GM sets up venture capital firm

General Motors has sunk US$100 million into a new venture capital firm, with an eye to breaking the shackles of national ownership and re-establishing itself as a sustainable shareholder business.

Tellingly, it has anointed former global product planning VP Jon Lauckner to head up the new General Motors Ventures LLC. Lauckner's place among the more vigorous movers and shakers behind the Volt PHEV platform (pictured) points to the deep shade of green marking the technologies the company is looking to foster.

Venture capital being among the riskiest of businesses, at face value this doesn't look the goods for a company now more than 60 per cent owned by the US government following the US$50 billion bailout on the public purse in 2008. In the face of questioning, the corporation has assured the public and media the money for the new business is coming not from the federal loan but out of current revenue streams.

Some, like John O'Dell from industry analyst Edmunds, continue to argue that those revenue streams are traceable directly back to the bailout, meaning taxpayers should be sharing in profits. But it's likely to be a while before the VC firm shows any profit. It only begins formal operation on July 1, and while GM is already looking into a range of technologies, it has said nothing about what it might be scoping out for equity stakes.

The company is already investing in alternative fuels to help lengthen the life of its internal combustion engines. In 2008 it began investing in two companies showing promise in ethanol fuels -- Illinois based Coskata, which is working on turning agricultural and industrial waste products and suburban garbage into ethanol, and Massachusetts based Mascoma Corp, which is doing the same thing with wood chips and waste paper sludge. Such investments are not only risky but also often slow in delivering returns. The two ethanol companies are cases in point -- they have yet to deliver a profit.

Risk notwithstanding, General Motors Ventures is arguably an essential move in rebuilding the company's stocks. VC investments have long been the key to keeping up with innovation in fast moving industries -- the last three decades have seen the seed capital industry flourish in Silicon Valley. It's a crucial means of keeping an ear to the ground in industries marked by high uncertainty, as the auto industry is now.

To this day, most of the biggest names in the IT industry maintain substantial investments there. Now it's the auto industry's turn, with new technologies emerging daily in the name of keeping the privately owned horseless carriage sustainable.

To hasten repayment of the federal money -- and therefore strengthen its claim on the motherlode the VC outfit may strike, GM is working towards a public stock offering in late 2010 or early 2011.

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