GM No Longer Dominated By Accountants
Mark Reuss, head of GM’s North American operations, is in a typically no-nonsense frame of mind. Pointing to the 2012 Buick Verano premium compact, he argues GM is not interested in taking a back seat to anyone any longer.
“Everything we’re going to introduce is going to win, not compete. That's the strategy here,” he’s telling reporters at the Detroit auto show, adding, “We've been a great truck company for probably too many years.”
GM, he says, plans to have a full lineup of cars in all segments to match its full line of trucks.
“It's time you’ve seen the investment that we’ve refocused on cars like the Chevy Volt, the Chevy Cruze [compact] and now the Verano.”
And he’s obviously sick to death of comparisons with Ford, currently the darling of auto industry observers. GM is a very different company, a Volkswagen Group-like multi-brand company with what he considers a five-year lead over Ford in developing the global architectures on which new models are built.
Ford executives wouldn’t agree, but Reuss stands his ground. An engineer by training and temperament – he at one time ran GM’s high-performance division – Reuss is one of those rare things at GM: a “car guy” in a senior leadership role.
The new CEO, Dan Akerson, is a telecom guy who most recently ran a big buyout fund for the outrageously well connected Carlyle Group. Akerson may have an engineering degree from the U.S. Naval Academy, but to steer GM to health he’s relying heavily on car guys like Reuss.
Reuss, the son of former GM president Lloyd Reuss, is delivering a message of self control and product excellence we’ve heard before from GM leaders. GM, he says, will hold the line on sales sweeteners and other giveaways and the company is being disciplined about not over-producing anything. GM is zeroing in on reinventing its product lineup and from top to bottom everything the company makes will sell on their merits.
“We’ve cut down our inventories so we really are making cars to demand which is a really powerful message,” he said. “We were a structural cost-driven company; now we’re a company in the pursuit of revenue and customer satisfaction.”
In other words, GM is no longer completely dominated by accountants who first and foremost want to cut costs. That’s another stunning development.
“We are about the destruction of mediocrity and the pursuit of excellence,” says Reuss.
The Verano is a pretty good showcase for the “new” GM. It’s already on sale in China, arguably GM’s most important growth market. So GM is bringing to North America a vehicle first intended for Asian buyers. The Verano, aimed to compete with the Audi A3 and Lexus IS250, will hit dealer showrooms late this year at an as-yet undisclosed price.
I expect the Verano to pull in new buyers to the once-moribund Buick brand and because it’s a so-called “global” car sold in many markets, GM should make money on the deal. Still, GM will be hard-pressed to make the kind of money in 2011 that Ford made in 2010. Last week, Ford announced a profit of $6.6-billion (U.S.).
Through the third quarter of last year, GM’s earnings passed $4-billion, however, and shares in GM are hot in the wake of the Nov. 18 $33-a-share initial offer price. J.P. Morgan predicts GM shares could hit $44 by December of this year because “it has the unique combination of No. 1 market share in both of the fastest-growing geographies” (the United States and the booming markets of Brazil, India, Russia and China), as well as “strong cash generation” and “the makings of a balance sheet free of nearly all financial liabilities.”
What seems clear from Reuss is that unlike much of the past quarter-century, senior managers at GM are worrying about customers. Reuss and others in GM’s senior ranks argue that CEO Akerson is pushing the company to become “consumer-centric” and marketing-focused.
“The importance of marketing is radically different within GM than it was under past leadership,” says Jim Hall, principal of consulting firm 2953 Analytics. “Before, marketing was not involved in product decisions. It was, ‘Here's your car, go and sell it.’ ”
The marketers ultimately need something to sell and most important of all the products GM is launching for the 2011 year is the small, fuel-efficient Chevrolet Cruze compact. Late last year, the Cruze replaced the utterly forgettable and painfully bland Chevy Cobalt in GM’s lineup, just as the Sonic will replace the very sad and cheap Aveo later this year. The 2012 Sonic, meanwhile, will be available as a four-door sedan and a five-door hatchback.
If it’s not already obvious, Reuss argues that GM is now on the offensive. The old GM, he says, “was killed,” and that means a new, leaner GM has emerged from the 2009 bankruptcy.
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