GM Business Strategy Brings Laser Focus On Future Opportunities
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Armchair CEOs love to bash Mary Barra, especially when it comes to the direction the automaker is taking in refocusing the GM business strategy on electric vehicles and autonomous driving technology. It’s a tired old argument we’ve seen countless times before in varying degrees of lucidity. But beyond the internet commentary criticism, Barra’s move towards EVs and AVs doesn’t come as some haphazard, spur-of-the-moment decision. Rather, it’s a strategy that looks to capitalize on future opportunities before it’s too late.
Indeed, the heart of the matter doesn’t lie in the next quarter’s sales numbers or earnings, or pleasing naysayers discontent with the interior of the new Chevrolet Silverado or GMC Sierra. The real fight lies much further down the road.
Barra addressed the controversial GM business strategy in a recent interview with Bloomberg, with the following being the takeaway quote: “If we don’t take the steps to keep the company healthy for not just the next few years but the next few decades, then shame on me,” she said.
Put another way, the modern automotive climate is no place for the timid, as the cost of doing nothing could be far greater than doing something.
Huge changes are afoot, and not just in the GM business strategy. Technology progression has already affected massive change and disrupted the auto industry to the core, but the bigger changes remain just over the horizon. Every major automaker knows this full well.
Thus, the tough question is this: what’s the opportunity cost of standing still? Or better yet, what’s the cost of not doing something fast enough? What happens to GM in that scenario?
We already know the cost of cutting models like the Chevrolet Cruze, or Buick LaCrosse, or Chevrolet Sonic. In reality, GM was either no longer making a profit on these vehicles, or not making a profit substantial enough to warrant the effort invested into them. And, as we’ve covered previously, GM is no longer the “everything for everyone” company that it was back in the 20th century. Nowadays, the compact sedan segment is dominated by the Japanese automakers, so why should GM struggle to compete in a contracting segment when it can instead make moves to dominate in a future segment instead?
But it goes a step further. In fact, killing off unprofitable models permeates every aspect of GM as a company, and becomes an integral part to the GM business strategy, particularly when it comes to human resources. For example, rather than devoting engineers – a resource that costs decent amounts of money and is increasingly difficult to attract – to make the Cruze more competitive with the Honda Civic and Toyota Corolla, why not allocate that talent to a future opportunity, such as EVs? The same can be said of employees every level, from the program managers, to production, to supply chain management, to accounting.
Rather than slog through a segment where it is obviously losing, GM has elected to instead move faster towards a segment where it could actually win.
No starting gun was fired, but make no mistake – the race is on.
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Who wrote this Barra’s publicist? Please, she has done a crap job. If she was a man she would be under more pressure. Since she is a woman, she gets a pass most times. GM failed to capitalize 10 ways till Tuesday because of her incompetence. Cadillac anyone?
+10.
Reading it is nauseating. It seems directly lifted from some type of press release or shareholders’ notes or minutes.
Alex, I see your always on the lookout to hire professional automotive journalists. Let me know when you hire one!
if she were a man, there would be a lot less pressure. who are you trying to fool? how many incompetent male ceo’s did it take to drive gm into a ditch?
Only one, ROGER SMITH!
“For example, rather than devoting engineers – a resource that costs decent amounts of money and is increasingly difficult to attract – to make the Cruze more competitive with the Honda Civic and Toyota Corolla, why not allocate that talent to a future opportunity, such as EVs?”
Aha…what makes the author think that relocating the same people that created failed Cruze into another corner of the factory will make them create a winner? That is the most asinine way of thinking I have come across. The “talent” that couldn’t create a winner will all of the sudden pull you through into the future..lol
There a obvious reasons why vehicles can’t compete in its segments. They’re NOT GOOD ENOUGH.
Reminds me of how Governments function: ‘Oh…you can’t do your job? Let’s put you somewhere else you can fail at your new job’.
“Rather than slog through a segment where it is obviously losing, GM has elected to instead move faster towards a segment where it could actually win”
Rather than trying to fix what’s broken and put out a winner let’s go over there and create something new and hope everyone else creates something worse….lol….that’s a real winner strategy right there!
You may have one of the most one track minds that I’ve ever encountered on the internet… No logical/successful company would allocate the same failing resources from one corner of the ring to the other. It’s not about moving literal people into an area of their non-expertise, it’s about refocusing capital investment from a low performing segment to a potentially high performing segment and spending that capital investment efficiently to develop that high performer which grants sustainability and high profitability. You wouldn’t take an under performing carpenter and put him under the hood of your car to work on it, so why would you take a team from one segment to develop a completely unrelated segment and pray for it to work out – the answer is you would not. I challenge you to think next time before you strap on your keyboard armor and go to war.
I challenge you to read AND try to understand what you’ve just read.
Sorry, if you cannot master an entry-level vehicle, how do you plan on leapfroging everyone to be the world’s leader in evs? Honda perfected the motorcycle engine before building motorcycles and later cars. They didn’t take a cheap engine and attach it to a motorcycle in hopes the latter would mask the failure of the first.
Actually Honda did take a cheap engine, And put it on a bike. After World War II Honda took generators that were formally used to power communications equipment. And installed them on bicycles.
Yet General Motors does just what you say Luke, on a regular basis.
If she was a man, she would have been fired by now.
for what? gm is making too much money? as i recall, gm is recording record profits. if you forgot, the UAW will be more than happy to remind you.
Remember Roger Smith’s GM posted record profits before he stated his handiwork. GM’s recor profits are the results of cost cutting. There is only so much you can cut and then increased revenue has to occur. However with holes in the product line through cancellations and delays, this will not happen. Result: GM’s profits will be down significantly in the next few years. Toss in a recession and we may be looking at losses.
better tell that to the UAW about the upcoming recession.
maybe then they’ll understand why gm doesn’t want to be strangled by an expensive contract when profits are declining as you suggest.
the UAW wouldn’t want gm to be forced to pay workers it doesn’t need in a recession would they?
unless gm has some surprises up its sleeve, i don’t see how the jump to EVs makes things easier.
as it is, EVs are money losers. it was reported gm loses about 9K on each bolt sold. unlike trucks, gm will be competing in the EV space with plenty of competitors. more competitors means lower margins. of course that is assuming EVs actually become profitable.
and gm isn’t the only one seeing EVs as their chance to get ahead. there is another competitor that is much bigger with deeper pockets and that is china.
so in a market with plenty of competitors, how is gm going to differentiate itself from the rest of the crowd? if it can’t, this will be like the cruze all over again.
Great leaders have the vision and conviction to make an idea a reality….and in doing so instill the confidence and enthusiasm to make it so.
That’s why Dick Tracy’s “Wrist Watch Radio Phone” looks really old-fashion to today’s teenagers.
Adapt, take risks and grow.(…or die of irrelevancy.)
Anything less is letting “the fear of the unknown” call the shots.
Too bad GM does not have any of these leaders let alone any leadership…
Well then that’s more than enough reason for you to apply for the “job”.
Put all your posted vision and introspection on the Industry and General Motors to work.
Keep us posted on how it goes….
Unfortunately Barra is the second coming of Roger Smith, whose leadership virtually distroyed GM in the 80’s.
Didn’t Unexpected oil crisis actual destroy our be loved big 3 ?
I think a lot of people greatly underestimate Mary Barra. And she’s right that these changes need to be made to keep the company alive.
There’s a reason this strike is still going on and I strongly suspect it’s because she won’t accept the quick and easy fix, which would be giving the union what they want.
People are generally unwilling to accept change, and there are a lot of people living in the past.
Mary Barra is a failed CEO period. It took her four years to realize there were issues at GM? If GM is to be a “tech” company, she would realize that a disgruntled workforce and salaried people playing CYA every day to hold their jobs is not a good way to build this “technology” company. The sooner she ousted the better.
“…killing off unprofitable models permeates every aspect of GM as a company, and becomes an integral part to the GM business strategy…”
Wow, how about finding a way to make unprofitable models profitable, and figuring how to make a model better and best in class instead of just killing it off?? Runaway Mary, Machete Mary. All well-founded nicknames for GM’s CEO.
Nice knowing you, Camaro.
Frank Sinatra used to sing
Love and marriage, love and marriage
They go together like a horse and carriage
This I tell you, brother
You can’t have one without the other.
“You can’t have one without the other” is why AEVs will be tomorrow’s car. Barra recognises this.
Frank Sinatra used to sing. No he didn’t. He was like the Elvis Costello of his generation. Great songwriter lousy Singer.
I believe that, again, GM will enter too late on the electric cars’ market, thanks to Mary Barra and her team… and now, the UAW!
The automotive industry is a cyclical business, and unfortunately GM isn’t aware of that fact. Let’s look at GM v Toyota in a couple of key categories. In the midsize BOF category, GM once offered a four door SUV across almost every brand. The Chevy Trailblazer and GMC Envoy had sister vehicles in both the Buick and Oldsmobile lines. When sales in this category were affected by the downturn in the economy and the rise in gas prices, GM decided to abandon the market and close the Moraine Assembly Plant that built the vehicles. Toyota has the four runner, a similar vehicle the the Trailblazer/Envoy twins, that they’ve been building (and improving) for decades. When the economy took a downturn did Toyota kill the vehicle or cut production? No, the suffered through a few bad years of sales (averaging only about 50K for several years) before volume has rebounded to over 100,000 units annually. GM did this with their minivans and their Doraville Assembly Plant, They did it with their last gen of Colorado/Canyon Trucks and the Shreveport Assembly Plant, and now they’ve continued to make these mistakes with the Cruze at Lordstown and the Volt at DHAM. GM is fighting (quite poorly) a war of attrition where they simply slash and burn to eliminate costs and they continue to bleed market share. Toyota kept the Tacoma and they sell nearly double what the Colorado/Canyon twins sell, even though the wentzville assembly plant runs three shifts and often six days per week. On a trip to the west coast this past summer, I noted Toyota Prius’ being used by all the taxi companie – these things were everywhere. I saw one each of the Volt and Bolt the entire time I was out there. What was GM doing for marketing these things to people/companies that obviously want gas/elec hybrids or all electric cars? I would have to say not a damn thing. With gas prices being very low, does anyone think that Toyota is going to abandon the Prius or Corolla? Of course not. Toyota will continue to improve both vehicles putting GM behind the product 8 ball the next time trends move back to small cars. I guess I shouldn’t worry though as GM thinks people will continue to buy big trucks and SUVs even if gas moves back up over $4/gallon. I’m a truck guy, I’ve owned 7 full size trucks since 1999 but I couldn’t stomach the $100 fill ups back in 2010 so I jumped into an Equinox that got 30+ miles on the freeway. What I know of flexibility in the assembly plants, I have to believe that GM hates it. I also have to believe that GM is only happy with plants building on type of vehicle and doing it around the clock. What would I do different if I were the CEO? I would move the Cruze to DHAM and would never have pulled the plug on the Buick LaCrosse and Chevy Volt. DHAM was GM’s most flexible plant but didn’t have a volume vehicle to build (The Impala being built at OSH as well). The Cruze would have moved DHAM to three shifts as their VPH is lower than Lordstown, instead GM is ceding market to the Japanese/Koreans. GM should have a mid size BOF SUV that would appeal to men. I believe that most men would prefer something rugged, like the fourrunner, to a crossover. You could move the full size van out of Wentzville and have these SUVs built on same platform as Colorado/Canyon. A new full size van should go to Oshawa truck, the current van is only about 20 years behind the competition. Why Oshawa? It’s a full size BOF Plant with stamping and slated to close. The van would probably only fill one shift there, so instead of running Arlington or Flint into the ground ( and their people) you could also move some Tahoe/Suburban volume, or full size truck volume, there. I hear of constant breakdowns/manpower issues at Arlington as the plant never has time for maintenance. I know the minivan market isn’t all that glamorous, but it allows FCA to run their Windsor Assembly Plant on three shifts (yes, I know it’s slated to cut a shift) but why not bring in a minivan and build it at two shift Fairfax? Now that leaves us with empty Lordstown…what to do, what to do?
Thank you for posting. People need to read how many aspects of GM’s management leave a lot to be desired. GM has been plagued by short-term thinking (as a lot of the auto industry). Witness 10 years ago. We were told that full-size pickup and SUV sales have peaked, and we had to close Pontiac and Janesville and retool Orion for subcompact cars. We were told the market for RWD-based compact and midsize SUVs is dead. Now we are told that there is not enough capacity to satisfy full-size pickup production and you cannot give away a Sonic these days. This type of short-term thinking has been a cancer to Detroit’s Big Three for decades, but not as acute as GM.
Lots of criticism and comment but what companies have any of you run lately?
Companies have had to take new approaches to how they do business as market and people change. Many diversified and had to go back to the core business.
While GM of the past pulled deals like Saturn and lost billions the EV deal is different.
The push for technology is this. While EV products will not take over they will be a growing dominate force in the industry. It is not a matter of if you chose to have them but you will have to have them as a percentage of you company of you will be closed out of some markets.
GM has taken this approach and started to invest. They are investing into EV technology that many others can not afford to do. By doing this GM can take a lead on where this goes and either share cost with partners or even sell or license technology to other brands.
This is like Apple. Apple is not as much a MFG as it is a tech company and developer. They have outside companies like Foxconn build their products they develop.
While I do not see GM leaving MFG totally I do see them going into developing technology and selling or licensing it to others as that is where the money is.
Intel does not build computers but they develop technology as that is where the real money is. They have chips in most computers of all brands.
We saw Fords latest EV leaving the GM proving grounds. That is a sign where they are sharing cost or are doing work for Ford.
We saw this on the transmissions as GM started with BMW. BMW paid GM for a transmission for their cars. They had exclusive use for two years and then the rights opened to GM who got a new transmission for Cadillac for free as BMW paid for it.
GM is focused where the money is for them. They will play to their strengths. While traditionalist will crow it really is the way forward.
While others struggle and are looking for partners to survive like Ford GM is still in the drivers seat able to be the lead in any and all deals.
Note while GM is talking EV they still have plans for the ICE for 2050 and possibly longer. It is not going away yet.
While GM is promoting technology they still will keep with the solid markets they are in.
The fact is GM right now could build the best small car on the market bar none and odds are it would still have trouble breaking into the top 3 cars mostly due to price. Their legacy labor cost are still a problem so higher profit models need to be their focus.
This is far from the Roger Smith Era. If it was the same they would have settle the strike already with a very bad deal for GM.
My take,
I think Mary is doing what she has to in order to be a successful company ” today ”
Scott3, I mean C8.R asks how many successful companies have you ran lately ?
The answer ONE !!! My company !!!
I do agree with scott3 AKA C8.R but will add some thumbs down meat !!
The GM of today is a numbers company, they have to be !! But where they spend their numbers is a management decision ! Maybe not the end product but the numbers it took to get the end product !!
Ask how I would do it different ?
1 team focused on the Japanese small to mid sedan —– numbers —— right !!!!! You cant make one vehicle to compete, not one !!
2 One them focused on LUXURY, all luxury, The luxury truck, ( huge profit ) the luxury SUV, ( huge profit ) the luxury sedan ( huge profit ) !!! It doesn’t matter if they are Cadillac or GMC, someone should make one at GM !!!
3 The grocery getter, enough said, and that is the GM focus of today, the grocery getter !!!
4 EV everything !!
5 Get rid of the union, waste of numbers for the company, waste of numbers for the worker !!
6 Get rid of the dealers, waste of numbers for the company, waste of numbers for the customer !!
The badging and naming is irrelevant, today, the main ” number” customer doesn’t link a product to an old ” boomer ” name ! Its like the argument over Cadillac names or letter – number. You are already calling it a Cadillac, that’s its name !! Its a GM – Cadillac, GM – Buick, GM – Chevrolet, GM – GMC, and whatever !!
Numbers company, Mary knows where the numbers are !! However she does not know how to get them !!! She and the numbers people she has hired to keep track of the numbers, are numbers people, not customer focused product offering people !!!
Where do the numbers come from ? Dealer ? Customer ? Product offering ? Value ?
Dealer – is a numbers tool for GM. Look at the truck numbers of last quarter, is it trucks sold to a Dealer ? or trucks sold to Customers ? You see, they all do it to make the numbers whatever they want !!! Trouble is. it catches up to you at some point !! But with the strike, trucks aren’t being made so, the numbers will work out, or will be closer !! And at 25% off sure GM can sell a vehicle or truck, even with a subpar interior, its money value !!
Value, One Japanese competitor, sedan !! GM cant make one !!!! Its design and service !! Not rocket science !! Its just like the truck numbers, once you get them down 25% the customer can live with the value !!!! GM is hedging customer desire and customer support with 25% price reduction !! on most GM vehicles !!! Is GM still profiting ? Maybe ? Its a numbers game !!! reduce prices hear, cut costs there, sell some capital !! POW , still profitable !!! This is a downsizing of ICE !! plain and simple !!But if GM would offer just a small amount ” more ” I feel, they could capitalize even more !! The value of the service !! and the value of the product, need to be slightly better !! And this is where GM and Mary are lacking !! Im not sure if its Mark or the numbers people, but the products are juuuuuuussssst ” good enough ” If the Bolt was a WOW, it would sell, the vehicle is good, but just ” good enough “. If the truck interior was WOW, it would sell, the truck is good, but just ” good enough “. If the onslaught of Cadillacs were WOW, they would sell, the vehicles are good, but just ” good enough ” And GM has all the parts and talent to make it happen, someone is just telling them ” good enough ” WHO ?
And why would anyone think the future products, whatever they are would be any different ?
New product released – behind or equal to current competition !!
How will that trend stop ?
No matter what the future product is !!
Those numbers will run out, you can only sell them once, you can only downsize once, you can only cut costs once.
You will need to move product at some point for numbers !!
To a Consumer, sure they are fickle, but when everything you offer is just ” good enough ” they will pass you by !!
The Consumer still wants to dream !!
And the Consumer never dreams ” good enough ” They already have that, they are getting by they live the ” good enough ” life.
They want WOW
In my opinion
Might consider that Tesla is a Tech company that is trying to be a MFG. It is not going all that easy.
Tesla may have done much better profit wise if they has just #1 sold or licensed their tech to automakers and just collect the money while they build the cars. #2 They farm out the MFG to another company to build the cars for them.
The problem is not the technology but the problem is MFG is not easy, cheap or profitable. It is why the stock prices are so low at most automakers as they are not going to make mega profits from MFG.
Nice try Scot3