Barra Defends Maker’s Use of Capital

CEO says GM investing, restructuring to get best returns.

by on May.05, 2015

GM CEO Mary Barra defended the company's use of capital after celebrating the production of the 500-millionth vehicle.

General Motors Chief Executive Mary Barra Monday defended GM’s use of capital during a meeting with reporters this week in Fairfax, Kansas.

Barra said GM is intent on covering the cost of capital and has taken steps to restructure or closed businesses that have not generated an adequate return on the investment.

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GM shut down its manufacturing operations in Australia and significantly restructured operations in Thailand, Indonesia and Russia where it recently pulled out of a venture in St Petersburg precisely because GM could not make an adequate return on invested capital, said Barra.

At the same time, GM expects to maintain a hefty level of new investment well into the next decade as it continues to invest in new products for markets around the world, said Barra, reiterating the talking points rolled out at a meeting last fall with analysts at GM’s Milford Proving Ground.

“We have significant investments in new technology, new materials, powertrains and transmissions. It’s across the board. I think you should look at how this industry is changing,” she said.

“We’re not letting anything distract us,” said Barra, who noted GM is continuing to spend money to make assembly plants such as Fairfax more flexible and efficient and to improve vehicle quality.

At the same time, GM fully expects to get an appropriate return on the capital it does invest in the business, Barra said. “We continue to share our return on invested capital quarterly. You‘ve seen the steps. We’re making that our job,” she said.

Barra also emphasized that GM, which went through bankruptcy in 2009, intended to remain independent, while using partnerships, such as the one on fuel-cell development with Honda and SAIC in China, to reach certain business objectives.

(GM celebrates milestone with $174 million investment announcement. For more, Click Here.)

Last week, Sergio Marchionne, Fiat Chrysler Automobiles chief executive officer, said automakers were failing to make an adequate return for investors and the failure cannot continue. The industry needed to consolidate and he suggested a merger of FCA and GM made a lot of sense.

(Click Here for details GM’s 500-millionth vehicle produced.)

The lack of return on investment has reduced the value of auto industry stocks and made it more difficult to acquire additional capital.

(To see more about Chevy cutting the price, extending range of the Volt, Click Here.)

Marchionne, while he’s talked about the possibility of merger, has made an no moves to discuss the possibilities with GM.

“I haven’t talked with (them)” Barra told reporters when asked if she had discussed a possible merger with anyone from Fiat Chrysler Automobiles. “This is a super-competitive industry,” said Barra.

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