GM NAMES BLANCHARD TO LEAD DETROIT INITIATIVES

Original Story: detroitnews.com

General Motors Co. said Friday it has named John K. Blanchard, director of local government relations for the U.S. since 2011, to immediately serve as its lead executive for GM’s initiatives in Detroit and Southeast Michigan. He will serve as the company’s single point contact in GM’s efforts to help revitalize Detroit.

Blanchard, 52, represents GM on many boards including the Detroit Riverfront Conservancy, Detroit Economic Growth Corp., Automation Alley and will be recommended to serve as GM’s representative to the Downtown Detroit Partnership.

“As a life-long resident of Michigan, John understands Detroit well,” Bob Ferguson, senior vice president for GM’s global public policy, said in a statement. “Having John lead our efforts will ensure the company has an even greater impact in helping rebuild Detroit.”

Blanchard has worked for GM since 1983, joining the company as a financial analyst. He has worked in GM’s corporate finance division, led the company’s worldwide real estate group and helped oversee redevelopment of GM’s headquarters at the Renaissance Center.

GM Trending Towards a Younger Workforce

story first appeared in The Detroit News

The new generation of automotive manufacturing workers at a General Motors Co. subsidiary here is focused on career and environment, and they want to work with cutting-edge technology.

That's part of what attracted many millennials — roughly defined as those born in the 1980s and 1990s — to help create an integral part of the future of the automobile: They're assembling lithium-ion batteries for the Chevrolet Volt extended-range plug-in and the equivalent cars the automaker sells in Europe and Australia.

The Brownstown Battery Assembly Plant, in a former warehouse with little to identify it as a GM plant, represents the Detroit automaker's youngest workforce. It is operated by a GM subsidiary, GM Subsystems Manufacturing LLC. And 45 percent of its hourly workforce is composed of 24-to-31-year-olds.

That's a huge contrast to other GM plants, where that generation, on average, represents 9 percent of the workforce. The average GM U.S. hourly worker is 47 years old.

About 70 hourly workers and 35 salaried workers assemble packs for the Volt that contain 288 lithium-ion cells manufactured by LG Chem. Trucks arrive four times a day to take battery packs to the nearby GM Detroit-Hamtramck Assembly Plant, where they go into the Chevrolet Volt, Holden Volt and Opel Ampera. Late next year, the Brownstown plant expects to start assembling batteries for the plug-in Cadillac ELR coupe.

Most of Brownstown's hourly employees have not previously worked for GM. Many, including the plant's youngest employee, Valerie Myaard, 24, of Flat Rock, had no auto or manufacturing experience. She started in May 2010 and now is a team leader, overseeing five workers.

Young seek new challenges

GM partnered with Scratch, a Viacom company, to help research young workers. It found they are quick to seek new challenges, are able to multitask and want to move up the career ladder.

Many Brownstown workers have held multiple jobs since the plant opened in 2010.

They also have worked together to develop the best and most effective ways of doing things. They determined where to set up components on a cart for assembly workers to use.

Even the plant's union shop chairman is just 27.

But attracting talented younger workers who see the auto industry as a career has been a challenge. It also is something Gov. Rick Snyder has said is vital to its success.

Jay Baron, president and CEO of the Center for Automotive Research in Ann Arbor, said in a statement that GM is just now starting to see a trend in the average age of the hourly worker in the auto industry.

Some workers thought a GM career was out of reach. Shannon Pearson, 28, of Taylor is one. She had family ties to GM and had a short-lived job at a GM plant in 2006.

Excited about technology

Many of the younger workers at Brownstown are relishing their roles working with new technology.

Brett Powell, 31, of Hartland, who has worked as a technician at the proving ground and worked for a small firm that manufactured electric vehicles, runs tests on returned batteries to find the cause of a failure.

Many at Brownstown have moved up the ranks quickly, including Tony Lamentola, 26, of Southgate. The college student previously worked as a porter and fast food restaurant employee. After starting at Brownstown in 2010, he was promoted last fall to team leader.

Lamentola said he likes being on the "forefront of technology" and sees the importance of getting young people involved in the auto industry.

GM, Ford Sales Fall, Chrysler is Up

Story first reported from USA Today

General Motors kicked off the second half of the sales year with a whimper, reporting a 6% decline in sales in July compared to a year ago. GM blamed lower sales to rental fleets.

But there was some good news. GM says its Cadillac unit saw 21% higher sales due to the popularity of its CTS, Escalade, SRX and the new XTS.

"Cadillac hit a home run and our newest Chevrolets and Buicks are performing very well," said Kurt McNeil, vice president in charge of U.S. sales in a statement. "Signs of a housing recovery and good news on consumer confidence and household income should help keep the light vehicle selling rate in the 14-million range and drive seasonally higher truck sales as we move toward fall."

GM says that it's sales of 201,237 vehicles reflected a 3% decline in sales to individual customers in showrooms and a 41% dropoff in sales to rental car fleets. Automakers generally frown upon rental-car fleet sales as low-profit arrangements.

GM touted other bright spots, too. Buick Verano sales have increased every month since the compact was launched in December. Sales of the small Chevrolet Sonic were strongest since its introduction, no small feat given lower gas prices. The even smaller Spark just went on sale.

Ford Motor

Ford's sales slumped 4% in July and like GM, it blames lower sales to rental and corporate fleets.

But there was good news in the showrooms: Ford's U.S. retail sales increased 2% in July versus year-ago levels, driven by strong retail customer demand for fuel-efficient vehicles.

Ford's Fusion midsize sedan, which is due to be replaced soon by an updated model, exceeded its best-ever July sales record last month. Just in time for summer fun, Mustang sales rose 8%.

The Explorer crossover SUV had its best sales month since 2006. And the big F-Series pickups had their 12th straight month of sales increases.

Turbocharged EcoBoost-equipped F-150s made up 42% of retail sales mix in July.

Chrysler Group

Chrysler Group sales rose 13% in July compared to the same month in the previous year, which the automaker says was its best performance for the month since 2007.

Rebounding Chrysler says it saw gains in each of its divisions --Chrysler, Jeep, Dodge, Ram Truck, and Fiat. It was the 28th straight month of gains.

"We again demonstrated our disciplined and methodical approach to growing sales and profits," said Reid Bigland, CEO of the Dodge brand and head of U.S. sales.

The gain was driven in part by two models that set sales records July: the Chrysler 200 mid-size sedan and the Dodge Journey full-size crossover. Sales of the award-winning Journey were up 69%. In a good sign for the U.S. economy, Ram pickup sales gained 17%. Pickup-truck sales are often a sign that construction is rebounding.

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Joel Ewanick Resigns from GM

Story first reported from Detroit Free Press

General Motors' global chief marketing officer, Joel Ewanick, has elected to resign effective immediately, the automaker announced Sunday evening.

Greg Martin, GM spokesman, said  Ewanick failed to meet expectations for company employees.

He declined to be more specific.

Ewanick, 52, joined GM in May 2010 to lead marketing in the company's North America unit.

He soon set in motion the first of several management shake-ups as GM continued its restructuring post-bankruptcy. He became global marketing chief in December 2010, giving him oversight of a $4.5-billion budget.

Ewanick had developed a reputation as an innovative marketing leader, but also as someone who had moved quickly among jobs before GM hired him.

"It has been a privilege & honor to work with the GM Team and to be a small part of Detroit's turnaround. I wish everyone at GM all the best," he tweeted on his Twitter account Sunday.

GM's market share in the U.S. for the first six months of 2012 slipped to 18.1% from 19.9% a year earlier, according to researcher Autodata Corp.

Ewanick's departure comes amid GM's continuing effort to clearly communicate to investors how it will restructure its European business that has lost more than $12 billion during the last 12 years, and is expected to report another loss for the second quarter of this year on Thursday.

Before joining GM, Ewanick was vice president of marketing and chief marketing officer for Nissan North America for little more than a month.

Before joining Nissan, he served as vice president of marketing for Hyundai Motor America. At Hyundai he launched the Hyundai Assurance program during the depth of the financial crisis in 2009. That program allowed customers to return their Hyundai vehicles if they lost their jobs.

Ewanick's departure comes less than three weeks after Chevrolet launched a similar program called "Love it or Return it" that allows consumers who buy Chevrolets between now and Labor Day to return them between 30 and 60 days of ownership if they're not satisfied, as long as they have less than 4,000 miles on the odometer.

Ewanick was instrumental in streamlining Chevrolet's more than 70 different advertising and marketing agencies into a more manageable relationship with one: In March, Ewanick orchestrated the merger of two large agencies -- Goodby, Silverstein & Partners of San Francisco and McCann Erickson Worldwide -- into one new agency called Commonwealth to handle Chevrolet advertising globally.

The Wall Street Journal reported Sunday that Ewanick clashed with GM over "failing to properly vet the financial details of a European soccer-sponsorship deal that he struck recently."

Chevrolet sponsors both Manchester United and Liverpool Football Club.

Those deals came shortly after GM announced it would not advertise in the 2013 Super Bowl and that it would not pay for any advertising on Facebook.

Alan Batey, vice president, U.S. Sales and Service, will assume the role of global chief marketing officer on an interim basis.

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Class Action Suits Against GM Still Out There

Story first appeared in USA Today.

Q: Are there any securities class-action lawsuits filed on behalf of former General Motors shareholders who lost money from the bankruptcy restructuring?

A: Investors in the company formerly known as Motors Liquidation may feel as though they got run over.

These investors had owned shares of General Motors prior to the massive bankruptcy restructuring proceedings in 2009.

The company underwent the restructuring, then re-emerged as a new company called General Motors. This new company sold shares to the public in 2010, raised more than $16 billion from an initial public offering and was reborn, again, as General Motors (GM).

Investors in the pre-restructuring company formerly known as General Motors saw their shares get delisted and end up trading for pennies on an informal trading marketplace under the name Motors Liquidation.

Some investors in the old General Motors continue to be frustrated by the turn of events. And when investors feel wronged, they are able to turn to the courts.

Investors who want to check to see if any securities action lawsuits have been filed can get quick answers from the Stanford Law School Securities Class Action Clearinghouse. This site aggregates securities class-action lawsuits and helps investors see if a stock they own or owned might be involved in litigation.

Not surprisingly, General Motors has been the subject of several securities class-action lawsuits. The cases have been consolidated into a suit filed on Sept. 19, 2005, called Folksam Asset Management, et al. v. General Motors.

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GM Transplants in Lansing Adjust

Story first appeared in The Detroit News.

A General Motors worker drives 600 miles so he can mow the lawn.

He's only half-kidding. Every other weekend, he and his roommate pack the car and drive straight to Tennessee at the end of their graveyard shift at General Motors Co.'s Lansing Delta Township assembly plant. They share the driving so the other can nap.

They're home for about a day and a half before it's back to Michigan and back to work.

These are the "transplants" — GM workers represented by the United Auto Workers union who headed north two years ago when the Detroit carmaker shut down part of its Spring Hill, Tenn., operation and shifted production of the Chevrolet Traverse to the Delta plant, adding a third shift of about 1,000 workers in the process.

They are among the 560 General Motors employees in Lansing who have spent the past two years living, in essence, double lives: full-time worker at the Lansing Delta Township assembly plant, part-time family member — in person, at least — in Tennessee.

For some of them, the choice to take the carmaker up on a three-year transfer wasn't much of a choice at all: anything to stay employed. Many have worked for GM for decades and are among the set of UAW-represented workers whose pay averages about $29 per hour. Add in benefits and the relocation package GM offered them — $30,000 and the ability to retain their seniority toward their pensions — and transferring for many appeared to be the best decision.

But it also has meant a radical departure from their daily lives, geographically and figuratively, as they adapt to communicating with their families via cellphone or computer, paying rent along with their mortgages on houses they own in Tennessee and missing family birthdays and other milestone events.

GM plans to reopen the manufacturing plant in Spring Hill, initially to make the Chevrolet Equinox small crossover later this year. A company labor executive last fall said the idled plant could see an initial infusion of $62 million and 685 workers. Spring Hill also could land new midsize vehicles for the 2015 model year, which would boost production there by as many as 1,200 jobs and $183 million.

They hear rumblings now, the Tennessee workers, that the UAW and GM are trying to work out a deal to let some Spring Hill transfers, who are spread out in factories nationwide, return home before their three-year terms end. They don't know if it's true. The company and the union are silent on the question. Some local workers say they could be packed to leave in 20 minutes if it happens.

They don't have anything against Lansing. But, they figure, why should they tie up a job in a place that doesn't belong to them when there are plenty of Michiganians who would line up at the mere thought of a "now hiring" sign and spend their paychecks here?

The Traverse started rolling off the Lansing Delta Township assembly line as part of GM's recovery plan after its quick trip through bankruptcy in 2009 to consolidate its operations and improve efficiency. Some of that plan involved shutting down and selling off brands — it jettisoned the Pontiac, Saturn, Hummer and Saab nameplates — closing plants and turning the remaining facilities into three-shift operations running basically around the clock.

Now, nearly six years after the Delta plant opened in late 2006, 3,123 hourly and 257 salaried workers have jobs at the facility, boosted partly by a third shift added in 2010 when the Traverse went into full production locally.

Most of the 560 Spring Hill workers accepted $30,000 relocation agreements that require them to work three years in Lansing before they would be eligible to transfer elsewhere. They aren't guaranteed jobs in Spring Hill. Twenty-five are here on $4,800 basic relocation deals that grant them contractual recall rights, or top preference, to return to Tennessee as jobs arise.

A Lansing-based GM spokeswoman, said she doesn't expect plans to re-open the Tennessee factory to have an immediate impact on Delta Township production.

Spring Hill, Tenn., is a suburban city of 29,000 about 40 miles southwest of Nashville. Its website heralds its "blend of commerce, history and country living." For awhile, its name was synonymous with Saturn, as the small city's assembly plant was for a time the only place in the country where the General Motors Co. brand was built. Locals know State Route 396, on which the plant is found, as Saturn Parkway.

Saturn was supposed to be "a different kind of car company," and for awhile it was. Spring Hill landed the facility in 1985, and the first vehicle came off the line five years later. It was intended to be GM's answer to small-car competition from foreign automakers. The chairman of United Auto Workers Local 1853 in Spring Hill, said people came from 45 states and 144 different plants to work at Saturn before the company ended the division in 2010.

To understand the impact GM has had on the Middle Tennessee community, it's important to understand two distinct trends. Spring Hill in the last decade experienced what can only fairly be called a population explosion. In 2000, the number of people who lived there numbered only 7,715. That figure soared 276 percent by the 2010 Census. It was so rapid, in fact, that in January of that year, Little Rock, Ark.-based data production firm Gadberry Group ranked Spring Hill as one of the nation's fastest-growing cities in 2009. The reason? General Motors.

And in that same decade, which saw GM executives idle production there in 2009 amid corporate-wide restructuring and bankruptcy proceedings, unemployment in Maury County quadrupled — from 3.6 percent in 2000 to 14.1 percent in 2010, according to U.S. Bureau of Labor Statistics seasonally unadjusted data.

While that can't entirely be attributed to idling the plant — it happened in the midst of the nation's most devastating economic downturn since the 1930s — it does offer some insight into how influential the auto industry became there.

Spring Hill Manufacturing never truly shut down. About 1,000 people remained on the job, mostly those with the highest seniority. At its lowest point, about 600 people worked there. The plant didn't manufacture any vehicles, but instead focused on engines, steel stamping operations and injection molding.

The factory is positioned on more than 2,000 acres on what once was agrarian land. To this day, it's still a working farm. The region served as a Civil War battleground, first in the Battle of Spring Hill in November 1864 and, a day later, in the Battle of Franklin. Re-enactors occasionally set up near the plant.

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GM Sales Soar

First appeared on CNN Money

General Motors is poised to once again be No. 1 in global auto sales, after three years out of the top spot.

It's a comeback that will be official when final 2011 sales figures are reported in the coming weeks.

Recapturing the top spot seemed unthinkable in 2008 when GM lost the title. At the time, the company was in a tailspin. Its very future was uncertain, and a bankruptcy filing and federal bailout loomed.

Toyota held the title between 2008 and 2010.

GM's feat is also a contrast to other U.S. industries that lost leadership to overseas competitors, never to see it return.

Cool cars from the Detroit Auto Show

GM (GM, Fortune 500) never lost the lead in U.S. sales, but its market share here slid nearly continuously for decades, from 44% in 1980 to only 19% in 2010. But for at least the last two years that trend has been reversed, helping GM quickly return to profitability in the wake of its bankruptcy.

But its home market is only part of the sales story.

It is also the largest automaker in China, which has become the world's largest market for auto sales. It sold about 2.5 million vehicles in China, narrowly edging out its U.S. sales once again, as it increased both sales and share there.

"They continue to be awfully strong in the U.S. and China. If you can conquer those two markets, you've got two-thirds of the world," said Rebecca Lindland, director of research for IHS Automotive.

GM CEO Dan Akerson downplayed the significance of the title when speaking with reporters at the Detroit auto show Monday.

"I like profitability more than I do market share," he said. "We're a mass producer, and scale matters to us, therefore we're pleased with that accomplishment."

Market share vs. profitability: In the past GM had held onto market share and its No. 1 rank by cutting prices on cars to the point where they were unprofitable. Bob Lutz, former vice chairman of GM, said worrying about their market share rank did the companies more harm than good. (Fiat 500 sales goal 'incredibly naive')

"There is absolutely nothing to be gained by being the world's biggest," he said. "I tried to tell them to say, no, it's not our objective to be No. 1. But they just couldn't do it."

But Lindland said GM can be pleased that it got back on top without that kind of deep discounting and grab for market share.

Through the first three quarters of last year, GM's 6.8 million vehicles sold was well ahead of both No. 2 Volkswagen, at 6.1 million, and No. 3 Toyota Motor (TM), at 5.8 million.

VW has reported final global sales of 8.2 million for the year, but GM should easily top that mark, analysts said.

How long GM will be able to hold onto its lead is uncertain. Toyota is is expected to post a sharp rebound this year after disruptions caused by the earthquake and tsunami that hit Japan in March.

"I don't think we've set the goal to be the largest manufacturer in the world. I think the lead is going to trade off," said Akerson. "I wouldn't count Toyota or any of our competitors out. But we're having a good run now. I'm very pleased by our product."

Does Akerson know what he is doing?

Story first appeared in Bloomberg.
In June, Daniel F. Akerson, the chairman and chief executive officer of General Motors (GM), gave a speech to about 400 engineers and designers at the company’s technical center north of Detroit. It was a boilerplate, morale-boosting speech, generous with exhortations about work ethics and staying vigilant. Then came the Q&A session. One employee wanted to know: What kind of hours did Akerson expect them to put in at the office? Akerson answered with a family parable. He told the crowd he’d called his son’s office at 6:30 that morning and found him at his desk. Akerson informed his son, who does not work at GM, that he would call again in 12 hours and that he expected him to still be at work. The moral, as if anyone in the room needed an explanation: “Generous Motors” is gone, so get busy. Next question.
The anecdote didn’t go over well, according to two people in attendance who spoke on condition of anonymity because the gathering was private. This was 10 months into Akerson’s reign as CEO and two and a half years after the company’s bankruptcy and bailout by the federal government. Thousands had lost their jobs, leaving the survivors to do more even as they watched their stock in old GM evaporate. Akerson said he hopes some people are uncomfortable, and that it’s not his role to make people comfortable. He added that he doesn’t know what it was like there five years ago, and really he doesn’t care, because they are in a war. One Bed Liner manufacturer wants to see truck sales increase so his business can get back on track. He is excited for the new CEO's changes.
When the U.S. Treasury appointed him to GM’s board in 2009, Akerson, 62, had no auto industry experience. He does have a résumé, though: nearly 20 years as a telecom industry executive, successfully leading MCI and Nextel, then a run as a private equity investor with Carlyle Group. Depending on who’s talking, these qualifications make him either a refreshing force for change or a clueless newbie doing more harm than good. A longtime car industry consultant said that it’s not that he isn’t smart or a good executive, he just lacks the background, and even when he gets an answer, he may not know if it’s the right answer.
Of course, the same could be said of Ford’s (F) Alan Mulally (previously at Boeing) (BA) and Akerson’s predecessor, Edward E. Whitacre Jr. (AT&T) (T). Akerson says being new was a gift because he could ask questions that were impolite, previously imponderable, or politically incorrect. His 39th-floor office at GM’s headquarters in Detroit’s Renaissance Center is decorated with large glamour photographs of a Camaro and a Cadillac, but not the auto-racing tchotchkes that industry veterans typically display. He says he is not a car guy, nor should the CEO be worried about rear axle ratios on the next transmission.
Now that GM is making money—profits hit $6.2 billion last year, and the company has $32 billion in cash—Akerson has moved the company out of survival mode and is pushing it, whipping it even, to grow.

Akerson was born in California and raised in Mankato, Minn. His father had been an enlisted man in the U.S. Navy. Akerson attended the Naval Academy, graduated in 1970, and served a tour aboard a destroyer during the Vietnam War. He boxed in college—he was a light heavyweight—which may help explain his penchant for talking smack. Since taking over at GM, he has declared Lincoln dead—Ford should “sprinkle holy water” on its luxury brand, he told the Detroit News—and ridiculed Toyota’s (TM) Prius as a “geekmobile.”
The jab at Toyota came during a speech last December in Washington, when he heaped praise on the Chevrolet Volt, a plug-in hybrid and would-be Prius killer. In December, Akerson and his top managers had a meeting in the office of Thomas Stephens, then the company’s vice-chairman of global product development. The team wallpapered the room with plans for the Volt’s rollout, including pricing, sales targets, and production. Stephens and the product development staff figured the plan was baked and ready to go. Sales started that month and supplier contracts were already in place for future model years. Akerson homed in on the plan to build 45,000 Volts next year and wasn’t satisfied. He said the package came to him completely sanitized, with the notion that he just had to put his stamp on it but he wanted more, more, more.
Prior to the meeting, Akerson says, someone told him that new models need to sell at least 100,000 in a year to be successful. So that’s the goal he gave his team: 120,000 Volts in 2012. When GM’s Volt engineers heard about their new stretch target, they blanched—and not merely because engineers everywhere tend to resent orders from the suits. It took the Prius about seven years to hit the annual numbers Akerson wanted. Since the Volt is still a money loser, jacking up production would only push prices lower and losses wider. Quality could suffer, too, they argued, if GM pressured its suppliers to nearly triple the volume of the car’s high-tech parts, especially its lithium-ion batteries.
After four months of fact-finding and debate, Akerson backed off. It turned out that the suppliers wouldn’t take on the risk of building enough batteries to power 120,000 Volts unless GM guaranteed to repay their capital investment should sales come up short. (In the past, the company had exuberant sales forecasts for hybrid systems in its large SUVs that never quite materialized, making it difficult for suppliers to make a return on their investment.) Since no one at GM could say for certain how many of these pricey, tech-laden cars it could actually sell, Akerson settled on a production goal of 60,000—half of what he wanted and still a third more than his development people originally planned. The compromise also sent a message to his team: He may be pushy and unschooled in the practicalities of automobile production, but he wasn’t, just a reckless gambler. GM Vice-Chairman Stephen J. Girsky says Akerson’s sense of when to relent is what makes him more than a mere bully. Girsky says that even when he losesit’s a good thing because he is challenging the organization.
William E. Conway Jr., co-founder and managing partner of Carlyle Group, said people say he is tough but he wouldn’t say that. He added that Dan will make the tough decisions, but he is also willing to change his mind.

One of Akerson’s first tasks after taking over as CEO last Sept. 1 was figuring out how to break up the old bureaucracy without losing too much institutional knowledge. For help, he turned to an old pro: retired IBM (IBM) Chief Executive Louis V. Gerstner Jr., who came to GM’s headquarters in January to talk shop. Gerstner was a computer industry novice when IBM’s board hired him from RJR Nabisco in 1993. Early on, he brought in a new chief financial officer, Jerry York, who had been CFO at Chrysler. Then he concentrated on assembling a team with deep knowledge of the computer business. His advice regarding GM, says Akerson, was to identify optimists with experience and a competitive streak and promote them.
In February, Akerson nudged aside the veteran Stephens in favor of Mary T. Barra, the 49-year-old human resources director, to run product development. (Stephens is now chief technology officer.) Akerson elevated former Hyundai marketer Joel Ewanick to global chief marketing officer and promoted Treasurer Daniel Ammann, 39, to CFO after the resignation of Ammann’s predecessor, Christopher P. Liddell. Filling out Akerson’s top team are Girsky, a former Wall Street analyst and private equity investor who’d been an in-house adviser in 2005 and 2006, and GM-North America President Mark Reuss. A GM lifer, Reuss is the management team’s car guy and has earned Akerson’s trust.
Reuss recalls that around the same time Akerson was pushing to sell more Volts, the boss was raising questions about the next-generation Chevy Malibu. At a meeting at GM’s design center north of Detroit in December, Reuss and design chief Edward Welburn proudly showed Akerson a hard-foam mockup of the future Malibu. The design added the distinctive tail lights and sculpted haunches of the hot-selling Camaro. Akerson loved it. Reuss says Akerson turned to him and asked how fast can we get this, when the car wasn’t due to market until mid-2012.
Akerson wanted it as soon as possible. He pointed out that the longer Chevy has to sell the current car, the more incentives it will need. That would push its price closer to the all-new Cruze compact. A loaded Cruze compact sells for almost $23,000, and the larger Malibu sedan starts below $22,000, not counting $1,000 in rebates and cut-rate financing offered on the bigger car. Akerson’s fear was that buyers would opt for the Malibu and cannibalize Cruze sales.
Old GM pushed back. One employee sent Akerson a long e-mail telling him why pulling the car ahead was a dumb idea. Engineers said that rushing the Malibu could compromise quality. Worse, the new four-cylinder engine wouldn’t be ready until later next year. The engine was designed to make its debut on the Malibu and there is no way to speed engine development, Reuss says.
The rebellion went straight to Akerson who said he started getting e-mails from people he didn’t even know saying he would threaten the quality of the product. Others told him that the Malibu already had a POR, for “plan of record,” which is GM-speak for “set in stone.” Akerson recalls asking in exasperation that don’t you ever reshuffle your plan so we can think competitively?
He responded to the internal critics by saying that the family sedan business is hotly competitive and GM would blow about $200 million in incentives over the next year while waiting for a fresher model of the Malibu. Then Reuss, who’d come up through the company’s engineering ranks, realized that the company had another four-cylinder engine that would be ready in January and could be mated with GM’s eAssist mild hybrid system. After just three meetings—unheard-of at GM—the company figured out how to start selling the new Malibu in January with the hybrid system, offering buyers 38 mpg on the highway. The hybrid version will help GM compete with the Ford Fusion and Toyota Camry, both of which offer hybrid systems in their cars.
Some of the new team’s decisions have been costly. Late last year, Reuss concluded that GM should jack up rebates to help dealers boost volume and thin out rising pickup truck inventory. Akerson backed him, and GM offered the industry’s largest deals in the first quarter of 2011. The move was an echo of pre-bankruptcy GM, which used massive rebates to boost sales and sell out the capacity of its overblown factory network. The strategy helped sales, but GM’s first-quarter earnings showed that the new management team overspent: GM said the incentives lowered profits by $300 million. Meanwhile, Ford said its price increases helped its bottom line by $900 million in the quarter.
Akerson is planning to stay at GM for three to four years, says a person familiar with the CEO’s intentions. During that time, he’ll have some legacy-defining decisions to make. GM has seven global engineering centers, which the company calls tier-one centers, each specializing in designing the foundations of vehicles that are most popular in their regions. The Korean center specializes in subcompacts for emerging markets, the U.S. focuses on trucks, Europe on compact cars, and so on. The cars are engineered in those centers and sold around the globe. The centers have produced some recent hits, including the Chevrolet Cruze compact and Buick LaCrosse sedan, but Akerson says the system is too costly and complex. He may shut down some centers and consolidate engineering. It would save money—and it could also backfire by shifting development of some models away from the experts. Akerson say there’s always that risk, but our competition doesn’t have seven tier-one engineering centers around the globe.
He’s weighing how to make Cadillac a global luxury player that can rival BMW, Mercedes, and Audi. This has been the subject of yet another internal debate at GM. Akerson says there was a push to go after Europe first and establish Cadillac as a legitimate competitor to the German brands. He disagreed. Akerson figured that investing in Europe first would mean missing out on the real growth market, China. He won. By the third quarter of next year, GM will be making more than 100,000 Cadillacs a year on the mainland. Going after the European market is at least two years away, Akerson says if they wait five years, German brands will take over, and they have a chance in the second-largest market in the world.
Another big choice awaiting Akerson is the designation of his successor. He has nothing but praise for Reuss, Girsky, Ammann, and Barra. He says he wants to groom a few different candidates and then heaps extra praise on Reuss.
Akerson knows that none of those decisions will matter if GM backslides, as it has so often in the past. The company has a long history of following periods of glory with periods of failure. Breaking out of that cycle will require a new work ethic, product vigilance, and all the other virtues he harangues GM employees about. This summer, Akerson had his top 60 managers engage in a kind of automotive war game called Tough Love. The exercise called for six teams with 10 executives each representing GM’s major competitors. The executives had to get out of the GM uniform, Akerson says, and figure out how to crush the company.
Akerson was on the Fiat-Chrysler team. Team Toyota, headed by Girsky, examined how that company handled its recall fiasco last year. The Japanese company offered deals to its customers to bring them back. GM figured Toyota may come out swinging with aggressive sales tactics once the tsunami’s impact subsides and Japan’s factories are cranking again. They also decided the Prius—the geekmobile—still gave Toyota a huge advantage in fuel economy. GM has the Volt, but team Toyota didn’t think GM would do much beyond that. GM’s remedy: Come up with something Toyota won’t expect. As a result, GM this summer resurrected the once-shelved Cadillac Converj, a concept car using Volt technology. Akerson says the car will come to market a few years from now, under the name Cadillac ELR.
When asked later about strategies his team came up with to destroy GM, he demurs, claiming he spent most of his time observing. The main goal of the exercise was getting his executives to consider every threat, as opposed to pretending the competition doesn’t exist. Akerson says he’s pleased with the changes in attitudes he saw during Tough Love. Akerson said going into this exercise, there were a lot of cynics and doubters, but after the feedback was, they realized they have got a lot of work to do. This bodes well for other related industries such as Tonneau and truck accessories makers.

GM Said to Have Disagreed With Treasury Over IPO Price Range

Bloomberg

General Motors Co. and its government owners disagreed over the price for the automaker’s initial public offering before settling on a range between $26 and $29 a share, according to eight people familiar with the matter.

The U.S. Treasury was seeking a split-adjusted price of $30 a share, referred to as the “Obama number” by officials in the administration, said the people, who declined to be identified because the talks were private. At that price, the government could say it recovered all the money spent on GM’s bailout under President Barack Obama, though not what his predecessor put in.

GM and its bankers for weeks had pushed for an IPO price in the low-to-mid $20s to help ensure demand and a significant gain on the first day of trading, the people said. The United Auto Workers retiree health-care trust and the Canadian government, which are also shareholders, sought a $30 offer price as well to maximize their return.

“If you’re a seller, you don’t want to leave money on the table,” said Maryann Keller, president of Maryann Keller & Associates in Stamford, Connecticut. “The Treasury would look stupid if they priced it at $20 and the first day of trading it closed at $29.”

Over the past month, Detroit-based GM and its bankers agreed to a higher offering price range as they watched rival Ford Motor Co.’s shares rise, said two people familiar with the matter. At a meeting in mid-October, the parties settled on $25 to $29 a share. As Ford shares climbed, they boosted the bottom of the range.

Ford Rising

Ford advanced to a six-year high yesterday after saying its U.S. vehicle sales rose 15 percent in October. The shares gained 75 cents, or 5.2 percent, to $15.18 in New York Stock Exchange composite trading, bringing the increase for the year to 52 percent. The Dearborn, Michigan-based automaker’s market capitalization has reached $52 billion.

At the midpoint price of $27.50 each, GM would have a market value of $41.25 billion, based on 1.5 billion shares that will be outstanding after the offering, according to the company’s filing and data compiled by Bloomberg.

President Barack Obama wants to recover as much of the taxpayer’s $80 billion investment in the auto industry as possible, two of the people said. The Treasury department cut its expected losses to $17 billion in August from an estimate of $28.2 billion a year ago.

“You now have all those U.S. auto companies showing a profit,” Obama said in an interview on the ABC-TV program “The View” in July. “They’ve rehired 55,000 workers. We are going to get all the money back that we invested in those car companies.”

Obama’s Money

Obama was referring only to the money his administration spent rescuing the auto industry, not the $13.4 billion in aid granted under President George W. Bush, according to the White House.

With a 3-for-1 share split, the U.S. government needs an average share price of almost $44 to get back all of the $49.5 billion it put into the automaker under Bush and Obama. That is based on the $131 a share breakeven level cited by a person familiar with the matter in September.

Including the repurchase of the Treasury’s preferred shares after the IPO, taxpayers will have received $9.5 billion in repayments, interest and dividends from GM since the automaker emerged from bankruptcy in July 2009, according to the Treasury.

Take away those payments and the money invested under Bush, and the Obama administration’s figure drops to $26.6 billion. With 912.4 million shares that Treasury currently owns, it can cover that if it gets an average of $29.15 a share. It plans to sell 263.5 million shares in the IPO.

A Treasury spokesman, Mark Paustenbach, and Noreen Pratscher, a GM spokeswoman, declined to comment about the pricing decision.

Market Value

GM’s underwriters, including Morgan Stanley, JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc., pushed in meetings over several weeks for a lower price that would ensure the offering would be oversubscribed and value GM at a lower level relative to earnings before interest, taxes, depreciation and amortization, also called Ebitda, than Ford, said six of the people.

After weeks of negotiations, the Treasury, the UAW and the Canadian government settled with GM and its underwriters on a price that was between what the two sides wanted, said the people.

The Treasury department agreed that it would be beneficial to start with a lower price so the shares would rise on the first day, creating good publicity for the offering, two of the people said. The Canadian government and the UAW health-care trust, which own 11.7 percent and 17.5 percent of GM, respectively, sided with the U.S. Treasury, five people said.

CEO Gap

GM’s underwriters argued that the automaker will trade for some time at a lower Ebitda multiple than Ford, said these people, because investors would favor the experience of Ford’s Chief Executive Officer Alan Mulally, who has been with the company since 2006. GM CEO Dan Akerson took over three months ago after serving a year on the automaker’s board.

The Treasury and GM’s banks project that the shares will quickly climb above the $30 level, said the people, because the automaker has more business than Ford in some of the world’s fastest growing economies from China to Brazil.

GM and Ford yesterday reported U.S. sales increases that topped analysts’ estimates in the best month yet this year. GM’s deliveries climbed 3.5 percent to 183,759, when the average of three analysts’ forecasts was for a 6.3 percent decline, while sales at Ford increased 15 percent to 157,935, topping the 14 percent average of six analysts’ estimates.