Rick Haglund: GM jolts business model with electric vehicles bet

General Motors headquarters and the Spirit of Detroit | Susan J. Demas

Despite decades of decline, General Motors Co. still delivers a spark to Michigan’s economy.

A new study by the Ann Arbor-based Center for Automotive Research (CAR) found that GM’s 46,800 jobs in the state have led to an additional 153,800 jobs here, creating a job multiplier effect largely unmatched by nonautomotive businesses. 

Workers at GM’s 15 manufacturing plants in the state earned $14.5 billion and paid $4 billion in personal income taxes, Social Security and other government transfer payments in 2019.

And GM this week laid down a huge bet that it intends to be the leader in the development and production of electric vehicles, as it was with gasoline-powered cars and trucks for much of the 20th century.

GM announced Wednesday that it will launch 20 new electric vehicles for sale in the United States and China by 2023 and will spend $20 billion over the next five years on electric vehicle development. That’s almost half as much as GM’s total investments of $44.3 billion for all its U.S. operations announced over the past 20 years, according to CAR.

Mary Barra

CEO Mary Barra, the only woman, and perhaps the best executive running an auto company today, has laid out a bet-the-business plan to transform GM into a Tesla-fighting, all-electric-vehicle automaker.

“GM is building toward an all-electric future because we believe climate change is real,” CEO Barra said during a presentation for media and investors on Wednesday.

There are lots of potholes on the road to that electric future, though. Most consumers have yet to embrace electric cars, largely because of higher vehicle prices, range anxiety, lack of charging stations and low gasoline prices.

Electric vehicles get no love from the Trump administration and many Republican lawmakers that deny the role of humans in climate change. Trump has said GM’s all-electric strategy “is not going to work.”

But GM President Mark Reuss said this week that the automaker has “thousands” of scientists, engineers and designers working to “execute an historic reinvention of the company. They are on the cusp of delivering a profitable (electric vehicle) business that can satisfy millions of customers.”

“Profitability” has been Barra’s mantra since taking the reins at GM in 2014. She’s made tough decisions to sell or close money-losing operations in Europe, Russia, Australia and other parts of the world, turning GM into the most profitable of the domestic automakers.

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A GM lifer, she saw how the automaker lost its mojo, in part by not adapting quickly enough to seismic changes in consumer preferences and business models. (Leadership arrogance, poor product design and quality, and terrible labor-management relations also had a lot to do with it.)

CAR’s study on GM’s still substantial contribution to the Michigan and U.S. economies also paints a gloomy picture of just how far the company has fallen.

Almost one of every two cars and trucks sold in the United States in 1978 was built by GM.  But the automaker’s domestic market share has fallen from 47.8% in 1978 to 16.9% at the end of 2019.

In total, GM’s U.S. sales fell from 7 million vehicles in 1978 to 2.9 million last year.

That sales collapse has resulted in dozens of plant closings and the loss of hundreds of thousands of high-paying GM jobs. GM’s U.S. employment peaked at 618,365 in 1979, making it the largest private employer in the country. 

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Today, GM employs just 83,860 U.S. hourly and salaried workers. That’s roughly the same number of workers it employed just in Flint in 1978.

GM’s decline took down the economies of auto towns along the I-75 corridor, stretching from Bay City to Dayton, Ohio.

I covered GM as a Booth Newspapers business writer over three decades. My first GM story was about the company’s 1986 decision to close 11 plants — its most ever in a single announcement — and slash 29,000 jobs.

The automaker’s decline continued almost unabated until 2009 when it finally filed for Chapter 11 bankruptcy reorganization, financed with a $50 billion bailout by the federal government.

GM will never again dominate Michigan’s economy as it once did. And in the long run, it’s probably good for the state not to be so dependent on one company and industry.

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But GM’s gamble on an all-electric future represents a huge economic opportunity for the company, as well as for its home state.

Policymakers know Michigan is in danger of losing its auto industry leadership if it fails to support automakers and suppliers in the shift to electric vehicles, self-driving cars and other coming advancements in automotive-related “mobility.”

Last month, Gov. Gretchen Whitmer announced the designation of a chief mobility officer in her administration. She also created a new state office that will coordinate economic development, workforce development and infrastructure efforts to “secure Michigan’s status as a global leader in autonomous, connected, electric and shared future mobility.”

Government action won’t ensure success, but Barra must feel a lot better about the reception she’s getting from Lansing than from Washington in her efforts to make GM the leader in electric vehicles.