Final Inspection
New GM, Barra Find ‘If It Ain’t Rough, It Ain’t Right'

New GM, Barra Find ‘If It Ain’t Rough, It Ain’t Right'

There was a motto for the Detroit Pistons’ post-championship years a decade ago: “If it ain’t rough, it ain’t right.”

Sitting in the media room ahead of GM’s annual meeting, as CEO Mary Barra answered questions related to the ignition-switch scandal, reports of potential wire fraud from the safety recall and rumors Fiat Chrysler CEO Sergio Marchionne has executed an end run into pressuring GM into a tie-up, I couldn’t help but recall that saying.

Borrowed from a hip-hop song, the blue-collar mantra reflected the Pistons’ knack for getting the job done when the odds were overwhelmingly stacked against them. Barra and her executive team have plenty stacked against them these days, and the next few months will be as pivotal for the new GM as a winner-take-all NBA final.

The 15-month-old ignition-switch dilemma will not go away anytime soon, despite being largely accounted for financially on GM’s books and through a $35 million fine from NHTSA. The Detroit automaker also nearly has wrapped up a tremendous moral obligation to the victims through its compensation fund.

But the U.S. Department of Justice continues its investigation into how GM handled the safety problem and many in the industry think the automaker could face a fine greater than the record $1.2 billion levied against Toyota last year for fumbling its unintended-acceleration recall.

A decision, which could include criminal charges, is expected from the DOJ sometime this summer. On Tuesday, Barra revealed for the first time she met with federal investigators last year, yet stopped short of addressing the matter any further by saying it would be “pure speculation” on her part.

Barra's team faces Game 7 environment.

The annual meeting in Detroit also brought news of potential wire-fraud charges against GM, again related to the ignition-switch recall. The question is whether the automaker fraudulently communicated information over the wire – radio, television or otherwise – regarding the defect.

And again, the Toyota case serves as precedent. The DOJ in 2014 determined the Japanese automaker provided fraudulent information about the safety of its vehicles, and in levying the charge said it would be a template for the entire transportation industry.

There’s probably no need to speculate. GM faces a similar fate. So along with the expected record fine, it probably will be shackled with several more years of safety oversight by the government.

As if that’s not enough, Marchionne this week countered Barra’s rebuff to take over FCA and achieve potentially massive economies of scale by appealing to activist GM investors who might get behind the idea if it meant a big payout for them down the road. Earlier this year, GM yielded to a group of investors to unlock some of its cash in the form of a dividend payout, so there’s some precedent suggesting Marchionne’s ploy could work.

Briefing the media, Barra continued to stonewall Marchionne. She says GM already has scale and has only begun leveraging it, evidenced by the next-generation Chevy Cruze bowing in two weeks. The current Cruze has sold 3.5 million units globally since its launch in 2010 and the new model portends even greater worldwide appeal and profitability.

Barra also reminded everyone the automaker is busy enough “merging with itself,” a reference to GM’s efforts to operate as a single, global company instead of a patchwork of regional fiefdoms. That prize grows closer every day that GM’s long-defeated European arm rallies back to profitability, as expected next year.

When Barra was appointed CEO in January 2014, the game plan was crystal clear: run the automaker’s margins to 10% by doubling the sales volume of new and refreshed vehicles; establish a leadership position in emerging technology; return the Cadillac luxury division to prominence; grow in China and other emerging markets; expand the captive finance business; and consolidate vehicle architectures and powertrains to slash development and logistics costs.

It took all of six weeks to cloud that strategy with the safety disgrace and now barbarians are at the gate, so to speak.

The coming weeks for GM are, in basketball parlance, akin to a Game 7 on the road. However, watching Barra huddle after the shareholder meeting with her lieutenants Mark Reuss, Dan Ammann, Alan Batey and Chuck Stevens like a starting five, I wager they'll rise to the occasion.

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