In the aftermath of a weeks long production shutdown, General Motors is focusing on getting customers the vehicles they want, cutting the features they don't and likely making permanent cuts to improve its cost structure, the Detroit News reported.
Efficiency is key for GM and other automakers now back to making vehicles after an eight week coronavirus pandemic induced shutdown that cost billions, forced temporary layoffs and pushed automakers to rethink aspects of the business, the paper said.
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"We want to make sure we go to market with what customers want to buy," GM CEO Mary Barra said on a Tuesday webcast with Credit Sussie.
"We think there is still significant work we can do from a complexity reduction perspective from the number of architectures we have to the complexity within a platform."
Dealers have had to revamp their business, too, the paper said.
They've switched much of their business online and offered contactless, clean delivery options – virus-induced innovations that could prove to have staying power in an evolving marketplace.
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By GlobalData"I think there will be permanent changes there," Barra said of the dealer experience. Some of those changes, she added, also will cut costs.
To address rising demand and depleted inventories, GM added second and third shifts at its profit rich truck plants in Flint, Fort Wayne, Indiana, and Wentzville, Missouri, though the plants aren't yet up to pushing out three shift production levels.
GM's inventory levels remain "on the tighter side especially as it relates to trucks," CFO Dhivya Suryadevara said on the call with Credit Sussie. Given that, trucks and SUVs are GM's focus during its production ramp-up.
A Cox Automotive analysis on Tuesday found GM's pickups were in shortest supply right now. Based on the sales pace in May, the inventory level at GMC is down to 60 days and Chevrolet is at 81 days. By comparison, Ram is at 89 days and Ford inventory of pickups stands at 109 days.
To help in its efforts to eliminate some offerings, in model year 2021 GM is flagging some options for dealer review to see if it is a configuration that may not get ordered or might be a faster selling model.
"The dealers are doing a very nice job of selling deep into inventory," Suryadevara said. "We are working on prioritising faster-turning models."
The Detroit News said experts expect incentives to dip with lower inventory levels.
Suryadevara said GM "will remain disciplined" on incentives "while staying competitive".
Before the pandemic hit the automaker first in China and then in North America, GM made several cost-reduction moves to save between US$4bn and $4.5 billion.
"I do believe we entered this crisis better positioned financially because of the many business transformation actions we have taken over the past several years to improve our cost position and to improve our competitiveness," Barra said.
"As we suspended operations we also moved very quickly to preserve our liquidity and protect the business."
GM ended the first quarter with a strong $33.4bn in automotive liquidity even as it suspended its guidance for the year.
To conserve cash, GM halted its quarterly cash dividend on its common stock and stopped its share buyback programme.
In March, GM drew down $16bn from its revolving credit facilities to increase its cash position and maintain financial flexibility during the current uncertainty.
The automaker also extended its three year revolving credit agreement for $3.6bn to April 2022 to further strengthen its liquidity.
GM and GM Financial previously extended a $2bn 364 day revolving credit agreement to April 2021.
GM also cut its salaried workforce's pay by 20% with the promise of paying it back with interest.
During the shutdown, GM had 6,500 participate in the company's salaried downtime paid absence programme instead of laying off salaried manufacturing and engineering employees. They received 75% of their pay with benefits.
Executive compensation was cut by 25%. The most senior executives took a 30% cut. GM's directors also took a 20% cut in their board compensation.
GM will continue to keep "a laser-like focus on our cost structure", Barra said, but the company remains dedicated to its electric and autonomous programmes. It still plans to invest $20bn in the projects through 2025.
These include: a new battery programme, building a battery cell manufacturing plant in northeast Ohio with LG Chem and offering a line of electric vehicles, including the GMC Hummer EV, in the near future.
GM's goal, Barra said, "is to really lead the future of transportation by the transformation that we're making. I believe we will come out of this with a lower cost structure that is permanent with everything we have learned and how we can do things better, faster and with less cost."
