'Impatient' Barra reawakens spirit of crisis at GM

November 26, 2018 12:00 AM

On December 2014, nearly a year into her tenure as CEO of General Motors, Mary Barra said GM basically does "one thing":

"We build cars, trucks and crossovers."

She has spent the years since then trying to defy that bland characterization, moving GM aggressively into emerging segments such as electrification and autonomous vehicles — costly technologies with unproven business models.

It's a sign of how much the industry has changed, and how much that first year affected Barra, 56, Automotive News' 2018 Industry Leader of the Year. Weeks after shattering the industry's glass ceiling as the first woman to head a major car company, she became the public face of a crisis, a massive recall of GM small cars to fix an ignition switch with a deadly defect.

She was berated during congressional hearings in Washington and forced to confront a pattern of indecision, complacency and incompetence — laid bare in a 276-page report by outside investigators — at a company where she had spent her entire career.

Not only did she survive the ordeal, she used it as a catalyst to reshape the now-110-year-old automaker's infamously siloed operations and culture.

And as she approaches the five-year mark of her appointment as CEO, she's calling on those crisis-management skills and lessons again to help drive the company and its work force of 180,000-plus through its next transformation and further from the shadows of "old" GM.

Since that first year, Barra said this month at The New York Times' DealBook Conference, "I've become much more impatient about how we do things and how quickly we do things."

The impatience shows. Under Barra and her executive team, GM has moved decisively to exit unprofitable or slow-moving markets and has redirected those resources to emerging technologies and alternative revenue opportunities, with a more inspiring call to action: "Zero crashes. Zero emissions. Zero congestion."

GM is considered a fast mover in future technologies such as electrified and autonomous vehicles, and in using its stockpile of consumer and vehicle data to generate new revenue.

Yet the shadow of old GM, and its ignominious federally backed bankruptcy, has proved tough to outrun. Despite GM outperforming Wall Street's expectations for 14 consecutive quarters, its stock price has traded near or below the 2010 initial public offering price of $33 through much of Barra's tenure.

And so, Barra drives forward with even more urgency, determined to get ahead of the inevitable cyclical downturn and any other headwinds that might impede its progress.

"Right now, she is doing the right thing by right-sizing the company before a possible recession hits," said Michelle Krebs, executive analyst at Autotrader. "She's also done well in terms of preparing the company for the future."

Barra's 5-year track record

Notable events since Mary Barra became CEO of GM in January 2014:

2014: Weeks after Barra assumes CEO post, GM embarks on ignition switch recall, triggering a crisis involving millions of vehicles and dozens of deaths. An independent report finds patterns of failures at GM; company implements compensation program for victims and begins overhaul of engineering department to improve quality and safety

2015: GM largely exits Russian market and announces it will cease production of GM-branded cars in Indonesia, while concentrating on other emerging markets with a $5 billion investment in a new family of global vehicles

2016: Barra is elected chairman of GM. The company begins an aggressive expansion into mobility with the acquisition of Cruise Automation, launch of Maven mobility brand and $500 million investment in Lyft Inc.

2017: GM sells Opel/Vauxhall and GM Financial's European operations to PSA Group and restructures international operations; sells South Africa operations to Isuzu; ends sales in India; and ends production in Australia. GM announces plans to deploy self-driving vehicles into a ride-hailing fleet in 2019 and release 20 new all-electric vehicles globally by 2023.

2018: GM Korea restructures with expectations of returning to profitability by 2019. SoftBank Vision Fund announces plan to invest $2.25 billion in GM Cruise, followed by $2.75 billion from Honda over the next 12 years

No one, not even Barra, pretends to know when the next downturn will occur.

"All I know is we're one day closer," she said Nov. 1.

That unknown and the demands of leadership in electrification and automation have led GM to continually fine-tune operations, including exiting Europe and working to cut costs. Hours after posting blockbuster third-quarter profits, GM last month offered voluntary buyouts to roughly 18,000 salaried employees in North America and most global executives with at least 12 years of experience.

"Today, our structural costs are not aligned with the market realities nor the transformational priorities ahead," she said in a letter to employees at the time. "We must take significant actions now to address this while our company and the economy are strong."

Those cuts, which could include layoffs if not enough employees take the buyouts, are in addition to GM achieving at least $6.5 billion in cost efficiencies from 2015 to 2018.

Wall Street has lightly cheered such moves, but GM still has a tough sales job to sustain that interest and patience as the emerging businesses take time to, well, emerge.

For example, GM is widely considered a leader in autonomous vehicle development, alongside Waymo, and was expected to begin testing its autonomous vehicles this year in New York. But testing hasn't started, and Barra last month said GM is focusing its efforts in San Francisco.

Reuters also reported last month that unexpected technical challenges — including the difficulty that GM's Cruise cars have identifying whether objects are in motion — could make GM's plan to launch a driverless ride-hailing fleet on U.S. roadways next year "highly unlikely."

She and other executives have consistently said the plans remain on track for 2019, but they stress that safety will be the determining factor for when the robotaxi service launches.

"She set a course for the company, and that is so important to have a plan and have everyone marching toward that plan," Krebs said. "The big challenge is when is the payoff? They're investing in areas that no one knows when the payoff will occur."

A similar test of patience awaits GM's plan for electric vehicles, including a new EV platform in 2021 that GM says will make the vehicles profitable.

The platform is part of the automaker's target to launch 20 new battery- or hydrogen fuel cell-powered EVs globally by 2023. So far, it has announced two for China, where the government is heavily supporting the vehicles. In the U.S., meanwhile, GM is close to maxing out on federal tax incentives for purchases of its EVs.

Barra was unavailable for an interview.

‘Hard choices'

Heading into 2019, declining sales in the U.S. and China and excess production capacity will pose more near-term tests of GM's resilience and Barra's resolve. GM faces what are expected to be contentious contract negotiations with the UAW and could look to the union for help in cutting costs on the plant floors — something the UAW hasn't always been so open to considering.

GM has the poorest plant utilization rates in the U.S. Its assembly plants represented about 1 million of the 3.2 million units of underutilized capacity through October, according to Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research. "They've got problems, big problems," she said. "They've got some hard choices to make, regardless of what expectations are for the membership."

Barra last month used GM's surprisingly strong third-quarter earnings as evidence that the company is up to the challenges. But she acknowledges there's more to be done to prove she's not running the same old GM that talks fast but moves slowly.

"A lot of people lost confidence in us," Barra said during a conference last month in Detroit. "So we have to work doubly hard to earn that respect and trust back, that we can be a company that not only innovates and grows, but leads."