I recently wrote an article about cyber security and the possibility that car manufacturers will follow consumer electronic companies into being more data centre centric and having more funds generated from data than the physical product. General Motors appears to be at the forefront of this evolutionary change in the industry and under the stewardship of Mary Barra, have been looking at how to restructure the business to take advantage of highly profitable product lines whilst getting rid of the lower performing pieces. She is making hay whilst the sun shines.
In a multi-pronged approach, General Motors are doing several things very well:
They are redesigning their profitable range of SUVs and heavy duty trucks to maximise revenues. At the same time they are adjusting production to focus on these high-value products and are delivering vehicles that buyers want. To do this they have had some production downtime in several factories which did hurt their recent Quarterly numbers, however this had been planned and the market was aware that they would be taking this action and the full year numbers still look good.
They have ditched the loss making European arm – although that deal is currently in a little bit of strife if the PSA Group demand a refund. The sale was a good plan, it was clear that no amount of restructuring was ever going to fix it, although GM did lose access to some of its small car ranges. Saying that though, as they were making a loss and weren’t suited to their core market, that counters the negative side of the sale. The company is also restructuring its Korean business which is also soaking up profits earned in the US. They expect savings of $500M and this part of the group to become profitable in a year or so.
GM also booted the head of Cadillac recently. This marque is currently in disarray with the ex-head moving the headquarters to the East Coast, away from the mothership in Detroit and they only sold 350,000 units in 2017, even though they were the fastest growing piece of the group. The biggest issue apart from the over spending in office space was that the marque was priced above their European competitors with a product that the market didn’t see the value in. I suspect that the average age of the private buyers was significantly older than their competitors.
After being one of the first to ship electric cars in the modern age with the failed EV1 project – and it only failed because the top layer of management had no vision, General Motors bounced back with firstly the Volt (aka Ampera in some markets) and then with the Bolt. The Volt set the scene and was a halo model for early adopters and the Bolt, which was one of the first truly mass-produced electric vehicles, is a much longer range vehicle which is helping to sell the desire to switch. The Bolt outsells the Tesla 3 and other products from Japan.
Another area that General Motors has taken a head start in, was the true directional change that the industry is heading towards. They bought Cruise Automation for autonomous vehicle technology and they have created partnerships with Lyft and Uber for ride sharing. They are clearly looking at a future where they get more revenue from the usage rather than selling the vehicle.
General Motors has invested well it seems. They have all the pieces now to mass produce fully autonomous electric cars that they can “rent” to the ride-sharing companies at a lower price than an owner/driver could – and take a cut of each journey. Mass production is key because it means that the new technology rapidly becomes cheaper to buy and install which means that the vehicles cost less to build. All the data generated can also be cleansed and provided to city municipalities, GPS companies and many other entities – for a price of course.
Meanwhile the SUV business will keep the cash rolling in until the data revenue kicks in.