Earth Protect Blog

By Lauren Hirsch

© The New York Times Co.

Engine No. 1, the activist investment firm that made its name by successfully taking on Exxon Mobil, announced Monday that it has taken a stake in General Motors. Unlike its bruising battle with Exxon, the purchase was pitched as a show of support for the automaker’s transition to electric vehicles.

GM’s stock rose by about 3% in early trading.

Activist investors more often take a stake in a company to lobby for management to make changes, not to endorse its strategy. Engine No. 1’s move also provides investors new information about how the upstart firm, which promotes its green credentials, values companies at a time when corporate America is incorporating social and environmental factors into traditional financial measures.

In a white paper released ahead of the automaker’s investor day Wednesday, Engine No. 1 argued that GM merited a higher valuation because of its scale and the commitments it had made to shifting to electric cars.

GM’s market capitalization is $77 billion, or about a tenth the value of Tesla’s.

“With General Motors, you have a management team and a board who has decided to really go all in on EVs — and to actually be a disrupter within their own industry,” Engine No. 1’s founder, Chris James, told the DealBook newsletter.

In January, GM became the first traditional auto company to commit to selling only zero-emission vehicles by 2035, an announcement that piqued Engine No. 1’s interest. The carmaker plans to spend $35 billion on electric and autonomous vehicles and build four battery plants in the United States by 2025.

Engine No. 1 first took a stake in GM in the first quarter. It declined to disclose the size of its position but said it is among the three largest in its private fund. (The firm’s positions have been relatively small so far, including the stake it used to win board seats at Exxon.) The firm has met informally with the carmaker’s management, including its chief executive, Mary Barra, and has no plans to start a proxy fight as it did at Exxon, James said.

“There is a very strong contrast here between the two companies,” James said, referring to Exxon and GM. “A lot of it has to do with Mary, who is just a great leader, and having a board that is forward looking and willing to accept change and risk.”