded in beating out a dozen other companies for the contract to supply batteries for the Volt. For LG Chem, GM’s contract was a critical vote of confidence in the Korean company’s growing EV battery business, which, building on its sales to GM, would become (as we document in our INET working paper) one of the world leaders in EV batteries.

By June 2009, however, GM was bankrupt. The Obama administration’s Presidential Task Force on the Auto Industry brought GM out of bankruptcy in 40 days. Through the United Auto Workers (UAW), GM workers made enormous concessions. In addition to absorbing 21,000 layoffs, they accepted wage freezes, reduced starting wages for new hires, the elimination of GM’s unemployment wage guarantees, and a no-strike agreement through 2015. Henceforth, the UAW would bear more responsibility for the funding of pension and healthcare benefits. All in all, the sacrifices made by workers saved GM $11 billion coming out of bankruptcy, while providing about $3 billion in savings for each year thereafter.

The U.S. and Canadian governments also poured huge amounts of taxpayer money into the GM bailout. The U.S. Treasury channeled $49.5 billion into GM from the Troubled Asset Relief Program (which had been set up the previous October to respond to the nation’s financial crisis). Canadian taxpayers put up another $10.9 billion. In return, the U.S. and Canadian governments received as-yet-unlisted shares in the “New GM”.

Mary Barra’s “class act”

There were those within the Obama bailout task force who thought that the New GM should have issued debt to the U.S. government so that, once GM re-listed on the stock market, future GM shareholders would have to wait for the debt to be repaid before they collected dividends. But the Task Force’s “auto czar”, private-equity guy Steven Rattner had hired a young hedge-fund guy, Harry J. Wilson, to design the financial restructuring, and Wilson insisted that, in return for taxpayers’ $49.5 billion, the U.S. government should be given shares.

On November 17, 2010, GM re-listed on the New York Stock Exchange, providing liquidity to the shares that the U.S. and Canadian governments held. GM did not raise one cent from the public shareholders who now held GM’s common stock. Rather, in the IPO, the U.S. government sold $15.7 billion in shares to the public, with the Canadian government and UAW selling some shares as well.

Therefore, GM’s new public shareholders contributed absolutely nothing to funding GM’s bailout, its relisting on the stock market, or its subsequent growth. They were, as is typically the case with public shareholders, simply purchasers of GM’s already outstanding shares, who could hold them for prospective dividends or, at any instant, sell the shares back to the stock market at the going price. That did not prevent Wall Street from complaining about “Government Motors”. So long as it held any U.S. “bailout” shares, under three successive “caretaker” CEOs, the U.S. government was overseeing GM’s resource-allocation decisions and executive pay packages. Obligingly, on December 9, 2013, the U.S. Treasury sold the last of its GM shares, leaving U.S. taxpayers with an $11.2 billion irretrievable loss on the financing that we committed to the bailout.

Rattner published Overhaul on the eve of GM’s IPO. In it, he diagnoses a key shortcoming, as he saw it, at GM, writing “typical of the cultural challenge [in transforming GM’s corporate governance] was a lack of focus on shareholder value. In all our time interacting with GM’s executives, we never heard them utter that all-important term.” To the contrary, relying upon Rattner’s account, one would have no clue of the central role that GM’s obsession with maximizing shareholder value, including doing $13 billion in stock buybacks in 1997-2000 and the attack by financial predator Kerkorian in 2005-2006, played in driving GM into bankruptcy.

The very day after the government sold its last GM shares, the company announced the appointment of its new CEO, Mary Barra, effective January 15, 2014. Now, CEO Barra could make decisions on how to allocate GM’s resources without any government oversight. The question for “New GM” was whether Barra would focus on value creation by producing higher-quality, lower-cost vehicles or value extraction by maximizing shareholder value.

Given her personal background, and given GM’s recent near-death experience, Barra should have been at the forefront of fighting against corporate financialization. Her father worked for almost four decades at GM as a die maker. GM supported Barra’s higher education: a Bachelor of Science in electrical engineering from the GM Institute and a GM-funded MBA from Stanford Business School.

Moreover, Mark Reuss, GM’s president under Barra, appointed in 2019 after a decade as GM’s vice president of global engineering and, then, global product development, studied mechanical engineering as an undergraduate at Vanderbilt University and received his MBA from Duke. Like his father Lloyd Reuss, Mark has spent his whole career at GM. Another car-guy champion of the Impact project, Lloyd Reuss was named president of GM in 1990 when Robert Stempel became CEO and, like Stempel, was discarded by the GM board when, in 1992, its directors decided that the company should be governed to maximize shareholder value.

Surely, after all the “missteps” under Jack Smith and Rick Wagoner from 1992 to 2009, Barra and Reuss junior would maintain tight grips on the GM steering wheel to prevent the company from once again veering down the road to MSV. And now, with the Volt PHEV on the market and the long-range Bolt BEV coming soon, GM could, once again, get serious about the EV transition.

Since becoming the CEO of GM, Barra has declared on various occasions that her innovation strategy is to complete GM’s EV transition. Compared with 2005, when Kerkorian purchased almost ten percent of GM’s shares, a decade later there were many more financial predators lurking in the shadows of America’s business corporations with even more sophisticated methods of predatory value extraction—which they call “creating” value for shareholders.

On February 3, 2015, barely a year after Barra had become GM’s CEO, Harry J. Wilson showed up at her office in his capacity as designated disgorger of GM’s cash on behalf of a wolfpack of four hedge funds holding 2.1 percent of GM’s outstanding shares. Yes, the very same Harry J. Wilson who, via Rattner, the Obama administration had put in charge of the financial restructuring of GM. It was Wilson who had convinced the Task Force that the U.S. government should be given stock rather than bonds in exchange for providing $49.5 billion in taxpayer money to bail out GM.

Wilson informed Barra that his band of predatory value extractors (our term, not his) demanded that she execute $8 billion in stock buybacks and provide him a seat on the GM board. Note that, like all other GM public shareholders, the hedge funds that Wilson represented had purchased GM shares outstanding on the stock market without a single penny flowing to GM. Buybacks for nothing, board seats for free.

The GM board rejected the demand that Wilson be given a board seat. But, to avoid a proxy fight, the board agreed to do an initial $5 billion buyback, while putting in place an authorization to do $5 billion more. In a press release, GM declared that “a foundational element of its approach will be to return all available free cash flow to shareholders while it maintains an investment-grade balance sheet underpinned by a target cash balance of $20 billion.” Hedge-fund activist David Tepper of Appaloosa Management, one of the wolves in Harry J. Wilson’s pack, made it clear what he thought about GM’s generous response to their attack: “I think Mary Barra is a pretty class act.”

Tepper is obviously referring to the “capitalist class”. How could GM “return” cash to shareholders when shareholders had not given the company any? Moreover, in the years ahead, GM’s management did not hesitate to lay off tens of thousands of employees to increase the amount of “free cash flow” available to do even more stock buybacks.

In 2015-2017, as promised, GM’s top management executed $10.5 billion in stock buybacks and paid out $6.7 billion in dividends, with the combined distributions to shareholders equaling 113 percent of net income. At the end of 2016, GM had employed 225,000 people worldwide; at the end of 2020, employment was down to 155,000.

When, in late November 2018, a highly profitable GM announced that it would idle five plants and lay off 14,000 employees, the company issued a press release in which CEO Barra declared: “The actions we are taking today continue our transformation to be highly agile, resilient and profitable, while giving us the flexibility to invest in the future. We recognize the need to stay in front of changing market conditions and customer preferences to position our company for long-term success.”

In keeping with the MSV playbook that GM had embraced under its CEO, tens of thousands of laid off workers—the company’s actual value creators—paid the ultimate price of Barra’s “class act”.

Finally, GM’s 21^st-century EV transition?

Despite the buybacks, in 2017 GM’s EV transition seemed to be on track. The sustainability report released that year envisioned an all-electric future for the company. In 2018, Barra declared that GM’s “commitment to an all-electric, zero-emissions future is unwavering.” GM did virtually no buybacks from the beginning of 2018 through June 2022. GM’s top management may have been aware of the bad look of doing buybacks simultaneously with mass layoffs. During the COVID-19 pandemic, supply chain disruptions constrained the company from doing buybacks or paying dividends.

In 2021, Barra was still claiming that GM was all in on electric vehicles, targeting 100 percent EV sales by 2035—a precise alignment of GM with China’s policy goal, announced in 2020, to transform its world-leading auto market. The Chinese EV boom has resulted in the rapid decline of GM’s once-huge ICE business in China. GM’s sales in China peaked at 4 million ICE units in 2017, 16.2 percent of China’s auto market. As EV sales in China soared, growing from 1.4 million units to 16.5 million units in 2025, GM’s sales in China collapsed to 1.9 million. GM’s unit sales would have been far lower, but for 436,000 mini-EVs sold in 2025 by its joint-venture partner, Wuling.

Even with ICE sales cratering and with the global EV transition in full swing, however, GM management could not resist the urge to “disgorge the free cash flow”. As a display of what CEO Barra meant by “the flexibility to invest in the future” when GM announced mass layoffs in November 2018, from August 2022 to June 2026 GM did $29.5 billion in stock buybacks, representing 90 percent of net income, along with $3.1 billion in dividends, equal to 10 percent of net income.

As fully explained in our article “How GM’s $10-Billion Buyback May Ice Its EV Transition,” published in December 2023, in the aftermath of the long UAW strike, GM purchased 25 percent of its shares outstanding in the form of an “accelerated” share repurchase. Barra blamed the workers for jeopardizing her ability to invest in the EV transition, but once again she was kowtowing to the hedge fund activists to save her own job. Class act.

Mark and Lloyd and the b-word that must not be uttered

GM’s top executives do not dare to say “buybacks”, especially when it may appear adjacent to the term “hedge-fund activist”. On June 18, 2026, GM President Mark Reuss gave a long interview to Car & Driver magazine, in which the interviewer, Jamie Kitman, posed the following question: “What about the Chinese? Technologically speaking, you wonder whether they benefit from not having activist shareholders, investors who are impatient with important investments that won’t pay off right away but are essential for a successful future.”

Rather than taking the opportunity to blame hedge-fund activists for forcing GM’s management to maximize shareholder value, Reuss deflected, saying that Chinese companies are “in it for the long game”. Kitman then tried to get Reuss to articulate what game his company, GM, was playing, clarifying: “I was also asking about the systemic standpoint. The system we have sometimes seems like it thwarts innovation and investment.”

President Reuss again avoided answering the question, and now claimed also to speak for CEO Barra, in stating (and we quote his long-winded, meandering, and hypocritical response in full, but with our emphasis):

The fundamental system of driving short-term results versus long-term results? It doesn’t mean we should stop doing the right thing. Mary is much of that same thought camp: The way the company was given to us won’t be the way that the company will be. It will be very good, and it will be very good for a long time. That’s important because a lot of people put food on the table working for our company and our plants—our engineers and our designers and on and on. They make a nice living, and they can send their kids to college. And it’s important to be able to do all of that. That importance for our country is hard to measure. It doesn’t always get rewarded. Especially in the short term.

“The right thing”?! Unfortunately, the interviewer did not ask Reuss the $29.5 billion “hardball” question. In polite company, one does not talk about buybacks. The corporate looting that buybacks represent is too obvious if given even a little bit of light.

Here are our follow-up queries to Reuss:

If you and CEO Barra care so much about workers’ ability to put food on the table or send their kids to college, why did you do $29.5 billion in stock buybacks from 2022 to 2026, as you reduced your total employment by 11,000 workers? You of course know that, as you laid off workers, GM’s revenues increased from $167 billion to $185 billion, GM enjoying ample profits. For what exactly should you, as GM’s president, be rewarded, particularly as it would appear that, for you and boss Barra, stock buybacks are a far higher priority for GM than retaining the company’s workers and investing in their productive capabilities?

Kitman recycled parts of his Car & Driver interview with Reuss in a New York Times article, focusing on the fact that Mark’s father Lloyd, who became GM’s president in 1990, was ousted in 1992. What the reader should know is that Lloyd Reuss was given the boot along with CEO Robert Stempel in 1992 as GM pivoted sharply to an MSV regime. His son should understand that the MSV system of which he is now a part subjected his father to an “unceremonious firing” (as the Times’ article puts it), forcing him into early retirement. In the name of MSV, as with many other companies in the United States, GM has laid off tens of thousands of hard-working career employees. Quite apart from inflation, when you don’t have a job, everything becomes “unaffordable”—especially in a country where the focus of the party in power is to strip away whatever might be left of the social safety net.

Buybacks are endemic to the U.S. economy, and GM is by no means the only company doing them. While GM did $29.5 billion in buybacks in the four years from mid-2022 to mid-2026, in the four fiscal years 2022-2025, the 500 companies listed on either the NYSE or NASDAQ with the highest revenues in each year did $3.5 trillion in stock buybacks, equal to 49 percent of their combined net income with another $2.5 trillion paid as dividends (another 34 percent of net income). Dividends are paid to all a company’s common “shareholders”. In stark contrast, the gains from buyback-manipulated stock prices go to “sharesellers”, including hedge fund managers and senior corporate executives who enrich themselves by disposing of their shares on the market.

As our research group, the Academic-Industry Research Network, has shown in numerous studies, stock buybacks done as open-market repurchases are a prime source of the concentration of income and wealth among the very richest American households. Buybacks are also a fundamental part of the explanation as to why in the 21st century the United States has become a global laggard in a growing range of critical technologies.

EV batteries: A case in point

In 2019, as GM was pulling its Volt PHEV off the market, Tesla was about to open its Shanghai Gigafactory as the first wholly owned foreign company to be allowed to produce on its own in China. Tesla appeared at that point in time to be leading the EV transition. But, as we document in detail in our INET working paper on the global leaders in EV batteries, Tesla’s ability to become the leading mass producer of BEVs by 2019 was dependent on Panasonic’s lithium-ion (Li-ion) batteries. For its EVs produced in China, Tesla turned to CATL, helping the China-based company achieve a globally dominant 39.1 percent market share in 2025.

In 2025, Japan’s Panasonic was the world’s seventh largest EV battery maker, with a 3.9 percent market share. From 2014, Panasonic had been instrumental in funding, setting up, and staffing the battery lines of Tesla’s first Gigafactory in Nevada. The factory was essential to Tesla’s ability to produce the high-volume Model 3 from 2017 and Model Y from 2020, by far its most successful BEVs to date.

After shutting down its EV1 program in 2000, GM got back into EVs with the Volt PHEV using Li-ion batteries developed by LG Chem, which spun off its battery division as LG Energy Solution (LGES) in 2020. In 2025, LGES was number three among EV battery producers, with 9.3 percent of the global market. LGES now produces EV batteries for many of the world’s leading auto companies. Meanwhile, buyback-infected GM has recently pulled out of one of three battery plants in which it had co-invested with LGES. With the high priority that it has accorded to stock buybacks, GM’s stop and start approach to its EV business has limited its scale, preventing the company from significantly driving down the cost of the EVs that it does produce. It has also limited the in-house learning necessary for GM to develop capabilities to produce innovative batteries on its own.

China-based BYD was founded as a rechargeable battery company in 1995, and by 2002 had emerged as the world’s second largest producer of Li-ion batteries for electronic devices. In 2003, it entered the auto business, with the intention of leveraging its capabilities in batteries to produce EVs. BYD sold just 147,185 BEVs in 2019, compared to Tesla’s world-leading 367,656. In 2025, however, BYD delivered 2,256,714 BEVs, blowing past Tesla’s 1,636,129.

BYD also sold 2,288,709 PHEVs in 2025, compared with Tesla’s zero, and the Chinese company could claim global leadership in both types of EV. BYD’s EVs are increasingly sold around the world, with many now being transported in massive BYD-manufactured transport ships. Moreover, inside every vehicle BYD delivered in 2025 was an innovative BYD battery, making the company the world’s second largest EV battery maker with a 16.4 percent global market share.

Contemporary Amperex Technology Co. Limited (CATL), by far the global leader in EV batteries, has its origins just over a quarter century ago, with the founding in 1999 of Amperex Technology Limited (ATL), to produce rechargeable batteries for electronic devices. In 2011, CATL was spun off from ATL as a dedicated EV battery producer. CATL is the world’s pure-play battery company, which can rightly be compared in the context of the EV transition to the role that TSMC plays as a pure-play chip foundry in the global semiconductor industry.

As documented in our working paper on the world’s leading EV battery makers, the success of China-based BYD and CATL manifests the social conditions of innovative enterprise that prevail in China for the relatively rapid transformation of a startup company into a global leader—an advantage that until recently one would have associated with Silicon Valley. BYD and CATL, like LGES and Panasonic, all have one thing in common. They retain a substantial portion of their profits to reinvest in the productive capabilities of their employees.

These Asian companies have thus far avoided catching the American disease of corporate financialization. Quite apart from the insane “policies” of the U.S. gilder-in-chief, corporate financialization is the root cause of the concentration of income and wealth among the richest American households. Prominent among them are the chief-executive-buybackers and hedge-fund-attackers debilitating our industrial future.

We gratefully acknowledge the Institute for New Economic Thinking for funding research for this article.