Bloomberg Businessweek Europe - 23.09.2019

Bloomberg Businessweek September 23, 2019

in the future, you’ve got to win” with electric and driverless

vehicles, she said. “This is what we really believe is the future

of transportation.”

Taking vast resources from businesses that make money

and moving them toward businesses that (so far) lose moun-

tains of it is obviously a large and risky bet. But the gamble

isn’t the decision itself. It’s the timing. GM, which is push-

ing hard into electrics and racing into autonomy faster than

any other carmaker, could be blowing cash for years before

there’s any payoff. Already, its Cruise Automation unit has

postponed plans to deploy autonomous cars this year. If driv-

erless and electric vehicles take off more slowly than Barra

expects, then GM will have prematurely jettisoned thousands

of skilled veterans and killed off its smaller gasoline models,

leaving the company even more vulnerable to a spike in fuel

prices than it is now. Worse, it could cede a chunk of prof-

its from the remaining decades of the internal combustion

era to others.

Barra is adamant that GM will sell a million electrics a

year in the very near future, while lowering costs and gaining

an economy-of-scale edge that Elon Musk’s Tesla Inc. would

envy. In autonomous driving, Dan Ammann, CEO of Cruise

Automation, believes a small group of companies will divide

a trillion-dollar market. That’s the potential that has Barra

risking so much.

You can glimpse Barra’s vision in an

underground garage in San Francisco, where dozens of

white Chevrolet Bolt EVs emblazoned with orange Cruise

Automation logos await testing. Cruise is the startup GM

bought in 2016 for $1.5 billion; it was losing money then and

continues to do so. Last year, Barra dispatched Ammann, at

the time GM’s president, to run the division, which has since

attracted $6.15 billion in capital from SoftBank, Honda Motor,

and T. Rowe Price. (GM still owns a majority stake.) With each

investment, GM’s share price has risen, suggesting that Cruise

has been boosting the stock as much as old-school GM itself

has. The investments also help GM develop the technology

while reducing the burden and risk to its profitable core busi-

ness, Ammann says.

Silicon Valley is rife with driverless technology startups.

Ammann predicts a great winnowing. “If you don’t have thou-

sands of engineers working on this, and billions of dollars of

capital to spend, and deep integration with a car company,

then your chances of success are very, very low,” he says,

speaking in one of Cruise’s six offices around San Francisco.

“As of right now there is only one company—which is us—that

has all of those things in place.”

Only Ford Motor Co. comes close to having GM’s suite

of assets and investors, now that it’s bought a controlling

stake in self-driving software company Argo AI LLC and

lured Volkswagen AG to join as a paying partner. Other

rivals are moving with greater caution, most notably Toyota

Motor Corp., whose leadership thinks autonomous driving

could be decades away.

For GM watchers with

modestly long memo-

ries, Barra’s grand vision

might conjure former

CEO Roger Smith, who

in the 1980s squandered

almost $100 billion on fac-

tory robots and nonauto

ventures such as Hughes

Aircraft and Electronic

Data Systems while GM’s

car business shrank.

But how could any CEO

simply turn her back on

a windfall in ride-hailing

and related services (par-

ticularly delivery) that

McKinsey & Co. sees gen-

erating $1.3trillion in revenue globally by 2030? And how

could Barra discount the possibility that a too-timid GM could

become the next Kodak or BlackBerry? With Amazon, Apple,

and Waymo chasing the same bounty, “car companies face

greater risk of nonaction than action,” says Morgan Stanley

analyst Adam Jonas. Barra portrays the stakes in starkly more

personal terms: “If we don’t take the steps to keep the com-

pany healthy for not just the next few years but the next few

decades, then shame on me.”

Barra’s early days as CEO didn’t suggest she’d be a china

breaker. Growing up in the Detroit area—her father was a

GM die-maker and United Auto Workers member—Barra fell

in love with an older cousin’s red Pontiac Firebird convert-

ible. With a degree in electrical engineering and a Stanford

MBA, she rose through GM’s manufacturing ranks, making

stops in so-called soft departments such as internal commu-

nications and human resources, and was once the technical

assistant to former CEO John “Jack” Smith Jr. The postbank-

ruptcy board of directors saw her as an underused talent

and in 2011 slid her into product development, the engineer-

ing works where self-proclaimed car guys create new mod-

els. In 2014 she became CEO; two years later she added the

chairman title.

Coming out of its rapid-fire, 40-day bankruptcy in 2009,

GM had downsized U.S. operations, Barra says, but still had

unfinished business, including serious international restruc-

turing. At a budget meeting in 2015 in one of GM’s tubular

glass towers in downtown Detroit, her overseas lieutenants

wanted cash for new models in countries where GM was los-

ing money as it chased market share. “We have to do this,”

she recalls being told. “I said, ‘We don’t have to do anything.’”

Later, GM said it would retrench or mostly stop manufactur-

ing in Indonesia, Russia, and Thailand. Two years after that

came the sale of German Opel, the U.K.’s Vauxhall, and other

assets to PSA Group of France.

Around the same time, Ammann says, GM noticed the

47

Strikers in Bowling Green, Ky.;

the powertrain factory in

Bedford, Ind.

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