Not long after General Motors filed for bankruptcy in 2009, President Obama reportedly asked his advisers why the company couldn’t make a Toyota Corolla.
Daniel F. Akerson, GM’s current chairman and CEO, offered a response of sorts in a talk to business students at the University of Notre Dame’s Mendoza College of Business. Akerson was the first speaker of the fall Boardroom Insights lecture series, which brings in corporate leaders and senior executives to discuss current business issues. He spoke Sept. 9, 2011.
Recalling Obama’s remark about the Corolla, Akerson said, “Today in that [market] segment the Corolla is dead last, and the new Chevy Cruze is the best-selling car in America and getting rave reviews.”
Akerson, who took over as CEO of the struggling auto maker in September 2010 and became chairman at the start of 2011, was positively overflowing with good news about Chevrolet, which turns 100 this year, and GM’s other surviving brands. Those include Cadillac (“the best-selling premium car in America last year”) and Buick (“fastest-growing brand in America today”).
He said the fortunes of GM and Toyota, Japan’s leading automaker, have actually been moving in opposite directions since GM’s bankrupcty. In the past year, Toyota has lost 3 percentage points of market share, he said, while GM picked up more than one point.
“That was unheard of in the prior 25 years.”
The CEO attributed his company’s rising fortunes to compelling designs and far better quality, reliability and durability than prior to bankruptcy. Warranty repairs are down 50 percent since 2007, he said.
When asked about the first steps he took after taking over the company, Akerson said 90 percent of what GM had been doing prior to bankruptcy was “great;” 10 percent needed to change.
One change involved recognizing the cyclical nature of the auto business, he said. During economic downturns, people put off large purchases like cars. He said GM was losing a billion dollars a year by abandoning projects begun during boom years when hard times arrived.
He also said the company needed to change its benchmarks. In the past, the measure of a new model was whether it marked an improvement over the previous model, he said. The new standard is whether it’s better than not just what the competition offers, but what competitors may have in development.
Akerson talked at length about the company’s development of energy-saving advanced propulsion systems to replace the gasoline-powered internal combustion engine.
“Your generation is probably the last generation that will rely wholly on internal combustion engines,” he told students.
He said the company is researching multiple alternatives, including hydrogen fuel cells. General Motors already makes many vehicles that run on hydrogen, he said, but they’re sold almost exclusively to companies for their private fleets. The vehicles aren’t practical yet for consumers because of the lack of hydrogen fueling stations.
Akerson described the Chevy Volt, an electric car with a small conventional engine used only to charge the battery, as a “game changer” and “the iPad of cars.” He said he and his wife drove 2,000 miles in the car on 2½ gallons of gas. The car retails for about $40,000 but can qualify for a $7,500 tax credit.
General Motors might not exist today if not for a government bailout of the company and Chrysler Corporation in early 2009. The failing automakers needed the money for operating cash and to enable them to offer loans to car buyers. A government report earlier this year estimated that taxpayers probably will lose $14 billion of the $80 billion that was loaned to GM, Chrysler and some auto lenders and suppliers.
“Was it worth it?” Akerson asked of the assistance GM received. “Since bankruptcy we’ve added 13,000 jobs and invested over $5.4 billion in the United States, and we are growing.”
He later added that had the major auto makers gone under they would have taken the chain of parts suppliers down with them, leading to “massive” unemployment.