Under Barra, Expect a More Radical GM

The new CEO's mantra is simple: “No more crappy cars.”

  • Share
  • Read Later

Correction appended: Dec. 10, 2013, 11:28 E.T.

Traditionally, the wrestling match for CEO succession at Ford, General Motors and Chrysler has come down to a choice between the “money guys” and the “car guys.” So with GM CEO Daniel F. Akerson, a money guy, having led the company from postbankruptcy to a successful IPO and, just yesterday, ridding the company of government ownership, it would make sense that a car guy would get the top job when he retired.

And she did.

Mary Barra, 51, who is in currently in charge of GM’s global product development and supply chain, becomes the first woman to run a major car company. An electrical engineer and GM lifer with 33 years experience, Barra has the ability to refresh GM’s product line while wringing costs from its sprawling global manufacturing operations makes her an essential figure in GM’s future. “Mary went into an organization that quite frankly was in chaos and brought order,” said Akerson of his successor during a press conference. “And fundamentally transformed the way we do development.”

Akerson, 65, is leaving the job earlier than planned after learning his wife has advanced cancer. But he had already created a horse race for the top job among four executives, including Barra; CFO Dan Ammann, 41; North America boss Mark Reuss, 50; and Steve Girsky, 51, an investment banker who headed corporate strategy and tackled some of Akerson’s big problems, like Europe. Ammann was named president and head of the Cadillac and Chevrolet brands, which will give him some hands-on car management. Reuss — who had been favored by previous chief Ed Whitacre — is going to get Barra’s job in product development, and Girsky is going to remain on the GM board. “They’re fine with it,” Akerson said, emphasizing that now that the government is out of GM’s hair, the company can start raising compensation to keep key executives from bolting.

(MORE: General Motors Reportedly Naming First Female CEO)

GM, says Akerson, is a company that must shift from reformation to transformation and the board saw Barra as that transformational leader. She certainly knows where the bodies are buried. Barra has worked as the plant manager at its Detroit Hamtramck assembly operation, head of global manufacturing engineering and was running GM’s human-resources operation when Akerson gave her responsibility for design engineering and quality on GM’s cars worldwide.

Barra’s mantra, as she explained recently at a Fortune conference, is simple: “No more crappy cars.” GM’s bankruptcy, she said, gave her the kind of cover needed to eliminate the bureaucratic and organizational obstacles that get in the way of quality. “You had the emotion and attention of everybody — we’ve got to do things differently,” she said. “If we’re going to compete in a segment in any market, we’re going to go to win.” She has streamlined the design process in an organization that is some 30,000 strong. (How many engineers does it take to design a car? Too many, in GM’s case; Barra sent 20 senior engineering execs packing, according to Automotive News.) At the same time, according to Barclays analyst Brian A. Johnson, she is re-establishing an engineering culture at GM.

What GM needs now is great products, not merely “not crappy” ones. GM has had its share of wins — think of the Chevy Silverado and Cruze — but its next task is to build cars that consumers crave — and pay full price for. GM’s incentive spending per car last month was $3,325, according to Barclays, 47% higher than last year.

The next phase of GM’s transformation is going to be trickier. Much like Ford and Chrysler, GM is in the process of matching its capacity to its market share and then trying to reduce the number of platforms it uses to manufacture cars around the world from 30 to closer to 15. The company can get a 30% cost improvement by using global platforms and it needs those cost reductions to raise its profit margins. Meanwhile, its European business is bottoming (just like everyone else’s), and although GM has been very successful in China, the competition is getting intense.

(MORE: Being a Woman Is the Least Interesting Thing About Mary Barra, New CEO of GM)

We’re already getting a sense of what GM will produce under Barra’s watch. She was no doubt influenced by the legendary design boss Bob Lutz, who pushed for edgier creations. Next year we’ll begin to see the vehicles emerge that were developed, designed and produced largely under her leadership, like Cadillac’s ELR plug-in hybrid. Cadillac will relaunch a new Escalade in early 2014 and Chevrolet will introduce the Colorado in the fall of 2014.

Running GM is, of course, a big job — the company had $150 billion in sales last year — although Barra will be likely be under more scrutiny than Ford’s Alan Mulally or Chrysler’s Sergio Marchionne, neither of whom are “car guys.” For all his emphasis that gender had nothing to do with the process of selecting a successor, Akerson could not resist a paternal pronouncement. It was “like watching your daughter graduate from college,” he said. “I am very proud … We ran a very robust, fair, equitable process, and we picked the best person.”

An earlier version of this article misstated the surname of a former GM chief. He is Ed Whitacre, not Whitaker.