Howes: In global pullback, GM moves because it has to

Daniel Howes
The Detroit News

Whoever thought the words “General Motors” and “moves quickly” could never be uttered in the same sentence probably didn’t anticipate CEO Mary Barra.

Under her leadership, Detroit’s No. 1 automaker is moving quickly to redefine its global automotive footprint, to boost its margins, to redeploy precious capital to high-profit pickups, SUVs and their flip side: the steadily evolving autonomy-and-mobility space.

Her moves to stop selling cars in India and to off-load GM’s South Africa operations to Isuzu Motors Ltd., announced Thursday, are two more examples of a continuing global pullback that shows the automaker is deadly serious about fattening profits and focusing finite automotive capital where it can generate the best return and better ensure its future.

Old GM it ain’t. This is not your father’s auto industry anymore, either. The industrial hegemony atop the nation’s most valuable companies has been displaced by leading tech and financial heavyweights like Apple and Google parent Alphabet Inc., and Facebook, Microsoft and JP Morgan Chase.

They are now America’s most highly valued companies, not the likes of GM and Ford Motor Co. or their industrial peers. Tech’s fluid and fast-moving business models are reshaping investor perceptions and driving expectations for growth and innovation — a high bar for the low-margin auto industry to meet, if it can at all.

That reordering, complete with the fat margins and growth prospects to go with it, is exerting relentless pressure on Detroit’s century-old automakers to rationalize, to exit businesses offering meager profit expansion, to make smart plays in autonomy and mobility lest its high-tech nemeses get there first.

This is a race, and right now GM is outpacing Ford. Barra’s decisiveness is drawing a distinct contrast to Ford’s apparent indecision. Ford’s move to offer 1,400 salaried buyouts in North America and Asia evinces a more cautious response to investors demanding to see a clearer path to sustained growth.

GM’s electric Chevrolet Bolt is in showrooms; Ford’s answer is not expected to debut until 2020. GM is exiting such marginally profitable markets as India; Ford continues to study its presence there, where the Blue Oval’s global “One Ford” products have been deemed wrong for a market that mostly cannot afford them.

Neither GM nor Ford have summoned the courage to mimic Fiat Chrysler Automobiles NV and exit small cars in the United States. But Ford is giving the segment a hard look, despite back pressure from internal constituencies and dealers, in an increasingly urgent bid to answer two questions: where to play, and how to win?

The upshot: America’s two largest mass-market automakers are fast approaching the point where they will cease being all things to all people, chiefly because the slim returns don’t justify the outsized expense. And, second, because looming autonomy, mobility and electrification plays represent more competition for finite resources, not less.

Barra and President Dan Ammann aren’t just talking about strategic realignment. They’re doing it, adding two more markets to a lengthening list that includes exiting Russia and the rest of Europe, ending production in Australia and Indonesia, and leaving battered operations in Venezuela.

They don’t have much choice: Detroit’s automakers, as well as its foreign-owned rivals, are negotiating a fraught transition from the century-old auto industry they know into a broader transportation ecosystem they’re learning by doing.

Its new technologies and new competitors, many deeply rooted in Silicon Valley, are forcing the companies that put America on wheels to overhaul their business — or risk being left behind by markets of consumers, investors or both. Shares of GM are stuck in neutral, and shares in Ford are down 40 percent since CEO Mark Fields succeeded Alan Mulally in July 2014.

No more can Detroit’s automakers be pension and health-care providers first and vehicle sellers second. No more can they pay workers not to work or reward executives for under-performing. Not for long can they keep playing in markets with the wrong products at the wrong price and call it success.

History can be cruel. Detroit’s legacy of capital destruction and cyclical busts continues to weigh on the ability of GM, Ford and FCA to gain traction with investors. That and the fact that seven-plus years into their revival, all three are more dependent than ever on the truck and SUV sales customers want but investors don’t value so much.

That’s the industry’s conundrum. It may not be fair, but it’s real.

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Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.