GM slid on dropping earnings. Who cares... not me!?
The auto business is well-known for its cyclical qualities. It was destined to happen.
The key difference with GM since the bankruptcy is one of leadership. That would be Mary Barra. Her background and strategic moves clearly show her abilities. Add her knowledge and people skills, you have a very unique individual to lead the organization. That doesn’t happen enough in many Fortune 500 companies today.
Let's look at a few things about Barra:
- She has been with GM for her entire career. And, she has worked in many areas in the business. That means she understands the problems and has a great breath of knowledge.
- She is an engineer by training (GM's own University!). Engineers always want to know the nuts and bolts of things. Working with production workers early in her career, she clearly understands the “nuts and bolts”.
- Her father was a union worker. She understands both sides of the coin. This is key to getting everyone moving in the same direction.
- She is decisive. European operations were sold. They had been a lackluster performer for years. Smart call.
- She keeps things direct and simple. The dress code which covered pages and pages of detail was boiled down to two words by her "Dress Appropriately". How much do you think that saved?
- In this article, she says that GM will be going after the market void that Ford is creating. Ford is getting rid of their US sedans. Dumb move Ford. As they say in tennis - "Point - GM".
- Her actions show that she is working toward removing much of the prior bureaucracy that took GM into bankruptcy in the first place. There will always be some bureaucracy. That’s just life in corporations, but it surely can be beat back a bit.
- Her candor and great communication skills speak to her skillfulness in addressing issues. She led the Personnel division during the bankruptcy. Who said personnel was a "dead end"?
- Retooling for new models has to happen. I can bet you that a lot of thought has gone into how that is occurring. I’m certain all parties were considered – union workers, management, customers and investors. Like all things in life – balance is so important.
- Under her leadership, GM has been pursuing electric cars and self-driving cars. She clearly has a view of the future.
Leadership is the "special sauce" of high performing organizations. It is also something that is not easily quantified but is, nonetheless, a very valuable commodity.
I own GM and if it drops lower than my cost basis, I'm getting more. Given the market's proclivity to value for the short term, it will happen. The only question is how long I will have to wait.
As a value investor, waiting is part of my core makeup!
