General Motors Chairman and CEO Dan Akerson addressed the National Press Club on Monday on the state of the company from which he will retire in January. His prepared remarks are below. As always, the speaker’s words are definitive.
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Thank you, Angela. And many thanks to the National Press Club for inviting me to speak here.
This is an auspicious time to speak to an audience of reporters.
As you may have heard, GM has been in the news a lot lately.
Last week, the transformation of General Motors passed two major milestones.
First, the United States Treasury sold its last share of GM stock, closing a remarkable five-year chapter in American business history.
That got some attention in the media.
Then the next day, we announced that Mary Barra would become our next CEO.
That did not go unnoticed, either.
On that day, for the first time in decades, all eyes at General Motors pointed toward the future.
The end of the “Government Motors” era has cleared the runway for the team to soar.
And soar we will, because we are building a GM that America can be proud of.
It has not been easy, and the path forward for Mary and her team will not be, either.
The enormity of the task became crystal-clear when I became CEO.
The “New” GM was, in a word, fragile.
We had emerged from a bankruptcy that lasted only 39 days.
That was good, because it didn’t leave a damaging cloud over our brands.
But a 39-day “quick rinse” bankruptcy only gave us time to repair the balance sheet.
Truly transforming our business would take much more.
We had to remedy decades of poor decisions.
And indecisions.
And “no decisions” that started to pile up in the 1970s and 80s like so much rotting firewood.
I categorize the problems we faced into three broad buckets.
They were out of control costs.
Wasteful complexity.
And diminished quality… all funded by ruinous debt.
You could pick just about any point in time and find something to shake your head over.
For example, in 1978 GM paid almost as much in benefits as it earned in net income.
Yet the very next year, it agreed to the largest pension increase in UAW history.
Eventually, GM’s pensions plans – the largest private sector funds in the world – became chronically and dangerously underfunded despite tens of billions of dollars in cash and stock infusions.
That actually weakened the company because it treated the symptoms, not the disease, robbing precious dollars from product development.
More recently, U.S. hourly labor costs increased 4 percent annually from 2003 to 2007, even though the company had total operating losses of $17.6 billion from 2005 to 2007.
In other words, while management was burning the furniture to keep warm, we were also automatically increasing our fixed costs.
Complexity was everywhere.
Just a few short years ago, GM had 30 different vehicle architectures supporting sales of about 9 million vehicles.
The company also had more than 70 different advertising agencies around the world for the Chevrolet brand alone.
That’s staggering, and shows that we lost our economies of scale.
In another move, GM leaders outsourced nearly all of the company’s information technology.
We effectively dismissed data capture and proprietary analytics as a core competency just as the Internet was about to transform all modern business models.
We also ended up with 23 leased or partially owned data centers, which is costly and risky.
Now, we are taking that down to two, fully owned by GM.
We couldn’t even close our books in a timely manner.
This list goes on.
We all know what happened next.
The company that topped the Fortune 500 list when it was first published in 1955, and stayed there for 35 years, became disgraced.
Here’s something even more sobering.
GM had lost sight of its customers and what they truly valued — quality, compelling design and reliability.
In my heart of hearts, I knew GM was fixable, if the new leadership played “team ball” and systematically addressed the company’s shortcomings.
So, I made a promise to myself and to the Board to deliver three things during my tenure.
The first was the restoration of GM’s good name.
The second was the transformation of the company and our operations.
And my third goal was to put quality and the customer back at the center of every decision we make.
As a result, we are looking at every aspect of our business… from every angle… to make every system, every operation, best in class.
For example, we have committed $3 billion to help our U.S. dealerships create the best customer sales and service experience in the industry.
We’ve reduced the time it takes to resolve complex customer issues from about 28 days to a week, and our goal is to get down to one day.
We are launching the industry’s largest deployment of 4GLTE mobile broadband to bring analog cars into the digital world.
We are investing more than half a billion dollars to build an information technology capability that would make Silicon Valley proud.
We recently invested more than $4 billion to grow GM Financial around the world.
Soon, we will be able to provide financing in markets that account for 80 percent of GM’s sales volume.
We have been the Patent Board’s automotive innovation leader for years.
But collecting patents isn’t much good if you don’t commercialize them.
Today, we are.
One example: reducing weight in cars is key to reaching tougher fuel economy standards.
That means using more aluminum.
Unfortunately, aluminum doesn’t weld together like steel, so most of the industry uses old-fashioned pop rivets to make things like doors. But not GM.
We patented a way to spot weld aluminum.
It’s fast. It takes complexity out of our plants and it allows us to take out about 25 pounds of rivets.
We have also revamped our financial systems from top to bottom.
Now we are getting to the point where we can track the profitability of each car down to the serial number, no matter where it’s sold in the world.
Also on the product front, we will reduce the number of vehicle architectures by half over the next decade.
We also defeased some $40 billion in pension liabilities, doubled our revolving credit line, and dramatically simplified our balance sheet.
Even more importantly, we have worked hard to earn the trust of our employees, both hourly and salaried, and get everyone aligned around straightforward profit and quality targets.
Today, for example, when salaried employees get a bonus, hourly workers share in the profits, too.
I could keep going on, but you get the idea. We have been fixing the plane while it’s in the air.
The bottom line results of all of this work have been very encouraging.
Our $23.1 billion IPO was the largest in U.S. history at the time.
We have generated more than $604 billion in global automotive revenue since we reorganized in 2009.
We have delivered 15 profitable quarters in a row and earned nearly $30 billion before interest and taxes.
We have announced about $9 billion in capital investments in our U.S. facilities.
We returned to the S&P 100 and 500, and we regained our investment-grade credit rating from Moody’s.
There is much, much more, and I’m sure that Mary and the team will keep our momentum going.
All of this is good for our employees, our investors, our industry and our country.
But none of it would matter much if we went back to business as usual.
That’s why it was critical to put the customer back in the center of every decision we make.
I keep returning to this theme because it is what the world’s strongest brands do, and embracing the customer is the most profound cultural change that has happened at GM.
I think our products tell this story the best.
It was only a few years ago that President Obama asked rhetorically, “Why can’t they make a Corolla?”
Well, no one asks that any more.
Today, we are taking on the best vehicles in the world and winning with products like the Cadillac CTS and Chevrolet Impala.
We are re-entering product segments like mid-size trucks that our domestic competitors have abandoned to the Japanese.
And our trophy case is filling up with quality awards.
In fact, we became the first American automaker to top J.D. Power’s Initial Quality Study.
Consumer Reports ranked the Chevrolet Impala and Silverado as the best sedan and truck you can buy.
Just last week, Autoweek magazine named the Corvette and the Silverado the “Best of the Best” car and truck.
It was the first time one manufacturer ever won both categories in the same year.
Earlier this year, the Cadillac ATS was named the 2013 North American Car of the Year. Now, its stablemate, the CTS, is up for the same honor in 2014.
It’s an embarrassment of riches that no one is embarrassed about, believe me.
Good as this all sounds, the truth is we are still in the early chapters of our comeback story and we have a lot to prove, especially to people who left us for other brands.
The only way to bring them back is to keep making cars, trucks and crossovers with world-class quality, reliability, durability and compelling design.
That’s a big commitment, and it costs real money.
After all, we are in a capital-intensive business that demands steady and significant investment.
So today, we are taking another step forward by announcing new investments totaling nearly $1.3 billion in five U.S. plants.
This will bring the four-year total of announced investments in our U.S. plants to more than $10 billion.
It is going to be spread from Detroit and our birthplace city of Flint, Michigan, to hard-working communities like Romulus, Michigan; Toledo, Ohio; and Bedford, Indiana.
About 7,500 people already work in these plants and today’s announcements will create or retain about 1,000 jobs.
That brings the total of new or retained GM jobs to more than 26,500, thanks to reinvestment in our plants.
As you can imagine, this is welcome news, especially in communities where hope and optimism were in short supply five years ago.
Thanks to the swift and courageous action by two different Administrations, the entire U.S. auto industry is back.
Rather than allowing the industry to collapse and turn the Great Recession into another Great Depression, our nation stood with us.
We come to work every day determined to restore GM as the American standard-bearer in the global auto industry.
Someone asked me recently if the “Government Motors” tag still hurts us.
To be honest, we don’t hear it that much anymore.
In fact, it reminds me of a comment Ronald Reagan once made.
He said he knew his economic plan was working “when they stopped calling it Reaganomics.”
Well, General Motors is working again.
We have put together a leadership team with experience, optimism and a strong competitive streak.
We are making vehicles that are the pride of the industry.
When I became CEO, I wanted to help build a sound foundation for the next generation of leaders to build on.
We’ve done that.
I cannot wait to see how far they take it. It will be great.
Thank you. Now, I would be happy to take some questions.
