General Motors has developed a new strategic plan intended to help it achieve 9% to 10% margins on an EBIT-adjusted basis by early next decade.

CEO Mary Barra and fellow top executives outlined the automaker’s “customer-focused strategic plan to become the most valued automotive company” at a conference for investors and financial analysts at the company’s Milford Proving Ground on Wednesday (1 October).

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“In the nine months that this leadership team has been together, we have spent a significant amount of time setting our goals for the future of GM and developing a specific action plan,” Barra said. “Our strategic plan is a pathway to earn customers for life and create significant shareholder value in the process. Every chance to connect with a customer is an opportunity to build a stronger relationship.”

GM’s strategic plan includes several major initiatives.

  • In 2015, about 27% of its global sales volume is expected to come from products new or refreshed within 18 months. That figure is expected to rise to 38% in 2016 and 2017, and reach 47% in 2019.
  • During the same time frame, GM plans to execute the world’s largest automotive deployment of 4G LTE high-speed mobile broadband, introduce vehicle to vehicle connectivity in the 2017 Cadillac CTS and launch a highly automated driving technology currently called Super Cruise, which allows for extended periods of hands-free driving on highways.
  • GM has also developed an innovative ‘mixed material body structure’ that uses GM-patented welding technology and a combination of steel and aluminium stampings, castings and extrusions to deliver designs that are lightweight, use 20% fewer parts, have class-leading torsional stiffness and exhibit superior noise and vibration characteristics.
  • GM is establishing its flagship Cadillac brand as a separate business unit headquartered in New York City to pursue growth opportunities in the luxury market with more focus and clarity. Cadillac expects to introduce four new vehicles in North America in 2015, including the recently announced CT6. In addition, Cadillac plans to introduce nine new models in the next five years in China, which is expected to become the world’s largest luxury car market later this decade.
  • GM’s joint ventures in China are planning to spend US$14bn from 2014 through 2018 to open five new vehicle manufacturing plants and support sales of just under 5m vehicles annually. In the same time frame, GM expects to launch 60 new or refreshed vehicles, including nine new sport utility vehicles.
  • GM Financial, which has seen its earning assets grow from $8.7bn in 2010 to $37bn today, continues to invest to support the sale of new GM cars, trucks and crossovers around the world. GM Financial has sharply increased the number of GM customers it serves in the United States, Canada, South America and Europe. Later this year, GM Financial expects to enter the growing Chinese market.
  • GM’s strategy to improve relationships with suppliers, derive more global volume from fewer vehicle architectures and lower enterprise costs for material and logistics is expected to deliver significantly better variable margins on upcoming high-volume product launches, including the Opel/Vauxhall Corsa and Astra in Europe, and the Chevrolet Cruze and Malibu in North America. By 2020, the company expects that about 99% of global production will be on core architectures.

Mid-decade financial targets

During the meeting, GM also reaffirmed the company’s previously announced near-term financial targets:

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  • In North America, the company expects to achieve EBIT-adjusted margins of 10% in 2016.
  • In Europe, the company expects to return to profitability in 2016.
  • In China, the company expects that its joint ventures will maintain net income margins in the 9% to 10% range.
  • In South America, the company’s core operations continue to improve as a result of recent product launches and material and logistics optimisation.
  • GM continues to address challenges in its international operations outside of China, including brand strategy, cost structure and sourcing to return to consistent profitability.
  • GM intends to return excess cash flow to stockholders primarily through strong and growing dividends based on sustained improvements in the company’s underlying financial performance.