Weekly Brief: GM Cuts Head of Old Business to Run New One

General Motors capped off its stunning week of announcements by revealing that its President, Dan Ammann, will leave his current role to become the new chief executive officer of GM’s self-driving outfit Cruise.

This comes after the carmaker announced it will close five factories in North America this year and two more overseas next year. The move will lead to 14,000 people losing their jobs – six thousand factory workers and 25% of all GM executives. What’s more, GM plans to discontinue the Chevy Cruze, the Buick LaCrosse, the Cadillac CT6, the Chevy Impala, and the hybrid Voltas as it shifts its focus from sedans to SUVs, trucks, crossovers and electric and driverless vehicles. GM says it will double investments in driverless and electric vehicles in the next two years and hopes to transform its business around a new model of mobility.

Ammann’s job change offers the perfect visual for this shift, as GM literally cuts the head off its old business and tries to stick it on its new one. The transplant won’t be without challenges. As my colleague Stephen Lawson detailed last week, Donald Trump has already threatened to end the EV tax credit in response to GM’s announcement, which is probably more presidential bluster than anything else but there could be real repercussions. Not just on the legislative front but also inside Cruise, where its founder and longtime CEO Kyle Vogt will get downgraded to the outfit’s CTO starting in January 2019. Internal chemistry is always a sensitive thing. Ammann has run a giant business and GM wants Cruise to become its successor. That transition in style, culture and expectation could produce some growing pains.

However, the biggest challenge is the unknown. Carmakers and tech companies are convinced that autonomous vehicles and robo-taxis are the future of mobility. You won’t hear me arguing about that but it is worth pointing out that the rate at which society is ready to move from one to the other isn’t obvious. What happens if Waymo’s robo-taxi fleet has a spate of accidents after rolling out its commercialized service this year? Or what if Cruise suffers a setback like Uber did following its pedestrian fatality in Tempe, Arizona earlier this year? Public opinion could shift in a heartbeat. Federal regulators could step in.

That wouldn’t end the driverless car revolution but it sure would slow it down, which would have a proportionately larger impact on GM’s cash flow given its latest gambit. All of which shows how bold GM is being when it jumps from a known, albeit flat-lining business, to an unproven model. Only time will tell now.


Leave a comment

Your email address will not be published. Required fields are marked *