If my mother was alive today, she’d be leading the chorus of family members who have been critical of me writing this blog. Even when I was a kid, I had contrarian views and was prone to questioning conventional wisdom but was always taught to think I was mistaken. My mother particularly would have been aghast by my early criticisms of GM CEO Mary Barra.
“Who do you think you are?” she’d ask, which is how she invariably began her putdowns. “You think you know more than the board of General Motors, Wall Street analysts, a CEO with decades of experience in the automotive industry, and the entire U.S. business media?
Then would come the kicker: “The whole army is out of step but you?”
As it turns out, my early and contrarian skepticism of Barra and Ford CEO Jim Farley have been proven correct. On August 10, 2022, I wrote this story for Deadline Detroit expressing skepticism of the two executives when the media was still writing fawning profiles of them. I don’t know torque from shmorque (or is it shmorque from torque?) but I learned a few things during my three decades working in journalism and public relations that trained me to see red flags about Barra and Farley.
One of those lessons was that the best CEOs typically want to be judged by the results they achieve, rather than the results they predict they will achieve. From a standing start, Barra was boasting that in a matter of years she’d be selling more EVs than Elon Musk. It took Tesla well more than a decade until it launched its first vehicle, and there were lots of problems along the way. It wasn’t all that long ago when Wall Street and the media were questioning Tesla’s viability.
Tesla was co-founded by a brilliant technologist named JB Straubel, who designed the company’s initial battery pack and is credited as the visionary responsible for the creation of Tesla’s charging network. Without that network, Tesla might never have achieved its success. I’ve previously written about the humility of Straubel and Rivian founder RJ Scaringe, another entrepreneur I admire for his character and advanced technical training. These guys lack Barra’s and Farley’s hubris and appreciate that slow and steady wins the race.
Barra and Farley have so much egg on their faces it’s a wonder to me they haven’t choked to death. After years of promoting themselves as Tesla’s worst EV nightmares, they’ve been forced to dramatically scale back their EV ambitions because they’ve painfully learned that manufacturing electric vehicles is much harder than they understood.
America’s transformation to EVs suffered another blow today with news that Hertz is unloading one-third of its electric fleet, totaling roughly 20,000 vehicles, and using the proceeds to likely buy more of Barra’s and Farley’s gas guzzling vehicles. The American public was already becoming increasingly skeptical about EVs, and Hertz’s move will no doubt heighten reluctance to embrace them.
Hertz’s business miscalculation comes as no surprise to me, particularly given who was responsible for it. His name is Mark Fields, and he is the failed former CEO of Ford Motor Co., who notably was fired in 2017 after only three years on the job because of his perceived slowness to develop electric vehicles. GM’s Barra also figures into the Hertz EV failure.
Fields found his way to a private equity firm called TPG Capital, where he serves as a “senior advisor” and sits on the boards of its various companies. Fields also is a Qualcomm director and a CNBC “contributor.”
Fields’ wisdom is very much in demand.
Hertz emerged from bankruptcy in June 2021 and four months later named Fields as its interim CEO. Fields’ compensation was obscene, particularly for a failed automotive executive. He was paid a salary of $62,500 per week, or nearly $250,000 per month. The company also granted Fields around 500,000 restricted stock units that were valued at $13 million.
Just weeks after Fields assumed command, Hertz announced with great fanfare that it had placed an order for 100,000 Teslas, which the company said would comprise 20 percent of its global fleet. In announcing the deal, Hertz feigned a concern for the environment and positioned itself as a “mobility company.”
“Electric vehicles are now mainstream, and we’ve only just begun to see rising global demand and interest,” Fields crowed in a news release. “The new Hertz is going to lead the way as a mobility company, starting with the largest EV rental fleet in North America and a commitment to grow our EV fleet and provide the best rental and recharging experience for leisure and business customers around the world.”
Environmental concerns were never the driving forces behind Hertz’s EV commitment. Rather, as the company subsequently admitted, it believed that EVs would require considerably less maintenance, a critical cost for a car rental company.
Fields was mistaken that electric vehicles had become mainstream more than two years ago. At the time, they only accounted for about 4 percent of new car sales, and most of them were Teslas. I didn’t need the help of Cousin Rob, whose number crunching skills I rely on because I’m mathematically challenged, to figure out the inherent problem with Hertz’s strategy: A fleet comprised of 20 percent EVs and only 4 percent of Americans owning them, meant Hertz would have a far greater supply of EVs than there would be an immediate demand for them.
My commonsense assumption proved correct.
Hertz’s decision to flood its fleet with EVs resulted in the company having to assign customers EVs that didn’t want them and, more alarmingly, didn’t know how to drive them. Driving an EV takes some getting used to and most Americans are unfamiliar with all the charging technology and infrastructure, except knowing that much of it doesn’t work.
I wrote about the growing trend of angry Hertz customers being assigned EVs they didn’t want last June, in a commentary headlined, “Travelers Beware! Hertz Will Put You in an EV.” The horror stories mounted with increasing regularity after my column, and the one featured here is representative of some of the disasters that occur when people unfamiliar with EVs are assigned them against their will. The woman was trapped in her vehicle, unaware how to open the door when it lost power. So much for the “digitized experience” Hertz said it would provide to educate customers about driving EVs.
Hertz was also mistaken that EVs would result in lower maintenance costs. Hertz’s EVs tend to get into accidents with greater frequency than gas engine vehicles. Hertz learned the hard way that repairing a damaged EV costs significantly more than a gas engine vehicle. Cousin Rob could have told them that; someone bumped into his Tesla in a parking lot and the repairs cost $5,000, despite no visible body damage.
Hertz CEO Stephen Scherr, a former Goldman Sachs CFO who replaced Fields two years ago, told the New York Times that customers unfamiliar with driving EVs potentially was responsible for the company’s higher EV accident rates. Seems to me, customers who were assigned EVs against their wills and then had accidents might have legitimate class action claims against the company.
Here’s where GM’s Barra figures into the Hertz disaster.
In September 2022, Hertz announced that it planned to order up to 175,000 EVs over the next five years, with deliveries of the Chevy Bolt EVs beginning in the following January.
“Our work with Hertz is a huge step forward for emissions reduction and EV adoption that will help create thousands of new EV customers for GM,” Barra said in a Hertz news release. “With the vehicle choice, technology and driving range we’re delivering, I’m confident that each rental experience will further increase purchase consideration for our products and drive growth for our company.”
GM sold a mere 75,883 EVs in all of 2023, and most of them were Chevy Bolts. It was a blessing for Hertz customers that Barra’s ambitious EV rollout failed so miserably. The company’s EV launches without exception have been fraught with issues; GM was recently forced to pause sales of its made-in-Mexico EV Chevy Blazers after two car reviewers reported serious problems with the vehicle’s software. Imagine if the reviewers were Hertz EV customers on vacation or business customers traveling to critical meetings.
Despite well reported issues with disgruntled Hertz customers being assigned EVs they didn’t want, Barra and Scherr were featured in the accompanying video posted four months ago touting GM’s EVs. The video underscores Barra’s cluelessness: There are no doubt legions of Hertz customers whose EV experiences were so unfavorable it will take years for them to even consider buying a battery powered electric vehicle. Dumping EVs on Hertz lots potentially could goose Barra’s EV sales in the short term, but could hurt GM’s sales long term.
Notably, Scherr was promoting EVs just months before his decision to clear his fleet of a huge chunk of them.
Another issue that caught Hertz flat footed was Elon Musk’s decision to unload Teslas at fire sale prices last year, which drove down the values of his used vehicles. That, in turn, reduced the value of Hertz’s EV fleet, which the company was forced to write down. Compounding Hertz’s Tesla exposure, Scherr told the New York Times Tesla was less willing than other automakers to give it volume discounts on parts. That shouldn’t have come as a surprise because Musk was previously quoted as saying Tesla didn’t offer Hertz any discounts on its fleet purchases.
The Biden Administration’s EV adoption drive has been one of the biggest political and business disasters of all time, driven by leaders with degrees from supposedly the nation’s finest schools. Energy Secretary Jennifer Granholm has a Harvard law degree, and Transportation Secretary Pete Buttigieg graduated magna cum laude from Harvard. Granholm, with an extensive litany of green energy failures even before her appointment, and Buttigieg are responsible for the failed buildout of a national charging network and other related debacles.
Hertz’s Scherr also has a Harvard law degree, Mark Fields has a Harvard MBA, and Barra has a Stanford MBA. Musk for all his technical brilliance, lacks branding and strategic marketing sense, which ultimately will cost him. Telling customers to “go f— yourself” isn’t a winning and sustainable strategy. While Musk deserves credit for Tesla’s success, the public’s association with him and EVs could also harm the acceptance of electric vehicles.
As for the whole army being out of step but me, we’ve learned in recent days that America’s Defense Secretary was MIA for three days and the Biden Administration had no clue. It takes a giant leap of faith these days to believe the U.S. army marches in unison.