Hurting from Recall, GM Reveals Margin-Boosting Plan

CEO Barra looks to new products, China sales, Europe restructuring and cost savings to right the ship.
Iris DorbianOctober 1, 2014
Hurting from Recall, GM Reveals Margin-Boosting Plan

General Motors CEO Mary Barra told an audience packed with investors and analysts that she is committed to increasing her company’s profit margins while scaling back costs and expanding operations in China, The New York Times reported.

Mary Barra

Mary Barra

It’s Barra’s strategy to salvage a storied American auto brand that’s been damaged badly by this year’s recall of millions of cars with defects that have resulted in at least 23 fatalities, according to the Times. The recall has cost the company about $4 billion while sowing seeds of doubt in consumers about the safety of its vehicles.

Federal regulators have already slapped General Motors with a $35 million fine after congressional hearings revealed its failure to report a safety defect in some cars. The company presently is under investgation “for possible criminal and civil charges by the Justice Department, the Securities and Exchange Commission and 45 state attorneys general,” the Times reported.

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Without mentioning the recall and the deaths, Barra said the plan is designed to bolster the company’s relationships with consumers as well as its stock price, which has plummeted more than 20% this year.

GM also said that next year about 27% of its global sales will be from new or recently refurbished products. That figure is expected to rise to 38% by 2016 and 47% by 2019.

The Times also reported that GM is expecting to save about $1 billion annually beginning in 2015 on material and logistics costs.

General Motors CFO Chuck Stevens reportedly said the company expects to stem its losses in Europe and return to profitability by 2016 through “restructuring moves that will lower expenses in the region by $700 million.”

To fuel its overall growth, GM is looking to China for gains. GM said the company will be investing $14 billion there “over the next five years, primarily to build five plants and introduce 60 new or revamped vehicles.”

GM predicts it will sell about 3.5 million cars in China this year and 4.9 million by 2018.

Finally, GM promised investors they would boost its stock dividend. The Times conjectured that the higher dividend could raise GM’s stock price, which has been flat in the low-$30 range despite market gains.

Source: The New York Times G.M. Outlines Plan to Increase Profit Margins

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