GM's Barra cuts costs, changes culture to emerge as CEO contender
June 14, 2013
by Tim Higgins
DETROIT (Bloomberg) -- At General Motors Co.'s Detroit headquarters, executive offices tend to be on high floors, have amazing views of the Detroit River, and contain a collection of model cars.
The latter is especially true for car guys, that swaggering breed involved in design or engineering as opposed to accounting or human resources.
Two things set apart the office of GM's current No. 1 car guy: One, its occupant is a woman. Two, sitting on a cabinet among the toy cars is an Albert Einstein bobblehead.
Mary Barra, GM's first female chief product officer, is coy about the bobblehead. Her boss, GM CEO Dan Akerson, gave it to her after a war-game competition among executives to see who could best attack GM. Barra's team won.
"It was really about what strategy we were going to take," said Barra, who has been at the company for 33 years. She's responsible for the design and quality of all GM cars and trucks.
Asked to share her secret to defeating GM, she smiles, and the lessons she learned in the HR and public-relations departments kick in. "Um, I don't really want to tell you."
Barra, 51, comes across as measured and standard-issue corporate, the opposite of swaggering. Rather than brag about the awesome torque of the new Corvette, she talks about "driving an organization that's customer focused."
She considered buying a restored Chevrolet Camaro a few years ago, but hasn't, in part because, said a confidante, it would be a dangerous temptation for her teenage son.
Barra is a corporate survivor who has played a role in the soap opera of GM management for a generation, emerging on a very public stage as the leader of the company's $15 billion vehicle development operations, a role that will largely determine the success or failure of the company for a decade or more.
After a $50 billion government bailout in 2009, GM has made about $22 billion in profit over the past three years, while making some of its best vehicles ever. Still, GM is nowhere near as profitable as global competitors such as Volkswagen AG and Toyota Motor Corp.
Adam Jonas, an analyst at Morgan Stanley, said GM's operations are much more complex -- and expensive -- than those of its major rivals. To make GM the world's most profitable automaker, Barra is following the example of Billy Durant, who founded the company more than 104 years ago: Slash development costs by building a wider variety of cars and trucks off the same parts.
She's trying to do that while avoiding what happened in the 1970s and 1980s, when the company earned a reputation for slapping Chevy, Cadillac, and Oldsmobile badges on similar-looking cars to save money. There wasn't much difference between a Chevy Cavalier and a Cadillac Cimarron, which Time magazine declared one of the 50 worst cars of all time.
"Mary Barra has probably the hardest job in the global auto industry right now," said Morgan Stanley's Jonas. "If she can really knock the cover off the ball, she deserves to be CEO of GM."
During her time at the company, Barra has worked in engineering and run an assembly plant, among other product-centric roles. When Akerson appointed Barra senior vice president of global product development in 2011, though, she had just spent a year and a half as GM's head of HR, which did not sit well with the car guys in the company and around Detroit.
It was the first time a woman held a major U.S. auto company's top vehicle development job. Akerson later said that Barra was in the running to replace him when he retires, making her the first female CEO contender in GM history.
"The fact that she's leaving Human Resources to take on The General's most important task certainly has the scent of Old GM's corporate politics on it," wrote the Truth About Cars, an industry blog.
"She had a difficult time getting credibility because she was in HR before, even though she is an engineer," said Rebecca Lindland, an industry consultant. "It's sexism, and I think it's the HR title."
Barra's vanilla style probably didn't help, either.
Bob Lutz, the outspoken former Marine pilot and legendary car executive, used to fly his own helicopter to work. At Chrysler Corp., he developed the Dodge Viper. During his time running GM car development, he brought new life to the company's lineup and modernized production with global vehicle platforms that Barra is now benefiting from.
"As to whether she's going to be the next Bob Lutz, I don't think so," said John Wolkonowicz, an independent automotive consultant. "I don't get the impression that she has gasoline running through her veins."
Reporters haven't followed her through pit row at Daytona International Speedway as they did Mark Reuss, president of GM North America, earlier this year, or talked about driving on the Nuerburgring race track in Germany as they have with CFO Dan Ammann. Both Reuss and Ammann are also considered potential CEO successors.
Barra's most high-profile moment came in 2009 after then-CEO Fritz Henderson put her in the HR role to help groom a new generation of leaders as the company worked to come out of bankruptcy. She allowed employees to wear jeans.
"Our dress code policy is 'dress appropriately,'" she announced in a memo quoted in the Detroit Free Press at the time. Barra had been attacking GM's bureaucracy, slashing the number of required HR reports by 90 percent and shrinking the company's employee policy manual by 80 percent.
Loosening the dress code, though, drew a flood of calls and e-mails from employees asking if they could, in fact, wear jeans. One manager was upset about the image this might send to company visitors.
"So you're telling me I can trust you to give you a company car and to have you responsible for tens of millions of dollars," Barra responded, "but I can't trust you to dress appropriately?"
It wasn't a fashion issue. Barra saw the dress code, along with other changes, as an opportunity to have a conversation about responsibility.
"There was a culture in the past where the rule was the rule and when you weren't empowered to make the decision you could all just complain about the rule," Barra said. "Well, now we were really empowering virtually every single person. We had a lot of HR for HR."
That's about as negative as Barra will go. She won't be goaded into criticizing her colleagues and refuses to take shots at former executives.
She stays on message: Her job is to make cars and trucks people want to buy, and to do so efficiently. The biggest part of that is reducing manufacturing complexity. That means using as few vehicle platforms as possible, which speeds up development and lowers costs.
VW is pushing to reduce its 15 platforms to five by 2019, with more than 55 percent of its vehicles based on just one of those platforms. VW says this will cut its costs by 20 percent.
In 2010, GM had 30 platforms. Barra said the company is on track to reduce that to fewer than 10 by 2020, which should help reduce development costs by $1 billion a year. She added that GM can save an additional $1 billion by avoiding the stop-and-start of vehicle-development programs that plagued the company during the lead-up to bankruptcy.
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