Akerson Says New GM Is Fundamentally Tougher
By Michelle Krebs June 7, 2011
To illustrate its vulnerabilities to its management, General Motors Co. recently required executives to participate in an activity called "Tough Love." Managers divided into teams each representing a major global automaker -- Volkswagen, Ford, Hyundai, Toyota, and such. Teams outlined GM’s vulnerabilities and a strategy to attack a disadvantaged GM. "The results were enlightening -- and a little bit frightening," GM Chairman and CEO Dan Akerson (above) told shareholders at the automaker's first annual meeting as a new public company this morning. And GM executives now are addressing those vulnerabilities. "God forbid before our competitors actually do," Akerson added.
It is approaches like Tough Love -- along with a host of other initiatives including the establishment of a new chief risk officer, recruiting new talent and being disciplined in finances and product development -- that is better positioning the company for the future. It is what gives Akerson, the fourth CEO at GM in the past couple of years, hope for a period of productive growth for the “new” GM, which emerged from Chapter 11 bankruptcy only two years ago and went public again in November, 2010. GM stock, however, currently is trading 13 percent below its $33-a-share initial offering price.
Reasons For Optimism
“First and foremost, our new business model is a reason for optimism. We can actually make money at the top and the bottom of the business cycle,” Akerson told shareholders meeting in the historic Fisher Building where GM annual meetings of old used to be held until they were moved out of Detroit after 1990. Indeed, GM has reported five consecutive quarters of profits and made money in the U.S. where the Seasonally Adjusted Annual Rate of sales has been less than 12 million units, compared with nearly 17 million in the early 2000s. “That (profitability at low industry sales volumes) was unheard of under the old construct,” Akerson pointed out. “We are focused on developing a fortressed balance sheet,” he told shareholders. He noted GM has on hand $36.5 billion in cash and available liquidity with only $5 billion in debt.
“We have a new senior management team that is the right mix of GM experience and passion combined with expertise with an outside perspective. We are attracting talent from competitors inside and outside of the auto industry,” Akerson said. GM’s global footprint is a huge plus, “legendary,” he said. “We are better-positioned than any other competitor in the world” for the expected growth in the BRIC (Brazil, Russia, India and China) markets. Volume in those markets is forecasted to grow by another 12 million units by 2015, and GM has hefty, and in some cases industry-leading, share in those markets. “That bodes well for GM in the future if we remain competitive.”
Akerson said the next 18 to 24 months will see Cadillac becoming more international as one bookend in the automaker’s global dual-brand strategy in which Chevrolet will continue to be nurtured as GM’s global high-volume brand. The two will be flanked by regional brands in China, Australia in Europe. As for Europe, Akerson said GM has made great strides” to improve the financial footing of Opel in Europe, which is still on track to break even once restructuring is complete. “We’re not looking at the abyss we were looking into 18 to 24 months ago,” he said.
Akerson told shareholders GM was focused on producing outstanding vehicles. “Our aspiration is not for average but for inspirational, beautifully styled, fuel-efficient vehicles customers want and desire.” He pointed to the success of the Chevrolet Cruze, introduced last fall in the U.S. Chevrolet’s efficient and dynamically pleasing new compact car soared to No. 1 (above) in the segment in May. “We are working to be stronger, faster and more profitable,” Akerson concluded. “We have the right people and the right product mix. I have no doubt about the success of this company – your company – in the coming years.”
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