GM breaks from tradition with new, untested path under CEO Mary Barra

Key Points
  •  Since becoming CEO in January 2014, Mary Barra has broken from her predecessors in running a smaller, more profitable auto company.
  • Barra announced a massive restructuring Monday, closing five factories, dropping six car models and shedding 15,000 jobs.
  • Barra was a game-changer right from the start, the first female CEO at any major automaker.
General Motors CEO Mary Barra
Getty Images

"A car for every purse and purpose." It was a simple enough mantra, but it helped General Motors' then-Chairman Alfred P. Sloan push past Ford in 1927 to become the world's largest automaker — and, for the next eight decades, it didn't look back.

Few companies better defined the concept "bigger is better." It applied not only to the ever-growing GM vehicles that, by the 1950s and 1960s, had grown to enormous lengths, but to GM's business strategy, which saw it grow into a global behemoth. Competitors such as Toyota and Volkswagen could only dream of catching up — until GM came tumbling down in the Great Recession and was forced to abandon four of its North American brands in return for a federal bailout.

The slimmer GM that emerged from Chapter 11 protection has taken a different path, especially under Mary Barra. Since becoming Sloan's latest successor as CEO in January 2014 and subsequently adding the chairman's title, Barra has adopted a very different mantra, "small is beautiful" — or profitable, at the very least.


That became readily apparent on Monday when she announced a massive restructuring of GM's North American operations, closing five factories while dropping six slow-selling passenger car models. The plan will also see GM's workforce shed about 15,000 jobs.

The shake-up reflects a variety of factors, including the massive U.S. market shift from sedans and coupes to sport utility vehicles and crossover vehicles. The classic, full-size Chevrolet Impala sedan will go away, buyers now opting for the similarly sized Chevy Terrain.

"We recognize the need to stay in front of changing market conditions and customer preferences to position our company for long-term success," Barra told reporters on a conference call Monday.

Another factor played a role in the GM cuts: the electrified and autonomous vehicles many experts believe will dominate tomorrow's transportation industry. Under Barra, the automaker has invested heavily in this brave new world, even though it remains an unanswered question how soon battery and self-driving vehicles will actually yield a profit.

"Mary Barra is pushing GM into the 21st century by proactively upending nearly every part of the U.S. business and its global operations, positioning the company to be more flexible, agile, and streamlined," said Rebecca Lindland, an executive analyst with Kelley Blue Book.

Game changer

Barra was a game changer right from the start, the first female CEO not only at General Motors but at any major automaker. But there were some who questioned whether she would steer a different course from predecessors such as Sloan.

She had, after all, grown up in a General Motors family and, even while attending the old General Motors Institute — now known as Kettering University — served as a co-op student on the factory floor. She remained loyal to GM after graduating but moved into management, rising far enough to catch the eye of CEO Dan Akerson, one of two outside CEOs who managed GM after its bankruptcy. The former telecom executive named her his successor when he retired nearly five years ago.

Barra didn't take long to show she wasn't going to follow the "business as usual" path taken by past GM chief executives. She has, for one thing, refused to chase volume for volume's sake, ceding the global sales crown that VW, Toyota and the Renault-Nissan-Mitsubishi Alliance are now battling for.

Abandoning Russia

Faced with dim prospects, the 56-year-old CEO ordered GM to abandon money-losing markets such as Russia and South Africa, even India, where the company has closed its showrooms, though its factories there will continue producing vehicles for export.

The most dramatic move came when Barra announced in March 2017 that GM's endlessly money-losing German subsidiary, Opel-Vauxhall, would be sold to France's PSA Group, the parent of Peugeot and Citroen. The three global sales leaders, Toyota, VW and the Alliance, are expected to finish 2018 with volumes of more than 10 million vehicles each. Without Opel, GM will fall short of 9 million at the current pace and, barring a dramatic shift, will be permanently out of the running.

If anything, the latest model cuts and plant closings could weaken GM's hold on the U.S. sales crown, according to industry analysts. But it's a move that had to be made, said Michelle Krebs, an executive analyst with Autotrader. "In contrast to times past, General Motors, under CEO Mary Barra, is trying to get ahead of a potential crisis by making cuts now."

The company's unexpectedly strong third-quarter results suggest that the steps being taken by Barra — and a close-knit team that includes New Zealand-born GM President Dan Ammann — are shifting in the right direction. But it's not that Barra is taking the easy way out, simply shedding money-losing operations and hoping to cut her way to profitability.

Risky propositions

Her strategy includes some risky propositions, underscored by the $1 billion purchase of Cruise Automation in 2016. The San Francisco-based start-up is taking the lead in GM's autonomous vehicle strategy and is planning to have its first self-driving vehicles enter a pilot ride-sharing program in 2019. GM is hoping to stake out a leadership position in autonomous driving, while chasing Google spinoff Waymo.

That highlights another element in the Barra strategy.

Barely two months ago, Honda agreed to invest $750 million in Cruise and will add about $2 billion more to support a joint autonomous vehicle program. Japan's big tech fund Softbank has also signed on as a Cruise investor. Honda has also inked a partnership with GM to develop and manufacture hydrogen fuel cells, a technology that could serve as an alternative to batteries in tomorrow's electric vehicles.

"The auto industry has always been a capital-intensive industry, and that's more true now than ever," said Stephanie Brinley, principal auto analyst with IHS Markit. Barra is taking "a different path."

She is not only willing to accept a smaller, albeit more profitable, GM, but also to pair up with erstwhile competitors in a bid to position the company for a very different transportation world. It's a risky strategy, but Barra will likely leave a stamp on GM like no other CEO since Sloan.

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