Final Inspection

GM Profit Report Further Clouds Spotlight on CEO Mary Barra

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The chief executive caps her first 100 days on the job by reporting a razor-thin profit of $125 million, down 86% from year-ago, and bruised by the recall of 7 million vehicles.

Well, that’s not exactly how General Motors expected the tenure of its celebrity CEO to start.

Mary Barra caps her first 100 days on the job by reporting a razor-thin profit of $108 million, down 88% from year-ago, and bruised by the recall of 7 million vehicles that reduced earnings by $1.3 billion.

The result marks the poorest quarterly financial report since GM emerged from bankruptcy in 2009, and the automaker expects a weaker annual profit than previously forecast when factoring in total recall costs.

“It’s an understatement to say the first quarter was challenging for GM,” Barra told Wall Street analysts on a conference call earlier today to discuss the results.

And for a CEO whose ascension in December was met with cheers for breaking a glass ceiling for women in the auto industry. It boosted employee morale, too, because it meant one of their own would be running the automaker for the first time since 2010.

Ironically, at Barra’s first appearance as CEO in January on the eve of the Detroit auto show, the media swarmed her for a comment on the trailblazing appointment. Last week at the New York auto show, the crush was more intense and decidedly more negative as she was pressed with questions over why the recall took so long to occur.

The media circuses in Detroit and New York bookended Congressional testimonies by Barra, where she often replied to lawmaker demands for answers to GM’s foot-dragging on resolving the ignition-switch problem by saying an ongoing internal investigation would yield an explanation. It proved to be fodder for an embarrassing, if not altogether unfunny, “Saturday Night Live” spoof.

And now comes the wobbly profit report. Talk about your U-turns. Or at least that’s how it appears.

GM, in fact, finished the Jan.-March quarter by delivering 2.4 million vehicles globally. That’s even with year-ago. Global market share dipped slightly, to 11.1% from 11.3%, but revenue came in strong at an improved $37.4 billion compared with $36.9 billion in like-2013.

And while each of GM’s regions posted weaker year-over-year earnings contributions in the quarter, the period saw the automaker deliver its first common stock dividend since the 2010 initial public offering and sales in China reached a record level.

New products in Europe gained momentum, adding optimism to the turnaround there, and North America provided record average transaction prices on the strength of disciplined pricing and incentive use on the automaker’s important new large pickups as it moved forward on plan to sell a richer mix of pricier trucks.

Third-party assessments of GM’s newest cars and trucks also remain positive, and the massive retool of its customer-service operations launched after bankruptcy resulted in Cadillac and Buick this month earning the top spots in the latest J.D. Power survey on the topic.

GM’s U.S. sales seem to be holding up to the recall scrutiny, too. “Although it is early, it appears we have not experienced a meaningful impact on sales and we continue to be optimistic about 2014,” Barra says on the call, a few hours after being named to Time magazine’s “100 Most Influential People” list.

Shortly after her appointment in January, Barra said there would be “no right turn, no left turn” in the strategy begun by her post-bankruptcy predecessors. The first quarter would seem to offer plenty of tangible, although overshadowed, proof GM’s wheels are pointed straight ahead.

In New York, Barra declined to call the dark cloud of the recall frustrating.

“It is a serious issue,” she told reporters, acknowledging it is “front-and-center” of GM’s business.

But until every switch gets fixed sometime in October, she added, “we’re going to keep the momentum going” by accelerating the delivery of “great products (and) strong business results. We’ve got the team to do it.”

Unfortunately, it won’t get any easier for the Barra camp.

The automaker’s internal investigation should be complete sometime in June, which would just about match the timetable of another inquiry exploring and evaluating options to perhaps compensate the families of victims involved in crashes linked to the defective ignition switches.

The investigations could result in the termination of a number of employees involved in GM’s small-car program during the previous decade, as well as additional restructuring, and possibly some costly reparations to those grieving families.

So expect more salacious headlines, but don’t look for Barra to veer off course over her next 100 days.

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