GM Remains Committed to Cars and Cadillac
Costly pickup truck launch going well, Barra says
Alisa PriddleWords
Ford started Detroit's round of first-quarter earnings calls with the blunt news it is largely getting out of the car business, with only the Mustang and a Focus a few years from now.
FCA was second to bat and CEO Sergio Marchionne talked about troubles launching the new Ram which is taking longer and costing more than forecast.
Rounding out the calls was clean-up batter General Motors. Yes, GM has new full-size pickups launching this fall, but the Chevrolet Silverado and GMC Sierra are doing so uneventfully, says CEO Mary Barra. Which is good, because trucks are a $65 billion business.
Taking down truck plants for retooling is always costly; automakers want to build and sell every profitable truck they can. Downtime cost GM $700 million to $800 million in the first quarter, bringing down North American pretax earnings to $2.2 billion. GM will build about 70,000 fewer pickups this year. The number would have been double that if GM had not added some final assembly work to the Oshawa plant in Ontario.
The launch is going well, Barrra told investors. And the rampup will include more crew cabs, representing 74 percent of production going forward. GM is planning to ramp up marketing of the new trucks, as well.
Against the truck costs, GM is enjoying a boost from its crossover launches, many of which were replaced last year. They are driving growth, but are not as profitable as trucks and competition will only get stiffer as consumers trade in their cars for these car-based utilities.
And when it comes to cars, Barra says GM is not packing up its bat and ball and going home, even as Ford and FCA are exiting most car segments in North America.
Although several car segments are shrinking, they are still significant, Barra said. GM introduced efficient new architectures in 2015 and 2016 for midsize and compact vehicles which remain good platforms for future cars with minimal changes needed and thus minimal expenditure. "Because we've made the investments, we need to deploy little to no capital going forward, so we view it as an opportunity. What you'll see us do is play very efficiently in a segment that, although it is declining, there is still an opportunity."
GM will continue to monitor how well models and segments perform and Barra has shown repeatedly that she will sell or stop underperformers, whether they be vehicles or operations or markets. There have been reports that the tiny Chevrolet Sonic and the full-size Impala will be discontinued.
Most of the cost-cutting actions GM has taken in recent years has been to address car demand, cutting production when necessary and pulling out of car-heavy markets such as Russia, Western Europe, and Latin America. GM Korea was on the brink of bankruptcy when a last-minute deal was struck this week to reduce capacity and shave $500 million in annual costs to remain competitive.
Barra also used a call with investors to discuss Cadillac, a brand that was not progressing fast enough in its revitalization, which led to President Johan de Nysschen being replaced last week by former GM Canada President Steve Carlisle.
The new Cadillac chief will further accelerate the brand's progress, Barra said. The all-new XT4 crossover unveiled at the New York auto show will provide a boost and lead a cadence of one new vehicle every six months, on average, to 2021.
It is not a right turn for Cadillac under its new leadership, Barra said, it is an acceleration of plans already in motion to introduce strong products that redefine luxury for the U.S. and China markets. The brand is expected to double sales to 500,000 globally by 2020 and improve profitability by $1 billion.
And, to make it clear, the work will continue to be done from Cadillac's current headquarters. "We will still stay in New York."
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