If I was an electric vehicle dilettante responsible for failure after failure, I’d be cowered in my corner office hoping no one would notice that I wasn’t very good at my job. The last thing I’d do would be to talk smack about someone who was kicking my sorry behind. Therein is why GM CEO Mary Barra was showered with more than $29 million in compensation last year, a giant multiple of my lifetime’s net worth.
Barra has been making the media rounds in recent weeks predicting that by mid-decade GM will sell more electric vehicles than Elon Musk’s Tesla. Never mind that GM sold a mere 457 vehicles in the first quarter, while Tesla sold 310,000 vehicles. Barra says she smells blood, and she’s confident that GM will knock Musk’s perennial grin right off his face.
“That’s the long game we are playing,” Barra told the New York Times. “And I’m here to win.”
“GM winning,” strikes me as an oxymoron given the automaker’s performance this century. Once a company whose success was so intertwined with U.S. prosperity it spawned the phrase, “What’s good for GM is good for America,” U.S. taxpayers in 2008 were forced to bail out the enterprise because of what Obama’s bailout czar called “stunningly poor management.” Barra, 60, who joined GM as an intern when she was 18 and rose through the management ranks while earning an MBA at Stanford, reflects the mediocrity of the executives who mentored and promoted her till she reached the top job.
If electric vehicles are indeed the future, GM getting trounced by Tesla is a particularly bruising embarrassment. Contrary to popular belief, Elon Musk didn’t pioneer electric vehicles. GM introduced the EV1 in 1996, in response to a California mandate that required automakers to have zero-emissions vehicles by 1998. The clunky two-seater had a range of only 100 miles and was only available for lease in California and Arizona. The auto industry successfully lobbied California to ease up on its EV mandate, and GM opted to crush its electrical vehicles into scrap, despite pleas from lease holders willing to buy them. Such was the longtime arrogance of GM when Barra came of management age.
Two years after GM ceremoniously destroyed its pioneering electric vehicles, Musk co-founded Tesla.
It’s a wonder how anyone could take Barra’s EV pronouncements all that seriously, given her record to date. GM was forced to recall all its electric Chevy Bolt vehicles last year because their lithium-ion batteries were prone to exploding. Then there was GM’s disastrous investment in EV truck maker Nikola. The automaker lacked the expertise and sophistication to determine Nikola was a pile of hype, but a young short seller named Nate Anderson had the smarts and wrote a report alleging fraud against Nikola and its founder, Trevor Martin. GM walked away from its Nikola investment, briefly valued at $2 billion.
Barra was already five years into her automotive career when Anderson was born.
As it says on investment disclosure documents, past performance does not predict future success, particularly when the past performance was so dismal to begin with. Barra told the New York Times that GM has learned from its mistakes, and that its loading for bear targeting the tens of millions of car buyers who aren’t early EV adopters or can’t afford the pricey luxury EV vehicles currently on the market.
“If you want E.V.s to get to 100 percent or even 50 percent of the market, there have to be affordable E.V.s,” Barra told the Times. “You’ve got to provide entry models in that space.”
Barra says GM’s not-so-secret sauce is the company’s proprietary battery pack that can be modified to fit all GM’s electric vehicles, ranging from a compact car to a full-size pickup. GM believes the flexibility gives it a competitive edge that will drive down costs and allow the company to sell more EVs at lower prices.
Even the Times, whose reporter gave Barra the kid gloves treatment, couldn’t let Barra’s claim go unchallenged. Sam Abuelsamid, an analyst at Guidehouse Insights, is quoted as saying G.M.’s strategy should “in theory” yield cost advantages over time, but said it was unclear how significant they would be and how long G.M. would have an edge.
Let’s not project “over time” and pretend we are Zen Buddhists who live in the moment. One of GM’s longtime sources of pride was being the “No. 1 car maker in America.” Toyota has eclipsed GM the past two quarters because the company continues to make affordable gas cars that still significantly outsell electric vehicles.
“A lot of our market share is really in the (gas) car side of the business,” Bob Carter, executive vice president of sales for Toyota Motor North America, told a news conference. “(Gas) cars are still an important part of the market.”
Barra is seemingly banking that Toyota, along with other Japanese and South Korean automakers who haven’t given up on making cars for the proletariat, plan to sit idly by and let Barra eat their lunch when GM returns to the market it abandoned. Musk has also said that Tesla plans to launch more affordable cars.
Toyota last month announced its first electric car will be available next spring, and Subaru, a brand popular with dog lovers, also will launch its first electric vehicle next year. Hyundai Motor Group reportedly will announce next week that it plans to build a massive electric plant near Savannah, Georgia.
It’s telling that the South Korean automaker wants to build EVs in the U.S., while Ford’s red-hot electric Mustang is assembled in Mexico, as are some of GM’s top-selling trucks. Reuters recently reported that GM was paying some of its Mexican workers $3 an hour to build the company’s highly profitable Silverado and GMC Sierra pickup trucks. Barra thinks that’s fair — $29 million a year for her and $3 an hour for the Mexican workers who build her cash cow trucks. Barra previously oversaw GM’s human resources.
Reading the Times’ profile of Barra I was struck by her seemingly lack of vision. Musk is on record as saying that Tesla’s insurance business will ultimately generate more profits than its cars and trucks. He’s also talked about acquiring a lithium mining company to gain better sourcing and pricing control of the critical battery material. I was taken aback that Barra told the Times, “Every time I go to design and see a vehicle they’re working on, I’m like, ‘How fast can we get that out?’” I figured Barra as an executive who closely studied spread sheets detailing such information.
Barra also made no mention about how GM plans to solve the serious charging stations disadvantages that GM, Ford, and every other EV entrant suffers from. Tesla has already built a national network of reliable charging stations, a detail Musk’s rivals have overlooked. Ford’s Farley admitted last week his company’s charging stations need “major work,” but offered no details when and how that work would be performed.
Speaking of Ford’s Farley, as CEO he presumably signed off on Ford’s veiled attack on Elon Musk in an ad that aired last week. The ad boasts that Ford assembles more vehicles in the U.S. than any other manufacturer.
Farley, who in 2021 was paid $23 million, has no shame. In addition to building the Mustang in Mexico and disclosing plans to expand capacity there, Ford has announced plans to expand its already sizeable white-collar workforce in India. There have been reports that Ford is mulling building EVs in India for export.
It’s a giant leap of faith to assume that Ford and GM, which also has a proven history of selling defective vehicles, will magically master considerably more complex EV manufacturing . Even Musk is struggling. Tesla has already been subject to more than a dozen recalls, including one disclosed this week because of overheating problems with its infotainment system while charging.
The more I hear Barra and Farley speak, the more I’ve come to appreciate Musk’s genius and the possible invincibility of Tesla’s dominance of the EV market in the U.S. for many years to come. If GM or Ford ultimately require taxpayer bailouts, count me among those who will shout the loudest in opposition.