GM's Shareholders, Not Just Government, Should Be Calling For Barra's Head

It is ironic that General Motors CEO Mary Barra has drawn the ire of President Donald Trump and members of Congress for announcing plant closures in Michigan, Ohio and Canada when it is her shareholders who should be calling for her head.

Barra claims she is responding to shifts in car-buying habits away from sedans toward SUVs, and wants to move aggressively into electric vehicles, hybrids and self-driving platforms. But these are the fifth round of layoffs in 14 years.

The truth is that Japanese auto makers can sell sedans at a profit, and GM can't. And GM is struggling to compete on its home turf in SUVs too.

Five years ago, sedans were half of U.S. auto sales, but those now capture only about 35%. And all the major auto makers must grapple with the plateauing of annual U.S. light vehicle sales at a bit more than 17 million.

SUVs are bigger and more expensive but improvements in the engine and vehicle design have greatly reduced the gas-mileage penalty imposed on drivers that choose those over sedans. And vehicles of all kinds are more durable these days.

Thanks to advances in metallurgy, fuels and lubricants - these industries are more high-tech than most folks recognize - and better design, engines last a lot longer now - over 200,000 miles as compared to half that a few decades back.

Consequently, car buyers are paying for the gas and keeping vehicles longer to compensate for higher SUV price tags.

Options like Zipcar and Uber, inexpensively delivered meals and groceries, and Amazon Prime free more young people from the necessity of car ownership. Increasingly, those living in cities and congested close-in suburbs with access to decent public transportation for commuting are opting to skip car ownership.

Still, the battle for the sedan and smaller SUV markets indicates just how vulnerable GM and Ford remain to more agile foreign competitors. Since 2015, sales of Impalas are down about 49% and sales of Fusions are down about 45%, whereas Toyota Camry and Honda Accord sales are down only 20% and 19%.

1 2
View single page >> |

Peter Morici is an economist and professor at the Smith School of Business, University of Maryland, and widely published columnist. He is the five time winner of the MarketWatch best forecaster ...

How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.


Leave a comment to automatically be entered into our contest to win a free Echo Show.