By on June 3, 2020

General Motors Renaissance Center

On Tuesday, General Motors CEO Mary Barra suggested her company would exit the other side of the coronavirus pandemic running much leaner than when it went in. While this will probably be the case for other automakers, as many (including General Motors) went into 2020 with restructuring efforts planned or already underway, GM is letting everyone know it’s doing cuts extra right.

This likely has to do with the automaker not wanting to look as though it’s in for a repeat of 2008, now that the global economy’s once again careening toward troubled times — but we’re just guessing. It also seems as though the extreme lack of industrial progress created by months of factory shutdowns has forced executives to fill the void with a lot of hot air. Fortunately, Barra’s message wasn’t totally devoid of useful information. 

“We were quickly able to take out significant costs and we are being very conservative about what costs we turn back on,” the CEO told investors during an event hosted by global wealth manager Credit Suisse. “I believe we will come out of this with a lower cost structure that is permanent.”

According to Reuters, Barra said those cost reductions may include changes to a few different vehicle platforms offered by General Motors. Plenty of manufacturers are looking at streamlining production, and Barra suggested GM might also benefit from reducing the complexity of some platforms. While decontenting cars is hardly new, it’s a reliable fallback for the industry when the going gets tough and manufacturers need to reduce overhead.

From Reuters:

She said that the pandemic had given GM the opportunity to go through all of its line item expenses and eliminate redundant processes.

“We’ve found things that we don’t need to do and things we can do more efficiently,” Barra said.

The U.S. automotive industry has been ramping up after the coronavirus shutdown, and major automakers have been keeping a close eye on suppliers in Mexico to see the pandemic disrupts the flow of parts.

Ford CEO Jim Hackett ran a similar idea up the flagpole in December. The Blue Oval similarly mentioned that something needed to be done about risky, long-term loans — an issue GM quietly addressed this week. But Ford then veered into unpleasant tech talk, promising that its credit arm would begin tapping into connected features to funnel your driving data to insurance agencies that may offer discounts if you play nice.

Wow… so generous.

While GM has similar programs, it’s kept them quieter, mainly rolling out its grand plans for investors’ ears. However, making sweet deals with insurance groups is hardly at the top of anybody’s to-do list right now. Automakers are significantly more worried about supply chain issues as the industry restarts, with Barra confirming The General’s situation was no different. She said the company is primarily focused on addressing popular models like pickups and SUVs (which have higher profit margins) and claims they’ll be the vehicles GM will divert parts to if shortages occur.

[Image: General Motors]

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39 Comments on “GM CEO Says Pandemic Helped Cut Costs; Decontenting Incoming...”


  • avatar
    thegamper

    Well, as it turns out, there are a lot of parts that any given car doesn’t really “NEED” in order to function…….probably.

    • 0 avatar
      Lorenzo

      They’ve been doing that all along, for ease of assembly. The linkage from the gas pedal to th engine is gone, replaced by an electric switch; the start button replaces the ignition key in the steering column that locked the steering wheel, again, with electrical switches.

      I expect all the instrument panel controls will be connected to a touch screen eventually, eliminating buttons and knobs. The days of changing the radio station or adjusting the HVAC while the car is moving will be over soon. They’ll probably be locked while the car is in motion to save us from ourselves.

      • 0 avatar
        NormSV650

        Bloomberg reports that GM is preparing itself for a downturn. Even if sales dropped 25% over a 2-year period the company would still be profitable, although profits could drop as much as 70%. That means the SAAR could drop to 12.7 million and GM would still be profitable. 

        • 0 avatar
          Lorenzo

          GM making a profit in bad times has been the case for decades. Car sales dropped from 11.1 million in 1978 to under 8 million in 1982, and in the latter year, GM made a profit of $950 million. Today they might not have the market share to make nearly a billion, but a profit is a profit.

    • 0 avatar
      mcs

      Here’s the “de-contented” C9 under development (disguised as a Ferrari):

      youtu.be/BUXuB4qPqP4?t=822

  • avatar
    Mike N.

    GM products always seemed half-assed compared to their putative competitors (looking at you, Cadillac). So now they’re going to quarter-ass it again? Like in the 90s and before?

    • 0 avatar
      bd2

      That’s b/c Cadillac decided to go “all-in” on electrics.

      We’ll see how that pans out, but think going electric isn’t going to be as smooth as many think, at least for the near-term (it’s not like the I-Pace and E-tron have been selling well).

      But GM having pulled out of unprofitable markets (and cutting capacity) seems to have paid off.

  • avatar

    I think this may cause a span of industry-wide decontented crap. A Covid Malaise, if you will.

    It will just be known you don’t buy a 2023-2026 version of an automobile.

  • avatar
    Jon

    decontenting… can you be more specific? What exactly shall be removed? I dont know whether to celebrate or protest in the streets until i know what is being removed.

  • avatar
    MiataReallyIsTheAnswer

    QUOTE- “Ford then veered into unpleasant tech talk, promising that its credit arm would begin tapping into connected features to funnel your driving data to insurance agencies that may offer discounts if you play nice.”

    LOL well nice job, giving us the best reason yet not to drive a modern Ford.

  • avatar
    SCE to AUX

    The comments here would be the same if GM announced they weren’t going to do any cost reductions, even after identifying some candidates.

  • avatar
    ToolGuy

    Pre-bankruptcy GM paid me money to give them financial advice. At the time, they had some products that were profitable and many that weren’t. I kept repeating that ‘we’ should do some portfolio rationalization. The “reply” was something like “oooga booga market share – me #1.” Eventually I decided to leave and they paid me to do so (also cashed out my pension which would have turned to mush).

    Back to present-day GM. Ways they could be looking at to reduce cost:
    • Eliminate vehicles (product lines) – they have already done a lot of this
    • Simplify trim levels and option packages – this can help a *lot* with inventory turnover
    • Rationalize processing steps – she said this explicitly (could be production, could be distribution)
    • Several months back she was discussing a significantly reduction in parts count – presumably by consolidating functions into fewer parts, not necessarily by eliminating functionality
    • “Decontenting” as most here view it, which is cheapening or removing content from a specific model – she didn’t necessarily say this

    What they are doing makes a lot of sense, if done properly.

    [On NormSV650’s comment above, 25% used to sound like a large drop in Revenue.]

    Life advice: If you like automobiles and think you have some good ideas for how to make great ones, get yourself a job at an OEM. You might change the world. (Or you might change your mind.)

    • 0 avatar
      Lou_BC

      Or you might find solace in fentanyl ;)

    • 0 avatar
      indi500fan

      You must have been a “Delph” (sorry about, that because they did get screwed) because nobody I know had their GM pension impaired. We got the opportunity to receive it as an annuity from Prudential (at the same monthly payment previously promised from GM) or take a one time cash payment at a very generous interest rate rolled into a personal IRA.

      • 0 avatar
        ToolGuy

        indi500fan, I left in my 30’s – any pension ‘promises’ made to me were far in the future and are still in the future. I went with “bird in the hand.”

        A co-worker at another OEM said her dad got his Cadillac retirement payments whacked – I don’t know the details (but since her husband was a Georgia Tech ME, she’s automatically a credible witness – lol).

  • avatar
    JMII

    Are we sure this is just about parts? If they are anything like my company what they have learned is you can function with less employees, less business trips, less office space, less lunch meetings, etc.

    On the parts side I would bet on more parts-bin “opportunities”. For example not every model needs unique A/C vents.

  • avatar
    Lou_BC

    I suspect that a lot of the fat to be trimmed will be in the realm of corporate air travel, meetings etc. Work from home will reduce the need for office space. It will give car companies the excuse to kill off low profit models. If you look at Silverado, they list 8 different trim levels. I can see that getting pared down to 4.

  • avatar
    Jeff S

    Agree about reducing the trim levels and killing off low profit models but what is likely to happen is much cheaper and lower quality carpet, trim, switches, and door handles. As for corporate air travel they could cut some more of that. Crazy to have 8 trim levels on a Silverado when no more than 4 would do–cut it down to 3. I have noticed the paper thin no texture carpet on my 2008 Isuzu and 2013 CRV both premium models versus the slightly better carpet in my 1999 S-10 now owned by my nephew. I would rather have a plastic floor than the paper thin carpet. Also the door handles and switches are much cheaper quality than my 1999 S-10. I would be willing to give up an ignition switch and a few other switches just not to cheapen the other hardware anymore.

    • 0 avatar
      sgeffe

      The carpet in my 2013 Accord was Michael’s-grade felt, same with my 2019.

      Floor liners of some sort are mandatory, even in BMWs, Acuras and the like.

    • 0 avatar
      tobiasfunkemd

      I recently bought a 2019 F-150 XLT, with a 2017 Tucson trade-in. After about a month of driving, I realized that the carpeting was a far, far cry from the Tucson in terms of quality, toughness, and thickness. Also, it’s barely anchored to the floor in the front cab, which makes taking the snap-in floor mats a fraught experience. Otherwise, I’m happy with the build and tech content in the vehicle. My big takeaway is that I can easily move down to the XL trim level on my next vehicle – other than the nice-to-have larger touch screen, a XL/WT trim would easily meet my needs. I do take a look at the high trim levels when I’m getting it serviced, and it is a monument to American marketing that they can get people to find $40k in value on essentially the same vehicle platform.

  • avatar
    HotPotato

    My Volt has been bank-vault solid — I credit the enormous T-shaped structural member down the center of the car, stuffed with several hundred volts worth of batteries — but GM’s dedication to cost cutting was pretty obsessive already; I shudder to think what they trim next.

    For example, they’re paying a huge number of claims across a range of models (and squandering a lot of owner goodwill) with the shift-to-park issue, which bricks cars all because they were trying to shave fractions of a penny in cost off a 30-cent microswitch in the shifter assembly. I mean, FFS. And it’s not even a user-replaceable part: you have to put in a whole new assembly. Fraction-of-a-penny-wise, pound-foolish.

    Not that the upstarts are any better. Tesla Model 3 cars come with paint so thin that normal road spray visibly damages the lower body paint in months; supposedly this is because some genius figured out that paint is expensive so they should use less of it. Now they’re stuck offering ticked-off owners a choice of lower-body paint-film protection kits or mudflaps, either one to be installed at owner expense. Nothing says high-tech like Pep Boys body protection.

    People used to buy a Mercedes to get away from this sort of thing: you paid an obscene amount of money up front, but the car would continue to look and run like new for the next 20 years. I’m not sure the luxury cost penalty buys you anything but a light-up star these days though.

    • 0 avatar
      mcs

      The Tesla paint thing is annoying. I’ve even heard of issues of rust perforation not being under warranty. Million-mile drivetrains are great, but not much good if the rest of the car is rusting out. I’ll have a conversation with a body shop owner I know before I get my car and see what he thinks. To me, correcting a few paint issues isn’t a big deal. In fact, I might even have the car redone in a custom color anyway.

      In all fairness though, my Leaf started rusting after 5 years. The other manufacturers aren’t perfect. Although, the Leafs paint-free Italian clear carbon fiber garage mate is doing really well (just don’t ask about the maintenance effort on the rest of it). Still, I wish Tesla would get their act together on painting the cars correctly in the first place. At least offer a good paint warranty to fix issues when they crop up.

  • avatar
    Jeff S

    The paint is another issue. My wife’s 2013 white CRV has the thinnest paint I have ever seen and it has the orange peel. The carpet is thin and yes we do have the all weather floor mats with the hooks on the driver’s mat but when you pick up the mats to vacuum the carpet you feel like the carpet is going to get sucked up with the dirt. This is on the top model CRV with AWD, heated leather seats, and navigation. True on the premium cars the carpet, paint, and trim are less premium than they were a few years ago and slightly better than the lesser cars. Another thing that many car makers have done is to make it harder and more expensive to work on vehicles to where it too costly to repair them after a few years and yes I realize this is part of planned obsolescence which to some degree most of us accept but in 3 to 5 years this is extreme. Some of the complexity is to lower the cost of manufacturing. One of the other things that automakers are doing on their lower cost vehicles is offering standard interiors with fabric made out of recycled soda bottles which are no more comfortable than all vinyl interiors. Many will upgrade to leather.

  • avatar
    ponchoman49

    Hear we again again. Say goodbye to things like dual rear seat back map pockets, glove box lights, overhead sunglasses holders, rear seat armrests, passenger seat height adjusters, lighting in the doors and thinner carpeting to name a few. Many of GM’s current vehicles suffer from some of these items already. The new Buick Encore GX is the start. A 3 cylinder engine. No passenger seat height adjuster or lumbar. No rear seat air vents. And this is supposed to be a near luxury vehicle!

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