General Motors on road toward change, growth
As president of General Motor’s North American operations, Mark Reuss has his hand on the automaker’s throttle. He decides what vehicles get built and where. He manages how many come out of the factories and the level of pricing and sales incentives for each model.
Reuss constantly talks of “discipline” as the post-bankruptcy mantra for the company. GM, he says, must use discipline to avoid making too many vehicles or face discounting cars because of sudden gyrations in the economy and consumer sentiment. It can’t let expenses creep up, he says, because that would upend an equilibrium that enables the company to make money at what are historically low levels of U.S. auto sales.
GM has had a strong 2011. It has sold nearly 2.1 million vehicles in the U.S. this year. Sales are up 14.9%, ahead of the industry average. And its market share is up nearly a full percentage point from 2010. GM accounts for 1 in 5 vehicles sold nationally.
At the Los Angeles Auto Show, which runs through Nov. 27, Reuss talked about GM’s recovery and where the automaker is headed.
It’s no surprise to see GM trucks among the top sellers this year, but all of the sudden you have a small car, the Chevrolet Cruze, selling more than 200,000 units this year, and you are doing well with small SUVs such as the Chevrolet Equinox. Where will your volume come from next year?
We have a new Malibu coming, and 2012 will be the full first year of Chevrolet Sonic and Buick Verano sales and we think those will be big.
There also is a small crossover, the Captiva, that sells around the world and we once sold here as the Saturn Vue. We have brought it back as a fleet-only play for Chevrolet. That allows us to scale back our fleet sales of the [GMC] Terrain and Equinox crossovers. That frees up inventory of those vehicles for retail sales and will also help the residual and resale values of the Terrain and Equinox. And it means we will have no marketing money or retail expense on the Captiva.
Where do you see industry going in the coming year?
We need some economic stability right now. The Italian-Greek economic crisis sucked the recovery right out of us. We really need to see some jobs come back into the economy. People need to feel confident that they can make their car payments.
The good news for GM is that we haven’t changed our break-even point, which is at [an annual industry U.S. sales level of] about 10 million to 10.5 million units. [The industry will sell about 13 million vehicles this year.]
If demand rises we can work more hours and more shifts and if it decreases, we don’t have to close facilities. We just slow it down. If we overshoot or undershoot we can adjust. We don’t have to get into a wild incentive play that upsets the market.
We will make money, but any forecast for the industry is tenuous.
How important is China to what you are doing in North America?
We want to get the scale of Cadillac up there because we know there is a market for it. The other piece is linking with Buick. It is a great brand in China. We can do a lot of things scale-wise with these two brands in both markets and go at the business quite differently and make some money.
Quality is a constant issue for automakers. GM’s various brands seem to bounce up and then fall back in the ratings but don’t have the consistency of the Asian manufacturers. Why is that?
This is really important. We have got to do something different when we look at the quality of our vehicles. I have responsibility for all the manufacturing plants and that means manufacturing quality too. The variability is not healthy.
In the history of GM and most auto companies, you get the best quality at the end of the life cycle of a car. Why is that? It is because there is no one making tons of changes to the car in the name of improving the car. We just let the factory run and manufacture the car. We don’t disrupt the making of the components and the actual car.
