By Mike Colias
Nearly a decade ago, Toyota Motor Corp. dethroned General Motors
Co. as the world's largest car company, leaving some GM executives
wringing their hands.
Mary Barra wasn't among them. When she took the CEO job in early
2014, she inherited a company that for decades was so large and
unwieldy executives sometimes didn't know whether parts of the
business were making or losing money.
On a visit to GM's unprofitable operations in Thailand that
year, she signaled a readiness to curb the company's fixation on
size. She criticized her Asian executive team's five year-plan to
introduce several new models, according to people who attended. GM
soon announced plans to cut Thailand's model lineup, rather than
add to it.
For years, the mantra in the capital-intensive car business has
been that bigger is better. But in nearly seven years running GM,
Ms. Barra has found success with an unlikely strategy: shrinking a
company that for much of the 20th century was the nation's biggest
corporation by revenue and profit.
Now, Ms. Barra is adamant that GM can still grow but in a
different way than in the past: through new businesses built on
electric and driverless cars. Those technologies cost billions a
year to develop, and are likely a long way from paying off. GM
could no longer afford to stay in markets where it doesn't make
money, Ms. Barra, 58, said in an interview.
"We've had to make some tough decisions and move away from
trying to be everything to everyone, everywhere," she said.
Under Ms. Barra, GM has exited Europe, Russia and India, places
where most rivals compete. In February, the company disclosed plans
to leave Thailand for good and pull out of Australia after 89
GM now makes cars or parts in just nine countries, down from 25
before Ms. Barra took over, and employs 164,000 workers today, 25%
fewer than before. Her get-smaller approach is especially unusual
because it came at a time of prosperity in the car business.
Global industrywide auto sales have risen 9% since the year Mr.
Barra became CEO. GM's sales fell 25%.
GM last year was the world's third-largest auto maker by sales,
behind Volkswagen AG and Toyota, and likely would fall to No. 4
after the pending merger between Fiat Chrysler Automobiles NV and
The moves have, until recently, helped GM notch record operating
income and profit margins. And the tidier global footprint aided
the company through the early days of the Covid-19 pandemic,
helping contain the fallout from global factory shutdowns as rival
Ford Motor Co. struggled to contain overseas losses.
The pandemic has only redoubled Ms. Barra's conviction that GM's
future rests on electric and driverless technology. GM preserved
investment in those areas even as it scrambled to cut costs
elsewhere to weather the crisis.
So far, though, investors have largely ignored GM as they pour
money into pure-play electric-vehicle makers.
Tesla Inc. shares have soared this year to make it the world's
most valuable car company. Startups are snapping up billions of
dollars in private investment or recently-launched IPOs, including
truck makers Rivian Automotive and Nikola Corp.
Shares of GM and Nikola surged last week following a deal for GM
to engineer and build trucks for the startup. Nikola shares have
since fallen sharply after a short seller's allegations that it
exaggerated the progress of its technology, drawing investigations
by U.S. securities regulators and the Justice Department.
Nikola has denied the claims. Ms. Barra has said GM did its due
GM shares remain stuck below the $33 IPO price from a decade
Ms. Barra's retrenchment strategy has been anathema for some
inside GM, a company long hard-wired to pursue international
growth. Some former GM executives question whether Ms. Barra is
leaving GM too dependent on the U.S. and China and unable to
capitalize on the moment if India or other developing markets take
For decades at GM, executive stints in overseas markets like
Brazil and China were highly sought after and considered unofficial
prerequisites for the C-suite, said Bob Lutz, a former GM vice
chairman who ran product development from 2001 to 2009.
There also was pride in retaining the world's biggest auto maker
title, he said. Mr. Lutz recalls a TV interview from around 2005,
when he was asked about the possibility of Toyota surpassing GM. He
expressed indifference. Later that day, then-CEO Rick Wagoner
called Mr. Lutz into his office.
"He said, 'Bob, we've got to get our messages together. I happen
to believe there is unbelievable value in being the world's
biggest,' " Mr. Lutz recalls. Mr. Wagoner declined to comment.
The super-size argument goes like this: The bigger a car
company's sales globally, the greater its cost advantages, with the
ability to command better terms from suppliers, whether on engine
parts or ad campaigns.
For GM, expanding into untapped markets overseas was a shortcut
to revenue growth. But markets such as China have become fiercely
competitive, pressuring profit margins. Others places, like Russia
and Brazil, haven't fulfilled their potential because of political
or economic upheaval. It was also hard to reduce costs by selling
the same basic models globally: Regional tastes were too varied and
environmental regulations were rarely aligned.
GM's push to expand dates back to the late 1920s when, under the
direction of longtime CEO Alfred Sloan, it overtook Ford in U.S.
sales and eventually expanded to Europe and Australia.
Mr. Sloan's aggressive growth strategy spawned more than a dozen
brands, hundreds of models and factories in dozens of countries. By
the 1940s, almost one of every two cars sold in the U.S. was made
Soon, GM had grown so dominant that it gained a reputation as a
collection of warring fiefs. The heads of its various divisions
operated like CEOs unto themselves, and squabbled over capital
spending and marketing dollars, say former executives and
Even after its government-led bankruptcy in 2009, GM remained
neck-and-neck with Toyota for the title of world's largest car
company by vehicle sales -- still so big and fractured that
executives in Detroit didn't have a clear view of the profitability
of individual countries, said Dan Akerson, GM's CEO from late 2010
to early 2014.
"Before, as long as the guy in Brazil or Europe was talking a
good game, we sort of left him alone," said Mr. Akerson.
Mr. Akerson appointed Ms. Barra to lead GM's huge
product-development operation. She had begun her career as an
18-year-old intern inspecting fender panels at a Pontiac factory in
suburban Detroit and spent much of her career in engineering roles
inside GM's factories.
Still, Mr. Akerson saw the GM lifer as a change agent impatient
with GM's bureaucracy. As GM's human-resources chief, she condensed
a 10-page dress code down to two words: "Dress appropriately."
In 2011, in her first week as product chief, she had all the
card-key security doors between her office and the engineering
staff removed, viewing them as symbolic of how GM tended to work in
After becoming CEO, Ms. Barra visited India in 2015 with Dan
Ammann, then GM's president, and Tim Solso, then the company's
independent chairman and now its lead independent director. The
executives were blindsided when they arrived to find a factory
expansion already under way without their knowledge, Mr. Solso
"Mary and Dan were dismayed. They had no idea that was going
on," he said in an interview. "It was a telling example of the old
GM saying 'We have to be the biggest and market share drives what
GM largely exited India about two years later.
Around that same time, a confluence of forces was beginning to
disrupt the car business. Alphabet Inc.'s Google in 2015 tested a
self-driving car on public roads. Apple Inc. was rumored to be
developing a car. Ride-hailing services like Uber were becoming
Ms. Barra, who got her M.B.A. at Stanford University, that year
arranged a week-long trip to Silicon Valley with her top
executives. They chatted with Apple CEO Tim Cook and his team about
industry disruption for a few hours, the people said. They
discussed autonomous-driving technology with Google brass.
Once back in Detroit, Ms. Barra scheduled workshops to sketch
out a growth strategy for GM, based on an evolving view that the
future would hinge on offering alternative ways for people to get
around, such as electric and self-driving cars, said John
Quattrone, Ms. Barra's human-resources chief before his retirement
That would also mean deeper cuts overseas to fund the future,
Mr. Quattrone said. Ms. Barra presented the new vision to nearly
300 executives at GM's proving grounds in suburban Detroit, an
expanse of green meadows and ribbons of asphalt where camouflaged
future models buzz around test tracks.
"We all have to sign up for this plan. If you don't believe in
it, then see John and we'll find a landing spot for you," Ms. Barra
said, according to Mr. Quattrone.
Later that year, Ms. Barra and Mr. Ammann began discussions with
French car maker PSA Group to unload GM's European business, which
had racked up roughly $20 billion in losses in the previous two
As talks advanced, the two executives made a one-day, round-trip
visit to GM's corporate offices in Germany to break the news that
GM was selling its European business to a stunned Karl-Thomas
Neumann, the division chief who had been trying to engineer a
turnaround, people with knowledge of the visit said.
"When you think about the resources that would have been needed
to have a full lineup there, with no clear profitability in sight,
we had to be real about that," said GM President Mark Reuss, among
Ms. Barra's most trusted lieutenants.
Eventually, the retreats from international markets resulted in
a hangover effect, former executives say. Some costs attached to
those severed business units remained even after the divestitures
-- a Detroit-based engineer or designer who worked on cars for
developing markets, for example.
Late in the summer of 2018, a few hundred of GM's top executives
gathered at a historic brick building in Flint, Mich., GM's first
factory. Ms. Barra dispatched her then-finance chief, Dhivya
Suryadevara, to warn that cost cuts would be needed, people who
attended the meeting say.
On Thanksgiving weekend that year, GM announced plans to let go
more than 8,000 white-collar workers, the cuts hitting the
engineering ranks hard. The company also outlined plans to close
several North American factories and let go thousands more factory
workers, which drew sharp criticism from President Trump.
Ms. Barra in the interview said the changes were strategic and
allowed GM to meld its electric-vehicle team with the broader
Both pieces of Ms. Barra's two-pronged strategy -- exiting
low-growth businesses while plowing the capital into an electric
future -- were on full display early this year.
In February, GM said it would end its Australian Holden brand, a
once-dominant brand and staple of the country's car-crazy culture,
known for rugged pickup trucks and muscular sedans.
In Australia, car enthusiasts and politicians vented a sense of
"General Motors may think the rich history of the Holden brand
in Australia is worthless, but I think it's priceless," said one
lawmaker, Queensland Sen. James McGrath, according to Australia's
Then, in early March, GM invited hundreds of dealers, analysts
and journalists to its suburban Detroit engineering center. Ms.
Barra made her biggest statement yet that GM was betting its future
on electric cars.
The CEO strolled the floor as visitors ogled a dozen future
all-electric models, some several years from seeing the inside of
showrooms -- a rarity in an industry where future products are
cloaked in secrecy. The models ranged from brawny pickup trucks to
a Cadillac that one executive said would be priced above
GM said it would spend $20 billion developing electric and
driverless cars through mid-decade. It is targeting sales of 1
million electric-car sales annually by then. In Ohio, near a
factory it closed last year, construction began recently with
partner LG Chem on a battery-cell plant bigger than 40 football
Still, it will be many years before electric vehicles take off,
analysts say. High battery costs are likely to keep prices higher
than conventionally powered cars through most of this decade, and a
dearth of charging stations in the U.S. will dampen consumer
interest, they say.
So far, the early offerings from incumbent car companies have
failed to achieve anywhere close to Tesla's success.
As Ms. Barra showed off GM's future battery-powered cars, she
was also confronting a new threat: a rapidly-spreading global
pandemic. GM spent the spring scrambling to borrow more than $20
billion amid a multiweek factory shutdown from Covid-19, during
which it bled billions in cash.
In June, Ms. Barra sat with top executives inside GM's design
dome, a circa-1950s auditorium where generations of leaders have
reviewed big Cadillac sedans with gaudy tail fins and Corvette
This meeting was different: Ms. Barra and her team sat at a
large table, wearing masks, to decide which future vehicles were on
the chopping block. Details of each model, from minor face-lifts to
major new entries, were spread across large digital wall charts,
including launch dates and sales targets.
Some were delayed, others scrapped altogether. By the end of the
meeting, all of the electric-vehicle projects on the board emerged
untouched, along with a nearly $3 billion renovation of a Detroit
factory and nearby facility to build them, Ms. Barra said.
"The situation allowed us to look at things with a very clear
eye," she said.
Write to Mike Colias at Mike.Colias@wsj.com
(END) Dow Jones Newswires
September 18, 2020 10:25 ET (14:25 GMT)
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