‘Normalization’ is banned at automaker
General Motors is insulated from traditional cyclical volatility in the auto industry, its CFO told investors Wednesday — and that includes whatever changes might be coming from the Trump administration.
CFO Paul Jacobson said the automaker has learned to stop having a “knee-jerk reaction” to market shifts and instead takes a conservative and consistent approach to ups and downs. That means sticking to a long-term strategy no matter what short-term challenges might arise.
Jacobson, who spoke Wednesday at the Barclays Global Automotive and Mobility Tech Conference in New York, said he would often grow frustrated hearing the word “normalization” bantered about when discussing how to run GM’s operations.
“We banned the word ‘normalization’ inside the company because what is normal? Isn’t it possible we’ve established a new normal?” Jacobson asked. “We’ve learned a lot about the value of our products in consumers’ eyes: How to price them, how to not react with a knee-jerk reaction to what’s going on around us, and focus on our inventory, our demand and our execution.”
A guarantee to ‘perform better in a downturn’
GM used to overproduce vehicles during good times, he said, only to then have to scale back and heavily discount them during down times, creating wild swings within the company’s ledgers. Now, it has “reset” its new normal behavior to use restraint in production and control incentives to keep prices strong and production volumes consistent.
“It doesn’t make us immune to a downturn, but I guarantee you that performing with that level of consistency and the fundamentals, we’ll perform better in a downturn than we ever have before,” Jacobson said.
That can mean leaving “money on the table in the good times,” he acknowledged.
“Could we make more money by producing more and driving more volume at lower prices? Yeah, on the margin, maybe we could,” Jacobson said. “It’s not going to be worth the capital, the fixed costs, et cetera, to ramp that up only to have to tear it back if the market comes back down again.”
The strategy is key when it comes GM’s goal to transition to all electric vehicles by 2035. The big hitch is that the incoming Trump administration could derail that target. Many experts predict President-elect Donald Trump will repeal the $7,500 consumer federal tax credit, which would slow EV adoption.
Trump also has vowed to increase tariffs — the taxes imposed on goods when they cross borders — on vehicles made in Mexico and sold in the United States. The Detroit Three all build vehicles in Mexico for sale in the States.
Jacobson said GM will not change its business strategy, noting that whatever Trump decides to do is still speculation.
“We’ve been pretty consistent that we’re not looking to next quarter, next year, et cetera. We’re thinking about this in a much longer time horizon,” Jacobson said. “I think many of the things we’re doing today will continue irrespective of what happens with the regulations.”
Where GM objectives and Trump objectives match
GM will continue to emphasize cost reductions, he said. He did not specify where the company would find savings. Last week, the Free Press reported that GM cut 1,000 jobs globally, mostly salaried but some hourly, as a “normal course of business” to gain operating efficiency. GM will stop using its Yuma Desert Proving Ground for hot weather vehicle testing. Additionally, GM is permanently closing its Durability, Corrosion and Teardown departments at its Milford Proving Grounds. In August, GM eliminated nearly 1,500 from its software division globally.
GM will continue to prioritize its software development and push out its EV lineup on its Ultium propulsion system to match demand because, Jacobson said, “We do believe that EV penetration is a long-term objective.”
As to higher tariffs on the vehicles GM builds in Mexico such as the Chevrolet Blazer and Blazer EV and the Equinox and Equinox EV to name a few, Jacobson defends GM’s manufacturing portfolio, noting a large U.S. presence.
“We’re the largest producer in battery cells in the U.S. together with our partner LG (Energy Solution),” Jacobson said. “We could have gone with cheaper alternatives and bought imported technology and we didn’t do that.”
GM and LG jointly run Ultium Cells LLC, which has plants in Ohio and Tennessee that produce battery cells for GM’s EVs. Ultium Cells will soon start operating its new facility in Lansing and its website said it will employ 1,700 there by the end of next year.
Jacobson said GM is ready to work with the Trump administration.
“I think our goal is very consistent with what the administration’s goal is in terms of U.S. jobs and what that could mean,” Jacobson said. “We’ve got to have the balance and flexibility to be competitive, because we compete in a global environment. But when you look at our track record, you look at onshoring in our supply base, that’s in the spirit of what we’re trying to do and what the country wants us to do.”
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More:GM cuts 1,000 jobs globally, mostly salaried but some hourly, in move to gain efficiency
Contact Jamie L. LaReau: [email protected]. Follow her on Twitter @jlareauan. Read more on General Motors and sign up for our autos newsletter. Become a subscriber.
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