Long the world's largest automaker, General Motors has watched an assortment of key competitors push past it in the global sales race this past decade and may soon find itself slipping into the No. 5 spot behind the likes of Volkswagen, Toyota and the company that will be created by the soon-to-merge Fiat Chrysler and PSA.
While the Detroit giant initially put up a fight to hang onto its global sales crown, GM has now abandoned its longtime strategy of growth, almost no matter what the cost. Since taking the helm about six years ago, CEO Mary Barra has followed a strategy that might be referred to as one of strategic retrenchment, abandoning a number of once-critical markets, including Western Europe, India and, most recently, Russia.
"They're in retreat, peeling off the places where they don't think they can make money for the foreseeable future," said Joe Phillippi, founder and senior analyst at AutoTrends Consulting.
General Motors lost its position as the world's bestselling automaker in the run-up to its 2009 bankruptcy, the company emerging from Chapter 11 protection having abandoned four of its North American brands: Hummer, Pontiac, Saab and Saturn. It briefly regained the lead from Toyota when the 2011 tsunami led to major production cuts by all Japanese automakers. A year later, Toyota was back on top and, since then, GM has fallen further and further behind Volkswagen and the Renault-Nissan-Mitsubishi Alliance, as well.
At its peak in 2016, the Detroit automaker's global volume hit a record 10.01 million, declining to 8.38 million just two years later. It is expected to continue that decline in 2019 and beyond.
GM officials declined to comment for this story, but they pointed to statements Barra has made in recent years.
In May 2017, when GM announced plans to halt retail sales in South Africa and India, she explained that, "we are transforming our business (to become) a more focused and disciplined company." Barra added that, "Globally, we are now in the right markets to drive profitability, strengthen our business performance and capitalize on growth opportunities for the long term. We will continue to optimize our operations market by market to further improve our competitiveness and cost base."
Since Henry Ford opened his first foreign assembly operation in Canada a century ago, the auto industry has embraced global growth, something that helped GM surge past its crosstown rival.
Alfred P. Sloan, the financial wizard who transformed a struggling company into the forerunner of today's General Motors, was an active proponent of globalization, whether through organic growth or acquisitions, as was the case when it acquired Germany's floundering Opel in 1929.
While GM isn't the only automaker to walk away from a money-losing operation – Hyundai, for example, announced it was pulling out of Japan in 2009 after determining it would never make a real dent in the historically closed market – global growth remains an industry mantra. Since the Chinese automotive market began to open two decades ago, virtually every major global manufacturer has staked out a presence there.
Automakers, said Phillippi, are loathe to give up a potentially profitable market to competitors. There is a constant chase for economies of scale. Even as he was completing the merger of Fiat and Chrysler, founding CEO Sergio Marchionne was determined to line up a third global partner – something his successor, Mike Manley appears poised to achieve.
But GM appears to be rethinking the benefits of ever-increasing volume, especially if it comes from markets that just don't deliver on expectations. Russia is just the latest example.
As recently as 2012, GM announced plans to invest $1 billion to double the size of its joint venture plant in St. Petersburg, bringing capacity to 230,000 vehicles annually. Along with the plant it had set up in Togliatti, 500 miles outside Moscow, GM aimed for annual production of around 350,000 vehicles.
The automaker, said former Chairman and CEO Dan Akerson, was "embarking on a new era in Russia, one of the world's fastest-growing vehicle markets, as part of our strategy to build where we sell."
But GM's timing couldn't have been worse. Russian car sales peaked that same year at 3.1 million and what began as a modest downturn soon turned into a rout. With the country's economy hammered by Western sanctions, sales plunged to just 1.4 million in 2015. After staging a modest rebound, sales again are tumbling – the numbers down 6.4% for the first 11 months of this year from 1.8 million vehicles sold in 2018.
The Detroit automaker had already moved to pull its Opel brand out of Russia in 2015 and will now halt production of Chevrolet models in Togliatti, selling its stake in the plant to partner Avtovaz, a subsidiary of France's Groupe Renault, Avtovaz announced last week.
The Russian retreat follows similar moves in a number of other markets:
- In 2013, that meant dropping the Chevrolet brand in Europe due to slow sales;
- Two years later, it stopped assembling vehicles locally in Indonesia, though it retained a retail sales network;
- In 2017, it shuttered its last assembly plant in Australia, though sales continue under the Holden brand using import models;
- The same year, GM pulled out of South Africa and closed its dealer network in India – though it continues to produce vehicles on the subcontinent;
- In 2018, the automaker warned it might stop production in South Korea, eventually closing just one plant after receiving concessions from workers and the government.
GM's biggest retrenchment came in August 2017 when it completed the sale of its German-based Opel and Vauxhall brands to France's PSA. Though the Detroit automaker retains a modest presence there with its Cadillac brand, the sale effectively ended its presence in Western Europe.
The decision surprised few considering GM had been losing money in that market for two decades and said it saw little upside potential despite repeated restructuring efforts.
Weakening sales and ongoing losses took the blame for GM's decision to pull out of other markets like South Africa and India, as well.
There has been speculation that GM isn't done scaling back. The company continues to struggle in a number of other markets, including various parts of Latin America.
Though it has declined to comment on whether it could order further retrenchment, Barra clearly seemed to signal that was a possibility during the automaker's investor day last January. GM, she told analysts and investors, is "willing to make tough and strategic decisions."
Under her leadership, that already has translated into a much smaller global footprint and a sharp slide down the global sales charts. Once world's largest automaker, GM seems content to let others take the lead.
Correction: GM filed for bankruptcy in 2009. An earlier verion misstated the year.