Investors Yet to Value GM Changes – Wall Street Journal
The nation’s largest auto maker by revenue trades below its $33-a-share 2010 initial public offering price amid worries over declining U.S. market share and fears that recently strong U.S. auto demand has peaked.
On Wednesday, the Detroit giant hopes to show it can sustain its momentum while preparing for rapid changes in the years ahead. Wall Street expects GM to post fourth-quarter profit of $1.21 a share on revenue of $38 billion, compared with $1.19 a share on sales of $39.6 billion during the same period a year ago.
Ms. Barra, now board chairman, has instilled at GM a new mantra following its 2009 bankruptcy and safety crisis: put up or shut up. The evidence it has become a more nimble and forward-thinking company, GM executives say, is its quick decision on a recent partnership with car-hailing service Lyft Inc. and market share gains in China last year amid that country’s economic turmoil.
GM’s $500 million investment in Lyft came together in a matter of weeks and was spearheaded by the car maker’s president, Dan Ammann. The old GM culture might have dithered on the investment, but Ms. Barra held informal discussions with executives rather than wait for the usual monthly meeting.
In November, Mr. Ammann started huddling in San Francisco with Lyft’s president. He quickly came to the conclusion that three-year-old Lyft could help GM prepare for a future when city residents turn to self-driving cars to get around.
“There was desire for both [GM and Lyft] to move promptly,” Mr. Ammann said. “Both saw the world changing quickly.” The investment was completed in a matter of weeks, a sign Ms. Barra has cut red tape and delegated big decisions.
Going forward, Ms. Barra, 54 years old, believes Wall Street and other constituents are looking for consistent improvement from the car maker. “We have to keep doing what we say we’re going to do,” said Ms. Barra. “We have to prove ourselves as a leadership team.”
Ms. Barra also weathered a safety crisis that emerged soon after she became CEO in early 2014. In September, GM reached a criminal settlement with the U.S. Justice Department, agreeing to pay a $900 million penalty and admitting to misleading regulators and consumers about a defective ignition switch linked to more than 120 deaths.
GM shares, which closed at $30.11 on Monday in New York trading, are down more than 11% since the start of the year. At that price, investors value the company at $46 billion. The decline comes amid booming sales of its pickup trucks and sport-utility vehicles.
Ms. Barra’s agenda is ambitious: She plans to spend $12 billion to revitalize its Cadillac brand, is developing new electric and hybrid vehicles, and last month created a new car-sharing brand in the wake of the Lyft investment.
Another sign of change: decisions are increasingly influenced by newer executives with experiences outside of GM. Mr. Barra is continuing a remake of the company’s leadership team that started before she became CEO.To run Cadillac, she tapped Johan de Nysschen, the former head of Infiniti Motor Co. and Audi AG
’s U.S. business. Barry Engle, the former CEO of Agility Fuel Systems Inc., was picked to run GM’s South American business. Ms. Barra also hired an outsider as general counsel, a move closely watched after GM’s ignition-switch crisis.
The shake-up reflects a desire to reshape a notoriously insular corporate culture with a tradition of grooming internal talent, including Ms. Barra, who joined GM as a college intern some three decades ago.
“It’s not like the newcomers are steeped in the old culture, and the old guard hasn’t worked in the culture Mary wants to install,’’ noted Paul Winum, a senior partner at RHR International, an advisory firm that hasn’t done work for GM. “Large-scale culture change inside big companies like GM usually takes years to take effect,’’ Mr. Winum said.
“In the old GM, everybody was promoted from within,’’ Tim Solso, GM’s lead independent director, said in an interview last month after relinquishing the chairmanship.
‘Mary’s involvement was absolutely pivotal for me.’
The shift means “you get diversity in thinking,’’ and things aren’t always done the GM way, Mr. Solso said.
Recruiting hasn’t always been easy, given GM’s reputation for rigid management. Several new executives and division heads said they were lured by promises of autonomy.
Mr. Engle said he joined after Ms. Barra assured him he would have a free hand to make changes. “Mary’s involvement was absolutely pivotal for me,” recalled Mr. Engle.