Mary Barra's fanfare has turned to warfare. The battle centers on defective switches and a lack of quality that has caused crashes and people's deaths and may cause more. She's fighting consumers, legislators, regulators and her own company's ways.
GM stock is at $37.72, down 7.8% for the year to date.
Once again the comeuppance of General Motors (and yes, I'm talking about being on the verge of collapse before the largesse of President Obama's administration in the form of a $50 billion bailout in 2009) is a classic. Now GM finds itself in the midst of multi-million vehicle recalls, lawsuits and speculation over its very viability again.
It represents the oft-repeated example of companies at the crossroads of flawed leadership, a toxic culture and ignoring core success values of enduring businesses.
- Flawed leadership -- The comfort level of imperial leaders and the incestuous practice of GM developing its own leaders resulted in an cycle of sameness in thinking and process. This is the classic curse of success where longstanding icons of commerce believe they're infallible and surround themselves with yes men and resist innovation in development for succession purposes.
- Toxic Culture -- Big union demands for increased hours, pay, benefits and management kicking the can to maintain irrational goals led to the security, authority and entitlements. Achieving today's deadlines had management and workers focused on daily cycles and time-to-market instead of long term sustainability of quality.
- Ignoring Key Values: When a company forgets things like integrity, quality, stewardship and accountability, it implodes. When there is a shift from principles to production, quality checks and balances can get in the way or at least be marginalized.
GM is not alone. Every fallen icon has had this same alchemy of destruction. Big companies tend to be their own worst enemies because they often fail to recognize fundamentals of leadership, culture, and values until something goes very wrong.
Will GM survive?
Of course; Democrats, Republicans and unions will ensure that happens.
Perhaps, however, if GM had been allowed to go through bankruptcy, as did the record number 89,402 regular businesses did back in 2009, someone might have stepped in to discover and correct the leadership, culture, and values.
Lesson learned: Leadership has nothing to do with the attributes of political correctness and everything to do with addressing culture and values -- as the highest-ranking woman in the entire automotive industry and her fans are learning.
Barra has tough months ahead as she delves deeper and deeper for fixes. To her credit, she appears determined to address the issues of GM and so far she certainly seems to be the best man for the job.
At the time of publication the author had no position in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
TheStreet Ratings team rates GENERAL MOTORS CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate GENERAL MOTORS CO (GM) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- GM's revenue growth trails the industry average of 20.9%. Since the same quarter one year prior, revenues slightly increased by 1.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has significantly increased by 141.26% to $1,976.00 million when compared to the same quarter last year. In addition, GENERAL MOTORS CO has also vastly surpassed the industry average cash flow growth rate of 40.62%.
- The debt-to-equity ratio is somewhat low, currently at 0.89, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.81 is somewhat weak and could be cause for future problems.
- GENERAL MOTORS CO has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, GENERAL MOTORS CO reported lower earnings of $2.35 versus $2.93 in the prior year. This year, the market expects an improvement in earnings ($3.13 versus $2.35).
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: GM Ratings Report