From an empty auto-parts plant in the heart of Rust Belt America, General Motors Co is out to show the world that the automaker once dismissed as an industrial dinosaur has gained some Silicon Valley cool just two years after its taxpayer-funded bankruptcy.

With a solar charging station as a backdrop, GM's venture capital unit touts a $7.5 million investment in Sunlogics, at the solar energy system maker's new headquarters in a former auto parts plant in Rochester Hills, Michigan.

The investment, announced last month, gives GM Ventures a stake in a company building solar charging equipment. It comes out of a $200 million venture capital budget GM earmarked to spend over three years in response to fears that the world's largest automaker could lose out on the next big thing to start-ups such as electric car maker Tesla Motors.

While the investment fund is minuscule compared with GM's $8 billion annual research and development budget, the commitment to venture-style investing is a radical step. After all, this is a company that is still one-third owned by the U.S. government and better known for its entrenched bureaucracy and crippling risk aversion over the past 30 years.

We're buying options on future R&D, said Steve Girsky, GM's vice chairman and former New York investment banker who drove GM Venture's creation.

It encourages people to take risks around here, he added. It encourages us to look outside of GM. You can only do so much with your internal R&D.

In embarking down the venture capital road last summer, GM joined a number of other automakers, including Volkswagen, Honda Motor Co, BMW and Hyundai Motor Co.

Driving the change at GM are a pair of Detroit outsiders keen to break from the company's association with big, gas-guzzling SUVs - Chief Executive Dan Akerson, a former private equity and telecommunications executive, and Girsky.

The goal is to jump-start innovation at a 103-year-old company that executives admit had badly lost its way. At GM's investor meeting this month, chief marketing officer Joel Ewanick said it needed to build a global brand image like Apple Inc.

CRANK IT UP

There was a period when GM was remarkable in terms of the innovations we generated -- not only the sheer number but the impact, said Jon Lauckner, head of GM Ventures. That fell away over the past 20 or 30 years and now it's time to crank that back up again.

GM's research labs were once a hotbed of invention, including the development of a new kind of gasoline to reduce engine knocking and the industry's first fully automatic transmission under Charles Boss Kettering, a man credited with 140 patents.

GM has had prior experience, not so successful, with electric cars, introducing the small EV1 in 1996 for California consumers to lease. GM killed the high-profile money-loser in 2003, a decision vilified three years later in the documentary movie, Who Killed the Electric Car?

In the 1990s and into the new millennium, GM counted heavily on large pickups and SUVs for the bulk of its profits, a reliance it came to regret in 2008 when the recession and spiking gasoline prices drove consumers toward smaller, more fuel-efficient cars.

Then, in the early years of the last decade, the automaker made a mistimed bet on developing fuel cell technology still expected to be many years from being ready for mass marketing. It then had to shift funding away from hydrogen to develop a new generation of electric cars led by the Chevrolet Volt.

The fast-track development of that plug-in hybrid allowed GM to claim credit for the most fuel-efficient car on the road, edging past Toyota Motor Corp's vaunted Prius.

Inventing a new kind of propulsion lends itself to creative inventor types and those people are not in Detroit, said John Casesa, an investment banker with Guggenheim Partners who works with venture capital firms.

GM's focus on a Silicon Valley-style approach to research comes two years after its bankruptcy and a $52 billion bailout, a turbulent period that had some venture capitalists and start-up executives crowing about how they would bury Detroit.

The venture capital bets are indicative of GM's approach to making investments for the future while still protecting what Akerson and other executives call a fortress balance sheet that includes more than $30 billion in cash.

Phil Murtaugh, CEO of electric car maker Coda Automotive and a former GM and Chrysler executive in Asia, said venture capitalists came to realize that the auto companies aren't necessarily dinosaurs run by stupid people. They're just extremely difficult, complex businesses.

Instead, venture capitalists fell in love with the global nature of the auto industry, where one small contract can result in parts in hundreds of thousands of vehicles built around the world. GM executives, meanwhile, now cite the risk of being left behind by disruptive change.

The industry is on the verge of a huge transformation that will challenge our engineering capabilities, Akerson told hundreds of engineers at a Detroit conference in April.

Somewhere, some kid is inventing the next Hewlett-Packard in a garage. We want to find him or her, he added in a reference to that technology company's humble beginnings.

GM, for instance, invested $5 million in wireless charging start-up Powermat in January with an eye toward rolling it into vehicles including the Volt. One idea: apply the technology to cordless charging for electric cars.

Of course, GM is not alone in putting money into such companies.

Global venture capital investment in transportation and energy storage through the first six months of this year is running ahead of the pace in 2010, when investments totaled $1.71 billion, according to consulting firm Cleantech Group.

HALL OF (HEATED) MIRRORS

Still, companies like GM have some way to go to convince venture capitalists who think the early success of start-ups such as electric car makers Tesla and Fisker Automotive signaled that the big U.S. automakers had lost their way.

Why have groups focused on heated mirrors, heated seats, new colors? Ray Lane, a managing partner at U.S. venture capital fund Kleiner Perkins Caufield & Byers, said in April in Detroit. Those are the not the priorities of the industry and they will not be the priorities of the generation of buyers coming up in the next 10 years.

Kleiner Perkins has a stake in Fisker and invested with GM in electric bus maker Proterra.

By not focusing fast enough on the promise of electric cars, the industry opened the door for start-ups.

Tesla will be in the Smithsonian at some point, said Alan Salzman, CEO of Tesla investor VantagePoint. Tesla may or may not be around 15 years from now, but they nonetheless clearly have served as the catalyst for the industry.

Automotive history is littered with the corpses of failed start-ups, including Preston Tucker in the 1940s, who was immortalized in a 1988 Hollywood movie starring Jeff Bridges.

However, Fisker CEO Henrik Fisker said he is focused only on building his company. I'm not here to teach the automakers anything. We're here to create a new car brand.

Girsky says GM has developed a healthy paranoia about competition from all corners, including companies outside the auto industry.

Competition is going to come from a lot of places -- the traditional guys like Ford, Honda and Volkswagen; the emerging markets guys like Geely, Chery and Tata and the new venture guys like Fisker, Tesla and Google, he said.

However, GM's restructuring has allowed it to stop worrying about survival and focus on investments that could transform the way it builds cars that are not yet even on the drawing board.

When a couple of these (investments) start to fail, Girsky said, no one's going to get shot around here.

(Additional reporting by Sarah McBride and Nichola Groom in Los Angeles, editing by Martin Howell)