Killing a Cash Cow vs. Making It Obsolete

There was a time not long ago when many observers—EV evangelists in particular—believed legacy automakers should transition their vehicle portfolios to electric vehicles as quickly as possible.

While that sentiment is not quite as fierce today, given the slowdown in EV sales, there are still those who argue that continued investment in internal combustion engine (ICE) vehicles represents wasted product dollars.

A counterpoint to that belief can be found in how General Motors has treated what may be the most important product cash cow in the entire auto sector.

GM’s full-size SUVs—Chevrolet Tahoe, Suburban, GMC Yukon, and Cadillac Escalade—have long been produced at a single U.S. facility: Arlington Assembly in Texas.

By any objective measure, Arlington is not a marginal plant.

It assembles more than 300,000 vehicles annually, produces vehicles with average transaction prices from the mid-$60,000s to well over $100,000, and drives roughly $20–25 billion in annual revenue for GM—along with billions in operating profit.

I recently wrote about why Arlington may be the most profitable automotive factory in the world.

That conclusion shouldn’t have been provocative. It’s just arithmetic.

So when critics talk about “phasing out ICE,” in the case of Arlington’s vehicles they aren’t talking about fringe products with little financial impact.

They’re talking about vehicles like the Cadillac Escalade—a product that combines luxury pricing, high volume, and extraordinary profitability in ways many automakers never achieve.

The pressure on legacy automakers to transition to EVs did not come from Washington alone.

It was reinforced—until recently—by the success of Tesla.

For much of the past decade, Tesla’s EV sales growth appeared to validate the idea that electric vehicles were not merely an alternative drivetrain, but a swift and inevitable replacement for internal combustion automobiles.

As Tesla scaled Model 3 and Model Y production, rapidly gained share, and reached a market capitalization that dwarfed all traditional automakers, a broader narrative took hold:

Legacy OEMs weren’t just late to EVs.

They were structurally doomed unless they pivoted immediately and completely.

In that framing, incrementalism represented failure.

Dual-track strategies were denial.

And continued ICE investment was portrayed not as prudence, but as resistance to progress.

Tesla’s growth curve became the benchmark against which all other strategies were judged. The belief was clear:

If EV adoption followed Tesla’s trajectory, then every dollar spent extending ICE platforms was a dollar wasted.

Instead of winding down Arlington and transitioning its full-size SUVs to EVs, GM doubled down.

In 2023, management approved hundreds of millions of dollars in new investment to prepare Arlington for a next generation of full-size ICE SUVs. That decision implicitly committed the company to continue selling highly profitable vehicles into what seemed—at the time—to be a certain EV timeline.

As we now know, that certainty was overstated.

As I’ve written before, automakers like Toyota Motor Corporation—arguably the best automaker in the world—never wavered from a multi-pathway propulsion strategy, prioritizing long-term vision and pragmatism over short-term FOMO or fear of EV evangelist ridicule.

Both Toyota and GM reached a similar conclusion: killing cash cows prematurely does not signal innovation.

In fact, it can make an automaker financially brittle.

There is a fundamental difference between making your cash cow obsolete and prematurely killing it.

Consumer demand and profits should always trump ideology in the auto sector.

Graham Duncan, co-founder and managing principal of East Rock Capital, once said:

Duncan was referring to a behavioral trap that shows up when leaders become emotionally attached to a thesis, a narrative, or their own intellectual identity.

Once that happens, the goal shifts from maximizing returns to proving the original belief correct—even when new information suggests otherwise.

It seems GM leadership avoided that trap.

Its most profitable factory will continue producing vehicles that EV evangelists believe should cease to exist as quickly as possible—while GM continues investing in an EV future that should arrive, but may arrive more slowly than many predicted.

This isn’t an anti-EV argument.

It’s an argument for discipline.

You don’t build the future by killing what funds it.

You build it by letting today’s success pay for tomorrow’s transformation.