Why This General Motors Restructuring Effort Could Be Different Than Before
7
Sponsored Links
If you look at the automotive industry, you see automakers raking in profits. However, General Motors and others are trying to position themselves before the market sours, which it almost always does after years of booming growth. The auto industry is cyclical, and everybody seems to recognize that. There’s a market contraction coming, and General Motors, along with its competitors are racing to position themselves to survive the storm. That’s why GM is offering 18,000 salaried employees voluntary buyouts by the end of the year.
“Our structural costs are not aligned with the market realities nor the transformational priorities ahead,” CEO Mary Barra wrote employees in a memo on October 31, according to The Detroit News. “Profitability is only part of what’s required for our transformation. To achieve what this company is truly capable of—and to win—we need to be even more agile and faster to market. And we need to do all of that against a backdrop where those outside our company are skeptical of our ability to manage through an eventual downturn in the economy—skepticism we see in our stock price, which has recently been trading below our initial public offering price.”
The company’s restructuring and transformation is about more than saving money. The automaker is also focusing on new technologies such as vehicle electrification and self-driving cars. There’s the Chevy Bolt, which could be the company’s autonomous vehicle platform. GM has a stake in Lyft while it acquired Cruise Automation to help with its autonomous vehicle R&D. The Detroit Automaker also inked a partnership with Honda for electric vehicles.
This long-term thinking for the company stems from what happened nearly a decade ago—GM’s historic bankruptcy filing and emergence from financial uncertainty. The bad habits of GM are said to have died then. No longer does the company want to look at growth opportunities in traditional automotive spaces. Before, GM expanded in Eastern Europe, China, and India, according to the report, in the pursuit of scale and profits. However, even those traditional growth avenues carry uncertainties the automaker never wants to experience again.
Barra’s wet blanket of an announcement came the same day as GM posted stronger-than-expected third-quarter earnings. That right there shows how today’s General Motors is different from the one post-bankruptcy. The company doesn’t want to become complacent again, which was one of the factors in the company’s financial woes a decade ago. We’ll have to wait and see if GM’s radical restructuring proves effective this time.
- Sweepstakes Of The Month: Win a 2023 Corvette Z06 Convertible. Details here.
Sponsored Links
“That right there shows how today’s General Motors is different from the one post-bankruptcy.”
Don’t you mean “…is different than it was pre-bankruptcy”?
Trying to change with the times is really tough, especially with entrenched thinking, investor naysayers, and traditional cash cows (trucks) that will need to change to keep up with new competitors. Hopefully Mary Barra can help the company leverage its many strengths to not only survive, but lead the industry.
I’m definitely nervous, though, given reports like this:
http://gmauthority.com/blog/2018/11/gm-says-no-to-electric-self-driving-pickups-for-decades/
Not only is the decision contrary to what Mary Barra has been saying, it’s idiotic that VPs are making statements like that on the record. Unless it’s misinformation (doubtful), why would anyone at GM lay out their intentions on this subject? Keep the competition guessing. Roll out products that clearly meet the “Zero Crashes, Zero Emissions, Zero Congestion” goal, but don’t talk about future product.
“Hopefully Mary Barra can help the company leverage its many strengths to not only survive, but lead the industry.” I’m not holding my breath. I have little confidence left in her long-term vision.
Regarding the VP’s statements, that just shows the disconnect between the executive office and the rest of the organization. Ms. Barra comes from HR- worlds different from designing and engineering a vehicle. The VP was spot-on with his comments. Barra’s vision has been overblown. She is a PR mouthpiece telling Wall Street what they want to hear; meanwhile customers can put up with cheap materials in the new GM car they bought because GM wants to save money, and dealers can deal with holes in the product lineup that the competitors are happily filling, employees can work with outdated equipment at the plants because GM is cutting capital spending to save a buck, and market share is falling because GM wants to save a buck or two with incentive spending.
IMHO Ford and FCA have better management and pulse on the market than GM. It will be interesting to see what plan Barra and company come up with when the cost cutting no longer has an effect.
@Tigger, Ford hire a furniture salesman as CEO which is a joke, and FCA still use old Mercedes chassis in their sedan, good engineering vision errr
Mary worked 2 years in HR. Other than those years she was factory or product. Don’t let facts get in your way though. It was hard to look that up.
Yet FCA stock is struggling at $16 and Fordcis at risk at $9 per share.
Ford is in real trouble now with slipping truck sales as their profit per unit shrinks due to higher cost of materials in the aluminum they are using.
The Fact is everyone is struggling with a contracting markets, high cost of development. Etc. GM is one of the few that has maintained ground and put a lot of work into contained cost.
Mary has a very diverse background at GM she was more than HR or just a PR move.
The one area GM still needs work in is to work as one as we still see some areas working out of sync with other parts.
The real trouble today is automakers need to find different ways to make money than just cars. GM is moving back to technology and contracting with other automakers to share this tech or develop it. No matter if self driving cars ever become reality much of the technology is finding use in the present cars in driving aides.
GM is at a cross road soon and will have to decide what to do with the cars at Chevy and. Buick in North America. If they can not make money with them built here they will have to import them or just kill them. Call it a mistake if you like but if you are losing money that is unacceptable. Even not making enough profit today is seen as unacceptable. Hence the move to the CUV market that has a much greater return on investment.
This is how you make GM more profitable, add active safety features standard to every GM vehicle and offer free wifi (it’s only $20/mo) for 3 years or over the life of the lease for all Caddys and top trim Buicks and GMCs…
With better quality material on all lineup, so people can perceived that the quality/reability on GM is getting better.