Mary Barra Is All About the Benjamins
In this day and age, leaders of car companies have to be ready to do what they have to in this highly-competitive market. In the case of General Motors, CEO Mary Barra has become focused on making the automaker profitable and is making drastic cuts to make investors happy.
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As a brand, General Motors is thought to have a presence all around the world. That might have been true before, but not so much now. Part of Mary Barra’s strategy for GM has been to closely evaluate each market that the automaker is in. If that market is not profitable, and has not been for a while, it gets the axe from GM. In 2015, GM cut ties in the Russian auto market and abandoned facilities there. GM has been in India for years, hoping to get a piece of the emerging market there. However, the Indian market is only interested in buying small cars with little to no profit for the automaker, so Barra withdrew a $1 billion investment there and recently announced it would leave the country by the end of the year. For decades, GM vehicles with Opel badges have been zooming around Europe. Since 1999, however, GM’s European arm has been losing money to the tune of about $1 billion a year, so Barra orchestrated a sale of the brand to Peugeot.
Some people in the auto industry have been criticizing Mary Barra, pointing out that to cut ties with this many markets means GM will not have an opportunity to benefit from upturns that might occur. For example, if India follows in the footsteps of other developing nations, it is possible that drivers will start to want bigger, more profitable vehicles soon. In response to that, Mary Barra has been quoted as saying “We aren’t going to win by being all things to all people everywhere. It’s not the right strategy.”
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Instead of playing games with smaller automotive markets, Mary Barra is focusing on where GM is the strongest and making money. Industry observers speculate that the money that GM is earning (and not spending in failing markets) is being prepared for the huge investments needed to develop ride sharing technology and self-driving cars. It does not hurt that GM investors are happy with increasing profits now that the money drains are gone. Time will tell if the strategy will work, but we applaud Ms. Barra for making GM more accountable for its business decisions. This leaner GM will be more prepared for any upcoming changes in the industry.
News Source: Bloomberg