Mary Barra has only been chairman and CEO of General Motors for three years, but the company she leads today is vastly different from the one she inherited. She has tried to make it more decisive, focused, responsive and responsible.
Barra and a team that combines GM lifers and carefully selected newcomers are creating a company that’s more sensitive to its customers and more focused on profits than ever before. Their vision for GM will be in the spotlight Tuesday at the company’s annual meeting in Detroit.
“We’ve never seen anybody run GM like this. She’s breaking all the rules,” KBB.com executive analyst Rebecca Lindland said.
Phrases such as “customer first” and “good stewards of our owners’ money,” are touchstones of the culture growing within GM.
“GM used to be all about sales volume and market share,” Autotrader senior analyst Michelle Krebs said. “Now, if they don’t see a path to profitability and leadership, they get out. The goal is to sell fewer vehicles and make more money. It’s a new GM.”
Among the defining moments of Barra’s tenure:
•The company accepted responsibility, apologized and essentially wrote a blank check when a GM employee allegedly concealed faulty ignition switches that led to accidents and multiple deaths.
•It has aggressively pursued radical new technologies and developing businesses, including ridesharing, autonomous vehicles and mass-market electric cars.
•It has shut down money-losing operations in Russia, Australia, India and South Africa.
•It has sold its massive European operations to Peugeot SA, essentially exiting a huge, but unprofitable, market
•It has put data from customers at the heart of its product development and manufacturing decisions.
•Common themes among those decisions include a refusal to let problems fester and an understanding that bright ideas and catchy slogans are meaningless unless GM has the focus and finances to deliver on them.
“The easiest time to solve a problem is when it’s small,” Barra said in an exclusive interview with the Free Press. “We talk to everybody about that: Raise issues (early) so you can get the help to solve them.”
From little-known engineer to CEO
Barra was a highly regarded but little-known career engineer — GM’s global product development chief — when she was thrust into the global spotlight as the first female CEO of an automaker. Mobbed like a rock star at auto shows and press conferences, Barra put her head down and kept moving forward.
“My mom and dad raised me and my brother to believe we could do anything we set our minds to,” she said. “They were raised in the Depression, and they so believed in the American Dream.
When Barra joined GM in 1985, a female chair and CEO of GM was almost inconceivable. GM and all automakers were an old-economy boys club, very unlike the high-tech companies the 21st Century demands.
“I didn’t necessarily go, ‘I’m a woman in the working world,'” she said. “I was a person in the working world.
“I do sit here today because there were people 20 years ago who gave me career opportunities and gave me constructive feedback and allowed me to grow and took risks on me with the jobs they put me in.”
Paying that forward, she’s an avid supporter of New York-based Girls Who Code, a nonprofit group encouraging middle and high school girls to learn computer science. Barra helped introduce the program to metro Detroit schools and has visited some of their meetings.
“I’m a huge fan of Mary Barra,” Girls Who Code founder Reshma Saujani said. “In some ways she’s the ultimate girl who codes.”
GM global product development and purchasing boss Mark Reuss worked alongside Barra for decades. They watched GM management kick problems down the road and make one money-losing decision after another. When the government-overseen bankruptcy gave GM a fresh start after the Great Recession, the two fast-rising executives promised themselves they would not repeat those mistakes.
“GM came out of bankruptcy with a clean slate, none of the baggage that had crippled them,” Maryann Keller, principal at analyst Maryann Keller & Associates, said. “The only liability was cultural issues that allowed them to pretend the bankruptcy had been because of the credit crisis, not management’s own bad decisions.”
Setting a new course
Bolstered by GM President Dan Ammann’s financial analysis, Barra set a new course, abandoning some longtime businesses that made little money, strengthening those positioned to grow and committing GM to new areas including autonomous vehicles, car-sharing and alternative energy.
“One of the most important things leaders do is deploy capital,” Barra said. “You’ve got to set strategy and deploy capital. We have been systematically going through the business, region by region and segment by segment, asking: Do we have a path to profitability, and is this the best place for us to allocate this capital?”
While shedding old-line businesses with little profit potential, GM has also invested in technologies and partnerships that may not pay off for years, including autonomous vehicles and the Maven car-sharing service.
“General Motors is a different company under Mary Barra,” Apple vice president of product marketing Greg Joswiak said. “She realized the importance of technology and put an incredible team in place. Her approach is night and day from the previous GM.”
A four-cornered graphic tool Ammann created illustrates the decision-making process. From left to right, the horizontal axis shows profit potential from low to high. The vertical axis ranks the strength of GM’s brands, products and technologies from high to low.
“What we’re trying to do is look at our entire business to see where our really strong franchises are,” Barra said. “How do we make them stronger? Where are areas that aren’t performing the way we want them to? How do we get them to the right quadrant, and where are the opportunities we’re going to place some bets?”
That analysis led GM to shed money-losing operations around the world, despite the fact that those decisions put regaining the company’s longtime status as the world’s largest automaker out of reach.
For decades, GM defined itself largely by the fact that it was the world’s largest automaker. Ending production in Europe took GM out of a three-way race with Toyota and Volkswagen for No. 1.
Barra’s comfortable with that: “Biggest doesn’t mean best. We don’t win until our customers say we win. They need to decide to buy our products.”
It’s hard to imagine a more fundamental shift in emphasis at a company that once expected its executives to wear lapel pins with the figure for its target market share to communicate its priorities.
“GM is redefining what competitiveness is,” Keller said. “Traditional car people focused on being biggest. They sacrificed internal discipline to chase sales leadership.
“Well, putting a factory in a country where you can’t make money is just foolish. How do you make the argument to continue billion-dollar losses?”
Barra says the goal is to be “the most valued automotive company,” a concept that goes beyond sales or stock value.
“It means most valued by all the stakeholders we partner with to do business, whether it’s our suppliers, dealers, employees, unions or the communities where we do business,” she said. “It means suppliers bring their best technology to us first. Employees want to work here. Dealers focus on our brands.
“All of that creates the most value, which then allows us to have the right return for our shareholders.”
That vision is at odds with a proposal by hedge fund manager David Einhorn’s Greenlight Capital to create two classes of GM common stock. Einhorn has said the plan would unlock substantially more value for GM stockholders. GM and key institutional investors are resisting the idea, saying it would strip the company of money it will need to maintain a high level of investment during the next sales downturn.
The issue could produce a potentially contentious shareholders meeting next week even though many analysts have said the move would be a bad idea.
“This is a cyclical business,” Keller said. “You have to continue to invest. Let’s not play goofy financial engineering games.
“Eventually, GM’s stock will reflect that it’s a better-managed company.”
The ignition switch crisis, in which an employee allegedly hid the truth about dangerously defective parts for years, provided the first window on another side of the new GM.
Barra, Reuss and other leaders had been working on a new set of company values “focused on customers, relationships and excellence” for a couple of years before the crisis broke.
Those principles guided GM’s response to the revelations that dangerous faults had been concealed from customers.
“It’s easy to say ‘Here’s our values,’ or ‘Here’s our mission statement. Let’s put it on a wall. Let’s all be excited,’” Barra said. “But it’s living it, and it’s living it when it’s hard” that matters. “So one of the things I (say) to employees all the time is: ‘We are going to do the right thing. We are going to deliver value, even when it’s hard.’”
Barra’s presentations to employees and the press when the crisis blew up have become textbook cases other companies cite in leadership and crisis-management seminars.
“As we worked through the recall, we were guided by three principals,” she said.
“We are going to do what’s right for the customer.
“We are going to do everything in our power to make sure this never happens again.
“We’re going to be transparent.”
There are still some critics of GM’s response and attempts to avoid lawsuits filed before its 2009 bankruptcy filing. Those cases are still working though the courts. Despite those outstanding issues, GM’s apparent honesty and eagerness to get to the bottom of the issue served it well, particularly in contrast with the foot-dragging and obfuscation that cost Volkswagen billions of dollars in fines for cheating on emissions tests.
“The ignition switch recall was a trial by fire, and she came out brilliantly: Strong and decisive,” KBB’s Lindland said. “She has managed the hell out of that company.”
GM still has to navigate the U.S. market’s historic shift from cars to SUVs and trucks and the rise of technologies such as autonomous and electric vehicles and vehicle sharing. The answers to those and other questions will be shaped by a data-driven process the company calls customer first. In essence, it aims to end the days when engineers thought they knew what buyers wanted more than the buyers themselves did.
“You have to put aside your personal opinions and figure out what will get people really excited and create vehicles they’ve got to have,” Pam Fletcher, executive chief engineer of global and autonomous vehicles, said. Citing Super Cruise, an advanced new autonomous driving system that goes on sale in the 2018 Cadillac CT6 this fall, she said, “There’s a lot of things we could do technically, but in the end it’s supposed to be a feature that is a driver-assistant and keeps you safe. We get squarely focused on that and begin to take away some things that might demonstrate what we’re technically capable of but mean nothing to the customer.”
“It’s a big mistake if you just focus on the technology. You’ve got to have your eye on the prize. You have to have your eye on what is it that we’re going to do for a customer that they’ll say, ‘I’ve got to have that.’ That’s what you have to focus on. The technology is just the tool you use to deliver that.”
The same approach guided development of GM’s hot-selling Chevrolet Colorado and GMC Canyon midsize pickups. Midsize pickups had become a stepchild of the auto industry, neglected in favor of larger trucks such as the Chevy Silverado and Ford F-150.
“The customer had abandoned the segment because it wasn’t giving them the features they wanted,” said Anita Burke, GM chief engineer of global midsize pickups. “They wanted versatility of pickup box, but not to give up comfort and features that are in every other vehicle.” GM’s research showed customers who’d like a smaller pickup also wanted fuel economy, comfort and the features their cars and small SUVs delivered. The midsize pickup segment nearly doubled after the Colorado and Canyon arrived, and GM was a leader in a segment where it’d previously been an afterthought.
“If you provide the customer what they want and deserve, they shall come,” Burke said. “We’re very proud that we set the benchmark for the segment” by adding models such as a powerful and fuel-efficient diesel and the new ZR2 performance off-roader.
The data goes to product development teams and the assembly plants, global manufacturing boss Alicia Boler Davis said. The assembly plant gets information about every warranty claim brought to a dealer within 24 hours.
“If there’s an issue, we look to see what we can do to make it better immediately,” said Davis, who helped create the process that delivers information on quality and customer service to manufacturing and product development. “We see the same data as product development. We’re the first line of defense.”
Next, GM must show that the approach will let it catch up in full-size pickups and SUVs, areas where Ford has established a significant lead with its new aluminum-bodied models, said Eric Noble, president of Carlab, an Orange, Calif., consultant. “Having a relevant metric to make R&D decisions is good, and the investments in autonomy and mapping look very prudent. Their investment level and timing in big pickups and full-size utilities lags.”
That test should come next year, when GM’s all-new full-size pickups are expected to roll out of the factory to face the F-150.
If they succeed, the biggest piece of the North American profit stream will be in place, paving the way to execute the rest of Barra’s vision for tomorrow’s General Motors.
Mark Phelan, Detroit Fress Press
Copyright Gannett 2017