General Motors is about to shake up its brand in a way that goes beyond car-line marques and models. CEO Mary Barra announced today a corporate “transformation” involving vast cutbacks in production, personnel and expenses, as well as a new emphasis on streamlined development of vehicles and technologies
GM’s big new plan follows its new long-term corporate vision under Barra: “Zero Crashes, Zero Emissions, Zero Congestion.” But before the company can get close to realizing that vision, Barra has set out a lot of work for the company to do.
The aim of GM’s acceleration of its “transformation for the future”—advancing a direction first laid out in 2015—is to get ahead of both the next recession in auto sales and a fast-changing car business that promises to be dominated by trucks, SUVs, electric vehicles and autonomous driving.
Barra announced the shutdown of production at five facilities in North America, plans to cut its salaried workforce by 15 percent and the shedding of one-quarter of GM’s executives.
Among other things, these cutbacks will be accompanied by a sweeping reduction in the types and numbers of sedans that the company assembles and an even greater emphasis on its high-profit trucks and utility vehicles.
At the same time, GM emphasized that it is “evolving its global product development workforce and processes to drive world-class levels of engineering in advanced technologies, and to improve quality and speed to market.” That will include a doubling of resources allocated to autonomous vehicle and electric vehicle programs in the next two years alone.
“The actions we are taking today continue our transformation to be highly agile, resilient and profitable, while giving us the flexibility to invest in the future,” Barrra said in a statement. “We recognize the need to stay in front of changing market conditions and customer preferences to position our company for long-term success.” These actions are expected to increase annual adjusted automotive free cash flow by $6 billion by year-end 2020 on a run-rate basis.
It’s little surprise that Barra came up with something this big. Once she got past the ignition-switch fiasco after her tenure began in 2014, she began to make it clear that this wasn’t your father’s GM she was running. GM already has stunned Silicon Valley with the success of its investments in Cruise and other self-driving advances, gobsmacked the rest of the auto industry by essentially pulling out of Europe and, most recently, shocked its own white collar workforce with the ambition behind an attempt to buy out as many as 18,000 employees who have been with the company since 2006 or earlier.
But the production cutbacks will be occurring at plants that make important sedans such as the Chevrolet Volt plug-in hybrid, GM’s original battery-powered play, and the Cadillac CT6, the expensive new flagship sedan that was supposed to turn around the fortunes of GM’s luxury brand, the Chevrolet Cruze compact car and other large sedans, the Chevrolet Impala and Buick LaCrosse.
In doing so, GM is taking a page from rivals Fiat Chrysler and Ford Motor Co., which previously have cut production on sedans, as that car type has lost favor rapidly in the US market. Japanese leaders still largely are sticking with making sedans for North America.
Barra also clearly has learned from the history of her office. One of the biggest reasons GM went bankrupt in 2009 and had to be rescued by American taxpayers was decades of reluctance by previous CEOs to right-size the company for new realities, including a stubborn hesitation to scale back at all on the company’s crucial self-perception as the world’s largest and most important automaker.
Barra is taking a big axe to the GM everyone once knew, with the idea that pruning ruthlessly now will give America’s biggest automaker—and still one of its iconic companies—the best chance of avoiding the General Electric syndrome and of flourishing in a new future that promises to be much different than the past or today.