Cars

With CEO Mary Barra, General Motors willing to kill straggling markets, cars

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The general in General Motors is fading fast.

Nine-three years after legendary GM CEO Alfred Sloan famously declared the automaker would sell “a car for every purse and purpose,” the nation’s largest automaker is focusing more on building models that people are actually buying. 

The strategy was outlined again Tuesday as GM reported an almost $1.7 billion profit in the second quarter, down about 42% from a year earlier.

CEO Mary Barra is fervently pursuing an emphasis on vehicles that stand the best chance of becoming the hottest sellers -— crossovers, SUVs and pickups — and all the while looking ahead to the next era, when self-driving vehicles are expected to hit the roads.

That strategy means GM could scrap some notable models. The six cars that Reuters says could be eliminated include famous names like Buick LaCrosse, Chevrolet Volt and Impala along with Cadillac CT6 and XTS and Chevrolet Sonic. 

“What it demonstrates is GM is laser-focused on profit, which is something that historically we have not seen,” Autotrader.com analyst Michelle Krebs said.
 

So far, the strategy to focus on hotter sellers hasn’t done much to help the company’s stock, which has hovered in the mid-$30s for most of Barra’s three-year tenure as investors continue to show little interest in old-school automotive companies. GM shares closed at $35.57 a share, up 25 cents, or 0.7%.

After GM released its second-quarter earnings Tuesday, Barra hinted that the company would consider increasing its cost-cutting targets, pledging “bold and decisive actions” to bolster profitability and prepare for a seismic shift toward self-driving cars.

GM has already shown that it’s serious about investing in family-haulers like crossovers and SUVs, including the recently redesigned Chevrolet Equinox, Chevy Traverse, GMC Terrain and Buick Enclave. Those vehicles are connecting with shoppers, who are abandoning passenger cars in droves.

Related:

General Motors posts $1.7B profit after ditching European operations

GM sells European operations to French automaker PSA

Report: GM may kill Chevy Volt, Sonic and four other cars

GM’s second-quarter market share in crossovers sold to individual customers rose 1.7 percentage points compared with the same period last year.  

“This is a strong starting point,” Barra said. “We’re going to be well positioned to capitalize on that growth.”

Though its stock price may not reflect it, there’s been plenty of good news at GM.

Eight years after its transformative government bailout and bankruptcy, GM is consistently profitable and more willing to navigate sharp corners when the road curves unexpectedly. Unlike the past, when it clung to such tired brands as Oldsmobile or Pontiac, GM isn’t being nostalgic anymore.

“If any part of the business isn’t meeting its profitability targets, it’s up for discussion as to the future of it and that includes everything from a vehicle to an entire business unit,” AutoPacific analyst Dave Sullivan said.

This year, GM has already sold its languishing European division, reversing a decision Barra’s predecessor had made several years earlier to keep the unit. It also ended sales in the disappointing India market and shed South Africa operations.

Perhaps the biggest surprise is GM’s apparent willingness to part with the Chevrolet Volt, its breakthrough plug-in electric car that it heavily promoted not only as a great car, but as a symbol of a tech-driven future.

“The only one that surprised me at all (on Reuter’s list) was the Chevy Volt,” Krebs said. But probably “it’s not just a pure kill, I suspect there’s a substitution.”

Instead, the company plans to launch nationwide sales of the battery-powered Chevy Bolt on Aug. 1, a long-range electric car that could rival Tesla’s Model 3, and the Volt could be replaced by another model that uses the same underlying technology.

GM, for now, isn’t confirming what models, if any, it has on the chopping block.

The automaker has shown a willingness to make sweeping cost cuts in recent years amid Wall Street demands for greater efficiency in manufacturing, procurement and engineering. The company is on track to meet its goal of slashing $6.5 billion in costs by 2018, said Chuck Stevens, GM’s chief financial officer.

For the future, GM’s emphasis on investments in self-driving car technology, ride-hailing app Lyft and ride-sharing service Maven give the company a fighting chance in the race to transform the industry.

But with investors weighing GM’s prospects in a high-stakes competition against tech giants such as Tesla, Google and Apple, the company is fighting to prove to investors that its plan to roll out self-driving Bolts through Lyft’s network gives it an edge.

“It appears they’re on the right path, but there’s so many unknowns,” Autotrader’s Krebs said.

Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.

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