Howes: GM’s ‘purse and purpose’ past gets radical re-do

Daniel Howes
The Detroit News

The automaker that brought America, and the world, “a car for every purse and purpose” isn’t so much in that business anymore.

And that may be the single biggest advantage General Motors Co. has in its journey toward being a much more profitable supplier of contemporary cars, trucks and mobility services: It’s willing to make hard choices so it can negotiate, and fund, the uncertain future of electrification and autonomy.

Detroit’s No. 1 automaker can’t afford to be all things to all people, as much as it represented the thinking behind legendary CEO Alfred Sloan’s letter to GM shareholders in 1924. His concept endured for 85 years, until bankruptcy, foreign competition and market reality forced The General to change or die.

“We have to be good stewards of our owners’ capital,” CEO Mary Barra told the Automotive Press Association this week. “But if we are somewhere where we just don’t see a path to having the right returns — there’s so many choices we have now — we’re going to invest in the opportunities where we have greater strength and greater opportunity to grow and, therefore, generate the right returns.

“Scale is still important,” she continued. “We still have tremendous scale if you look at our leadership position in the United States, in China and in South America, but we aren’t the company anymore that plants a flag everywhere and tries to be everything for everybody all the time. We’re looking at where do we have core competencies, how do we win, how do we drive growth and strengthen the overall business?”

Alfred Sloan it ain’t. And over time it’s likely to be a template GM’s rivals (see Ford Motor Co.) likely will emulate because they have to. The burdens of 20th-century automaking are too heavy to co-exist, unaltered, with the industry’s tech-driven second century.

That’s a radical shift in action and tone from the pre-Chapter 11 GM that became the archetype of American industrial decline. Under too many of Barra’s predecessors, GM earned a legitimate reputation for unfulfilled promises and for destroying investor capital.

It’s still early, but Barra’s tenure is shaping up to be an implicit rebuke to that history. Today’s GM sold Opel and Vauxhall in Europe after 90 years there. It abandoned an early post-Soviet bet on Russia; ended production in Australia; bolted South Africa and India, on track to be one of the world’s highest volume markets.

Ask the people in Dearborn, and they’ll snicker, maybe mumble the word “retreat” and hope no one notices just how stuck the Blue Oval’s share price has remained. Ask Wall Street investors, some of whom are finally becoming believers in GM’s story of redemption ... and showing it by trading GM higher.

GM’s leadership reached a conclusion its predecessors (and even its crosstown rival, despite mounting evidence) preferred to avoid: The chances of success are improved by making choices, doubling down on existing strengths and investing in technologies not necessarily created here.

The industry that put America, even the world, on wheels through much of the 20th century is facing the biggest seismic shifts this industry has seen since Henry Ford’s moving assembly line revolutionized industrial production.

Maintaining the status quo in a town long synonymous with it has outlived its usefulness. Today’s GM is breaking with its past because big chunks of it cannot serve a future that will require huge cash commitments and a disciplined, broadly profitable core business to support forays into electrification and self-driving technology.

That’s a hard lesson to learn and to execute, as Ford CEO Jim Hackett is probably coming to understand in a particularly acute way. He’s got the unenviable task of being more follower than leader in the Department of Hard Choices already visited regularly by his friends over at GM.

But in companies more than a century old — with entrenched internal interests and external lobbies like dealers, longtime auto communities, even countries — deciding what not to do amid near record profitability is no easy task.

Selling it is harder, even if it’s the right thing to do for the business, its owners and the future.

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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.