Swift Economic Recovery in GM CEO'S Crystal Ball
General Motors CEO Mary Barra predicted a brief recession and streamlined economic recovery in a recent interview. Mixed in with favorable coverage of how the company saved Michigan’s Governor Gretchen Whitmer by manufacturing personal protective equipment intended to combat the pandemic, the Detroit Free Press took time out to get Barra’s expert opinion on various subjects.
She mused that a 300-mile range will be the sweet spot for GM’s electric vehicles, noting that the company may eventually offer distances in excess of that with its new Ultium platform, and touted the merits of the Inclusion Advisory Board she recently placed herself at the head of. Things began to get more substantive when she attempted to predict how long the economy would languish as a result of COVID-19 lockdowns
“If you step back to March, and even before then, we had a lot of learnings from China, from Korea and the United States. We believe we do a very good job of keeping people safe by reducing the possibility that someone with COVID can enter our plants,” she said of the virus. “And then all the work we do within the facilities to prevent the spread. We took time and we trained everybody. People understood that we’re working hard to keep the environment safe for them. One of the things we’re trying to do now is really encourage people to use those same protocols when they’re not at work.”
She praised Whitmer’s new executive order requiring masks (with violators subject to a $500 fine and business legally obligated to deny unmasked persons entry), suggesting it will prove an important factor in America’s recovery as more areas mandate similar rules. Then Karen Mary discussed how GM sees automotive sales rebounding swiftly, claiming the turnaround is already underway in the automotive sector.
“We are seeing a recovery. We think it’s going to be a relatively short-lived recession,” Barra elaborated. “But we have a long way to go because we went to a pretty low base. The new outbreaks do pose potential setbacks, but we’re hopeful that the U.S. economy will be back to 90 [percent] of pre-pandemic levels early next year. There’s a lot of uncertainty.”
That precariousness has been worsened by General Motors (and the industry as a whole) swapping toward quarterly sales reporting. When data was shared monthly, it was much easier to take the industry’s pulse and make an assessment. But we know that Q2 volumes typically outperform Q1 and GM’s figures didn’t reflect that in 2020. If the recovery is actually happening, next quarter’s volumes should see significant gains over the last three months, with Q4 performing even stronger.
For the most part, we’re chronicling this for posterity; for the ability to pull it out at a later date and see just how accurate Ms. Barra was in her predictions. We’ve seen a number of other business leaders suggest news of another massive recession is overblown. Economists, on the other hand, have predicting bad news since 2019, when a survey by the National Association for Business Economics showed 72 percent of respondents claiming there would be a prolonged economic retreat by the end of 2021. One could ague that the pandemic accelerated that timeline and delivered it early. The U.S. unemployment rate has already ballooned to 11.1 percent, food prices have spiked, and people are buying fewer non-essential items.
GM itself has already gotten things wrong. In May, it predicted the company would return to full production by mid-June. While it hedged its bets by saying the market would ultimately dictate what occurred (duh), it was obviously incorrect in its original assertion. Looking into a crystal ball isn’t easy; we just hope leadership is less wrong this time around. As annoyed as we get with the vapid corporate messaging emanating from the industry, it’s never fun to report layoffs or economic strife.
[Image: GM]
A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.
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She gave the most positive outlook possible without sounding dumb. What else would she, or any automotive CEO, or any CEO say? He comments would be parsed and would potentially affect other peoples' behavior--from consumers to CEOs. She could have said "...you know, we, and by "we" I mean the company AND our union partners, have gone to great lengths to make make our plants safe from COVID-19. In fact, by having hundreds of people in our facilities each shift, we are doing Michigan and other states a BIG FAVOR, since these people are at work, wearing masks, 6 feet apart, and NOT out spreading the virus or engaging in inappropriate behaviors. They are also not costing the states unemployment benefits. No need to thank me, Gov Whitmer, just saying :) " THAT would have been refreshing and factually correct.
Let's look at this from GM's business perspective - yes, unemployment is high, but the vast majority of people who have been affected are low-paid workers, and GM has literally given up on making anything for them. From this perspective, things might not be as bad as they look. On the other hand, look at what's happening to a brand that *does* cater to lower-paid workers - Mitsubishi. I'd be surprised if they don't close up shop altogether. I do think that the new-vehicle buyers who are capable of buying a $40,000 car now might be buying a $30,000 one instead to be conservative, but the time when GM catered to entry-level buyers is long gone.