By Peter M. DeLorenzo
Detroit. As the new year gets under way, the churn and burn has started all over again. We’re awash in glowing sales reports piling up from the end of last year, and you can just feel the sense of optimism building through the press releases from the various manufacturers. But I can only cringe at this news, because it takes all of about five minutes for industry honchos to start high-fiving in the hallways and making assumptions that the bad times are over and that nothing but good tidings are ahead.
That this has been proven to be flawed thinking in this business over the decades has been well documented. Industry executives taking the path of least resistance by making (wrong) assumptions that things are all figured out, while conveniently ignoring the various elephants in the room is like a cottage industry that never fades away. And the biggest of the elephants? The Detroit 2 + 1’s continued wrestling with the EV “thing.”
Surprisingly enough, there is a cadre of Detroit-centric executives who believe that they have the EV “thing” all figured out, that it’s only a matter of time before everything comes good and the “Grand Transition” – promising untold prophets and a new golden era for the industry – is well under way. Except that it isn’t. A long litany of problems keeps coming to the fore. Battery assembly issues? They’re still happening with alarming frequency. Supply chain issues? Still present and accounted for. And the jarring inability to actually produce EVs with any noteworthy cadence is an ongoing mess. Add to that the perpetual infrastructure problems, the kaleidoscope of recurring charging nightmares and the fact that actual consumer desire to own an EV is lagging far behind the auto manufacturers’ future plans to build their business around the mass adoption of them, and you have a giant bowl of Not Good.
One manufacturer in particular is struggling with this “Grand Transition.” In a noteworthy piece last month, Mike Colias reported in The Wall Street Journal a story headlined with the following: Mary Barra Spent a Decade Transforming GM. It Hasn’t Been Enough. The subhead was even more dire: The CEO pushed GM hard into electric and driverless cars. The finish line keeps moving farther away.
Ouch, Baby.
The lengthy article spent considerable time tracing Barra’s hard-earned ascension to the top, but it also documents Barra’s Bad Bets on driverless technology and her over-committing to EVs in excruciating detail, when the company wasn’t even close to being ready.
First, the driverless technology part. Under Barra’s direction, GM poured $8 Billion into the San Francisco-based driverless startup, Cruise. It has proved to be an unmitigated disaster. The tech startup pulled about 400 robot taxis off the streets of San Francisco and a handful of other cities last October after one of its driverless vehicles collided with a pedestrian who had been struck by another car and dragged her 20 feet. And then at the end of last year, Cruise announced that it had exited a slew of executives and laid off about one quarter of its workforce. There is no upside to this story. Even though GM suggested that $50 million in revenue was possible from Cruise by 2030, driverless technology is not only stalled, it is turning into a bottomless money pit, and GM’s ass is hanging out in the breeze on this one, big time.
As for the EV “thing,” Barra made a huge and very public commitment to her “zero crashes, zero emissions, zero congestion” mantra to the tune of $35 Billion to be spent on development between 2020 and 2025. This combination of driverless technology and 100 percent EV production would be arriving by 2035, with 400,000 GM EVs on the road by 2023. In fact, Barra insisted that 2023 would be “a breakout year” for GM’s EVs. This proved to be not even remotely feasible, and it was flat-out ridiculous. GM sold just 854 of its King Kong Hummer EVs in 2022. Let’s consider that again. 854. Besides the aforementioned Cruise debacle, Barra’s constant pronouncements that GM’s EV technology would be prolific and widely accessible were a humiliating non-starter. GM made huge commitments to battery factories, and then production problems meant that it couldn’t assemble batteries at a pace that was even close to being acceptable. Gaining access to key supplies was problematic as well. The ultimate result? GM simply couldn’t build their EV portfolio with even a shred of a proper cadence. (And in the most recent development, GM issued a “stop sell” order on December 22 on its highly-touted new Chevrolet Blazer EV for owner-reported software problems.)
All together now: This is Not. Very. Good. for Barra. Colias also reported that in an interview in December at a media event, Barra said she continues to have confidence in both the electric and driverless-car parts of her strategy. She is sticking with a goal of producing one million EVs in North America in 2025, and she still has faith that Cruise can lead the driverless race. “As you go through a technological transformation like this,” she said, “there’s going to be ups and downs.”
Ups and downs? GM’s problems aren’t just “ups and downs,” they’re a continuous series of rolling miscalculations and show an alarming pattern of serial incompetence. Barra’s only salvation in all of this? GM’s bottom-line performance has surged under Barra, as Colias reported, and GM’s higher-margin business lines like trucks and SUVs are gushing profits. During Barra’s tenure, operating profit nearly doubled from previous levels and consistently tops rivals. GM has beaten Wall Street earnings forecasts in 34 of the last 35 quarters. But, and this is a very large but, all of GM’s notable profits have come from ICE-powered vehicles. Barra’s delusional commitment to the EV “thing” has been a disaster for GM. Yes, she could be applauded for trying to get out in front of the “Grand Transition” but she – and GM – are so far out over their skis on this that it is becoming dangerous for the company.
One saving grace for GM in all of this? One year ago, the company committed $1 Billion to four engine assembly plants that will build the sixth-generation of its small-block V8. A mistake at the dawn of the EV Era? Hardly. This move – which flew completely under the radar – will be crucial to GM’s continued profitability and success. The ICE Era has decades to go, in case you were wondering.
It is clear that Mary Barra has accomplished a lot of good things in her tenure at GM, but nothing lasts forever, even for the first female CEO of a major car company. The clock is ticking on Ms. Barra, and the next eighteen months will prove to be pivotal for her and GM.
And that’s the High-Octane Truth for our first week back in 2024.