Leadership Live With David Rubenstein: General Motors CEO Mary Barra

This is Leadership Live. I'm David Rubenstein coming to you from my home in Bethesda, Maryland. And I'm on this show and talking to CEOs around the country who've been managing their companies from their homes as well. And today, I'm very pleased and honored to have Mary Barra, who is the CEO and Chairman of General Motors. Mary, welcome to our show. Great to be here and great to see you, David. So Mary, let me ask you about how it is to manage a company and how General Motors is doing in this environment. So is it harder to manage a company remotely with all your employees or is it harder to sell cars in a situation when people can't really go to the showroom? So what's been a bigger problem for you, selling the cars that you want to make or actually making the cars that you are so used to making? Well, I think the biggest challenge early on was getting back so we could make vehicles. And we had a lot of work to do to make sure we took all the necessary precautions, learned lessons from China, from Korea, from our work in making ventilators and masks, and put all those best practices together to bring people back to build vehicles. I'm really proud of how well the team adapted to working from home. And also our dealers who have been great partners with going mostly online for the sales process and also developing a clean delivery system. So everybody adapted fairly well. So you are a lifelong General Motors person. You grew up in Michigan. Your father worked at Pontiac and you went to General Motors Institute before you went to Stanford Business School and came back to General Motors. And you've worked your way up over the years. And for the last six years, you've been the CEO of the company. You've worked through the Great Recession and you also worked through 9-11. So how do you compare this situation, COVID-19, to let's say 9-11 and then later the Great Recession in terms of its impact on General Motors? Each of them impacted General Motors in a different way. 9-11 was very much a demand challenge and doing what we could to get people back moving and participating in the economy. Clearly, the 08-09 recession, that was very impactful for this company because we went bankrupt and had to restructure. I would say this time though, because of the lessons learned from those two very different situations and the work we've done since the 08-09 time frame, we were much better prepared for this situation. Our balance sheet was much more healthy. And so that's allowed us to continue with key programs and be able to weather this situation much more productively than what had happened in the past. But you don't think it's because a woman is a CEO that you're better prepared? No, I think it's all the hard work we've done for the last decade. I have a phenomenal team and together we've made some tough decisions, but I think really focused the business on the future. When you joined General Motors, obviously it's never been a woman who has been president or CEO or chairman of the board. Did you think when you joined after Stanford Business School that you actually one day could be the CEO? No, not at all. It was just a few months before I was named in this position did I ever think that this would be the role that I would have. I've worked in so many different areas and really enjoyed different parts of the company. So it was not something I set out to do, although I always wanted to look for opportunities to continue to contribute on a greater scale. So when you did become the CEO, did you hear from high school friends who told you they knew you were going to be successful and all of a sudden people call you for discounts in automobiles they wanted to buy or things like that? Well, a lot of people sent very nice notes of congratulations from people I had talked to in a long time to your point from high school, grade school and GMI, but not too many requests for discounts. So back to COVID-19 for a moment. When you decided that you had to shut down your manufacturing facilities, did you decide it in March that you just couldn't protect the health of your workers or was the state of Michigan that wanted you to send your employees home? What forced you to send your employees home? Well, you know, we were working with the state and with our unions and understanding the situation. We were all learning together and at the time there was so much that no one understood. So we actually made the decision slightly before the state did their kind of ruling across all industries. But it was working in partnership with all the different parties to do what was in the best interest of all of our employees. So when you close your facilities, did you close all your manufacturing facilities in the United States, basically? Well, we had started off and we had rolled through and closed all of our facilities in China and then as they started up, we were moving to the United States and had to close them. There were some essential operations that kept running. Our customer care and after-sale warehouses, for instance, because they needed to continue to provide parts to dealers to fix vehicles because vehicle transportation became so important for people during this whole phase. So when you shut down the facilities and you send the workers home, is it called furloughing? Is that the expression you would use? Well, at General Motors it's called a layoff. We have a policy for all of our different types of employees of what happens in that situation. So we just follow the policies or the agreements that we had with our union. How many employees did those General Motors have that were laid off out of the total number you have? Well, there were probably about 30,000 employees that could still work from home and we have about 80,000 employees in the United States, so the balance were on some form of layoff. So when somebody is laid off, they're not getting compensated at all and they are getting some health benefits, presumably? No, pretty much across the board in the United States for our employees, they're at about between 74 and 75 percent of their, I'll say, straight time pay that they would normally be getting. Some of that is made up of either the company paying in combination with what unemployment benefits would be. So now, what percentage of those who were laid off are now coming back as you begin to reopen your manufacturing facility? Virtually all. Both the represented employees and our salaried employees that couldn't work from home, they are primarily back. We may have a few shifts that we're still calling people back from in certain locations across the country, but for the most part, everyone is back or will be back shortly. So when the facilities were closed, the U.S. government said, can you make ventilators and, I guess, masks as well? So there was some controversy back and forth. Were you agreeing to do this voluntarily or did you were forced to do it? What was the real story on that? Well, so I got an email from Pensional in mid-March asking if we would be willing to work with a company called Ventac. And so, I'm so proud of the team because we started that dialogue. And from when the team first talked, which was the day after I got the email from Pensional, a month later, they were actually producing ventilators. We were working with the government, the Department of Health and Human Services, and all the different areas, the FDA that we had to work with. And I think what happened was there was some confusion, which has since been worked through. We got a contract. They did enact the DPA, but frankly, we were already on our way and committed to building ventilators. And like I said, I think there was a little bit of a misunderstanding. It's worked out now and I think everyone is very pleased. And we're on a path to make 30,000 ventilators that we'll complete in the August timeframe. Does the U.S. government need all these? Does the country need all these ventilators anymore? Well, I know early days we were shipping right to hospitals. And so, I think it's a combination of need that we have right now to make sure we have the right number of ventilators in the right locations. And also, I think there's an interest in having the right national stockpile as we go forward as a country. So, if you're good at manufacturing automobiles, why does it mean that you're good at manufacturing ventilators? Is the skill set transferable? How do you actually train your employees to make ventilators? Well, I think the interesting thing is as we started making ventilators, Ventech was making between 200 and 300 ventilators a month and we wanted to ramp that up to be able to make 10,000 a month. And so, leveraging the engineers, both manufacturing and product engineers throughout the company and our quality systems, our launch processes, there was almost everyone in the company, there were different functions that played a role. But I think the real key ingredient too was our automotive supply base. Because of the ventilator, about half the parts, so depending on which ventilator, 200 to 300 parts came from a brand new source. So, our automotive suppliers said, yes, I can make that part to the tune of 200 to 300 different parts and we're able to make them, prototype them and have them production ready within that month. So, we are indebted to our supply base. And I speaks to what the auto industry knows how to do and that's build up scale. So, right now everybody in the White House is happy with you and you're happy with them now that all that's behind you, is that right? Correct. Yeah. Okay. So, let me ask about another aspect of General Motors, managing remotely the company. So, you have an office in, your main office is in where? In Detroit, Michigan at the Rensen. All right, Detroit, Michigan. And so, you manage your company from there and you've been doing it for many years. When this came about, did you move to your home to manage the company and how was that to do? Was that hard to do? We all moved home and it's just changed. I do miss a lot of the face-to-face interaction, but we quickly moved to conference calls. We're used to conference calls and Skype and different meeting technologies because of the global operations that we have. So, we're always on early morning calls with China or Korea, evening calls, et cetera. So, it just became how we did business across the board. And I would say, I think we adapted quite well. I think we had to learn what it meant though when the day didn't necessarily have the office start and office end. People found themselves working incredibly hard and we had to make sure and remind people to have some balance with their work. But the transition was pretty seamless. For some CEOs with whom I've talked, they realize now they can do a lot from home or remotely and so their employees realize that. And many of their employees aren't rushing to come back to work. In fact, some employees want to stay doing things remotely. Is that your experience or will you ultimately want to bring everybody back? I think we'll come back. And depending on the work that we do, we have so many different functions. Some people need to be at work or they can't complete their responsibilities. Some people can do virtually everything from home. And we've also found variation across the globe. So, we're going to survey our employees, work with them and find what works well for them, but also knowing that face-to-face time is important to make sure we maintain our culture and also to the collaboration and innovation that we do together. But it will definitely be a blend and we'll have more people working from home than we did in the past. When the Great Recession happened, the automobile companies sought help from the federal government, a bailout, some people might call it. This time, none of the automobile companies sought that. Other industries did. Is that because the industry is much stronger or has more cash than before? Your balance sheet seems to be pretty strong compared to where it was 10 years ago or so. Yeah, I think everybody took different steps. I mean, clearly, that was an incredibly difficult time for the auto industry. And I think we learned a lot. We were very disciplined as we moved forward to make sure we had an investment grade balance sheet that positioned us to be able to weather a storm like this. And on a regular basis, we model all different types of impacts to the business as part of our risk management process. And so, we put all those into play as we started to face the situation, especially the unknown nature when you think back to March. So, when you go back to work in your office and your employees do, will you have to wear masks? Do you have to take people's temperatures? What kind of requirements are you going to have? And what requirements will you have for your workers on the assembly line? We have the exact same requirements regardless of where you work. You'll first answer a questionnaire, a few short questions to understand if you've had any exposure to COVID, if you're not feeling well, and we'll have the ability then to send you to speak to a medical professional and be tested if that's what they deem appropriate. You'll have your temperature scan. There's much more additional cleaning and disinfecting across the different work areas, regardless if it's one of our facilities that manufacture parts or if it's one of our office areas. And yes, you'll be required to wear a mask. And we'll continue to learn, but right now, without a vaccine, the virus is still there. And we have found masks to probably the number one thing from an effectiveness perspective of stopping spread of the virus inside any of our facilities, both office and manufacturing. So last year, 2019, if I remember the numbers, you manufactured and sold, I guess, roughly 7.7 million vehicles, something like that, around the world and 2.9 million in the United States. Is that right? Something like that? That sounds about right. Okay. But you actually therefore sell more vehicles outside the United States than you do in the United States. Is that correct? Well, we have significant operations. We have number one market share in South America, as well as we're number two in China. And China, even though there's a bit of a downturn in China even before COVID, is still a large market, bumping up around 24 million, where when you look at the U.S. industry last year, was about 17 and a half. So by the fact that these other markets together are quite large, and we have strong presence in those markets, that's how the numbers stack up. And do you anticipate any, because of the USMCA or any other trade agreements we have with China, that more things will be manufactured in the United States than maybe a year or two ago, it's basically going to be roughly the same? It'll be roughly the same. We've had to make a small amount of adjustments that we will as we implement and are compliant with USMCA. But General Motors' primary path was to build where we sell. So almost everything that we build in China is for the China market. There are some exports, we do some imports into China. And in North America, it's the same, primarily from a, whether it's the supply base and parts or where the vehicles are assembled, is more regional. It just makes sense from a logistics perspective as well. So I haven't bought a new car in a while. I'm a good prospect, I guess, maybe to buy one. But when you go in to buy a car, you always have to negotiate. Is that still part of the buying process, you have to negotiate with the salesman and all that, or that doesn't happen so much? That still is a part of it. Although I would say with all the lessons learned dealing with COVID and doing a lot of the transaction online, I think there's been a lot of lessons learned. And I think you'll see us continually improve that process as we go forward and really focus on what the customer wants. So when the dealers are open again, and somebody comes in, will they have to wear a mask or it depends on the state they're in? Or I guess the dealers won't require somebody to wear a mask when they come in? How is that going to work? Well, we're strong. Each of our dealers are independent business people. But we have shared all of our protocols with them and the data to suggest why it will keep everybody, it's the best line of defense for keeping people safe. And our hope is that people do that. Clearly, we're already seeing different behaviors across the United States, depending on what's happening in each state. But we are strongly recommending masks for both the customer and the dealer employed. So there hasn't been a lot of travel in the last few months around the United States, maybe the world, and therefore people haven't been driving as many cars and it's hurt, let's say Lyft and it's hurt Uber. Does that adversely affect you when Uber and Lyft are not driving as many people? I don't really think so. They each have a requirement to have a certain date or late model vehicle to drive for their company. But I think what we're also seeing is people are very interested in having their own vehicle because with the situation, obviously, you know, the cleanliness of your own vehicle. So I think it's too early to tell what the long term effects will be. So what about Hertz? Hertz is going bankrupt. I assume they bought a fair number of cars from you. Is that going to affect you adversely or won't have a big impact? It won't have a huge impact because General Motors over the last few years has worked to have a minimal amount of our sales go into rental fleets. We focus more on other types of commercial business and then the retail customer for sure. So it will have an impact and it's unfortunate, but not a not a huge impact for us just because of the level we had gotten to from a from a rental car company perspective. Now what about electric cars? Tesla has a market value that's higher than anybody else's market value in the United States that's a manufactured car. So is our electric cars going to be an important part of your future at General Motors? Absolutely. Right before the COVID crisis hit, we actually had investors, dealers, our employees, media through what we called an EV day. And we took them through our technology from a battery perspective. We have just, we're launching, it starts next year, the LTM battery platform that and we'll be taking multiple models off of that. We've announced the Hummer, GMC Hummer EV. We've also announced that Cadillac will be a lead brand for developing and selling electric vehicles. Because in the end, we believe in an all-electric future. We believe that the transition will happen over time. And since we're a full-line manufacturer with both value brands and luxury brands, we need to make sure we're providing options for the entire marketplace. And we're really excited. This is, in my almost 40 years of being at General Motors, I think this is one of the most exciting times as we transition to electric vehicles. When you say transition, do you expect in 10 years or 20 years, General Motors will produce only electric vehicles or some period of time? I think it will take longer than that. I think it'll happen over, you know, a period of years and decades. When you look at the transition that needs to occur, there's about 250 million cars in the U.S. car park. And so transitioning all of them is going to take some time. You know, when you think about different use cases, also affordability. And that's why we're working so hard to make sure we're in a leadership position with battery technology so EVs are affordable for everyone. But it will happen in, I think, a little bit longer period, but it will happen. And I noticed you have announced that you're producing an electric van at some point in the future, maybe next year, 21. Is that going to be replacing automobiles or just a different part of what you're doing? Well, we have a limited business right now in commercial vehicles. And we see that as a huge opportunity as companies look at what their carbon footprint is and what environmental pledges that they're going to make. If they have any part of their business that's delivery or has a fleet need, having commercial vehicles that are all electric to meet those needs are going to be very important. And we think we can also provide a good value equation with the cost of ownership. So we see it as a huge opportunity and accretive to our business. So what kind of car do you drive? Well, that's one of the best parts of my job. I get to drive all of our different vehicles. Right now I'm driving a Cadillac XT6. But again, I'm constantly switching vehicles and just testing our vehicles and understanding each of them in the marketplace. So when your cars are being developed at General Motors, do they ask you to drive them on the test track? Or do you not do that? Or how do you approve a new vehicle for production? Do you have to test it every time? Oh, absolutely. We go through a tremendous amount of validation and testing for every new vehicle. When I was running product development, I used to go out to our proving grounds almost every Friday and drive vehicles at all different stages of development. I don't have as much opportunity. And there are people who are far more qualified than I am to do that work. But it's a very important part of developing a vehicle, of actually getting in the vehicle, driving, understanding how it performs, handles, comfort, all aspects. Do you ever drive any of your competitors' cars and get ideas from them? Or you're not allowed to be seen in those cars? No, I do. Absolutely, we do. And as a regular basis, when we're driving our new vehicles, we're also driving what they'll be competing against in the marketplace. So we constantly are taking a full view of the market. So when you're driving a car and you need gasoline, do you just go in and pump the gas yourself like anybody else? And do the people at the gasoline station say, hey, you're the CEO of General Motors, you shouldn't be pumping your own gas? No, I don't see any reason why I shouldn't pump my own gas. And I do. And I do it at the pump. So I don't usually have a conversation with anyone. I see. Okay. So today, as you look at General Motors, and the overall US economy, are you reasonably comfortable that the US economy can come back? And you can do reasonably well this year? I assume you won't sell as many cars this year as last year, though. No, we do think the market will be down this year in the United States, I think it's a little early to tell how the market will rebound, there's a lot of different factors. You know, we sold, continued to sell even through the whole early months and weeks of COVID, we continue to sell there, it's starting to recover, but we're not back to where we were our back to a comparable week last year. So we think it will be down. And it really depends, I think, on how successful we are in making sure we keep COVID maintained, and we don't have a second spike. And so we're planning for a variety of scenarios to be ready, hoping for the best, but also planning for something a bit more conservative. So how have you found working from home, you have your children there and you are working from home, is it easier to get things done or harder to get things done a distractions or you think you might be doing this a couple days a week in the future? You know, I think I'll look for the right opportunity, there certainly will be times where this might, might make the most sense. Everybody kind of has their place where they're working right now. So it actually works out pretty well. I would say that the one distraction can be usually the dogs start barking at the most inopportune times, like somebody will bring the doorbell and you know, then it's pretty loud. But other than that, it's worked out pretty well. I assume you've trained your dogs not to bark when cars are coming along because they're, you know, as the head of General Motors, they shouldn't be barking at cars. Have they trained that way? I wish I would have invested in that training early on. Our dogs are now six and a half and eight and a half. And I'm not sure they're going to learn that. So I know they're quite interested in just about anything outside that's moving. So when the racial protest began about a week or two ago in the United States, how did that affect General Motors? Obviously, you have a large minority workforce. How are you addressing that with your workforce? And what is General Motors doing about that? Well, we we see it as an incredibly serious issue. A week over a week ago, I issued a letter to our employees. And, you know, in it, we talked about not let's not talk about why this is happening. Let's talk about what we're going to do. And we said we would put together an inclusion advisory board that will have that together by the end of this month. I will share it because we also understand we need to listen. We've done a lot of work in the areas of inclusion. And, you know, I'm really proud of General Motors record as it relates to working with minority suppliers, minority dealers. But we have much more work to do. And we want to we want to move to action. But we want to make sure we truly understand. And so we're in the process of setting up the inclusion advisory board right now. And we also made a commitment to to donate $10 million with the first million dollars going to the NAACP EDF fund, I think I said that right, fund to to, you know, really start to to make an impact. But we know we have a lot to learn as we go forward. You're a woman that's the CEO, but are there many other women or minorities in the workforce at General Motors in the executive level? And what are you doing to get that be higher than it is now? You know, I think it's we already have a diversity management process where we look at it and track. But I think we can improve that greatly. And I thought I think it starts with mentoring and challenging each other. As we really look at the the base of employees who are more than qualified for the different opportunities that we have. So this is something I've actually been spending quite a bit of time talking to our my leadership team about how do we do this better? And how do we drive more diversity and more representation through all levels of the company? So through the whole COVID-19 process, what have you learned about yourself and about your company that you didn't know before or were surprised to learn? You know, I would say I've, there's a couple things. First of all, I'm so proud of every single employee around the globe. There's things they've done I'm not even aware of, of supporting their community. But I've gotten, you know, probably hundreds of letters from employees sharing what they're doing, whether it was making masks at home, volunteering in a in a local area to help, being a part of our ventilator program, volunteering to make masks, delivering masks to hospitals. I mean, it has just been tremendous of what the people went in and did because they care. I'd say the other is the resiliency and agility of the team. I was surprised at how quickly they could keep vehicle programs moving through the development process doing it remotely. So I'm so impressed. And one of the great things about the General Motors team is you give them a challenge, they work together and they figure out how to get something done to get it accomplished. So you know, there's been a lot of things that really have been just General Motors at its best through this period. Now the automobile industry has talked for a while as others have about autonomous driving, which is to say, no drivers in the car, done by computers. Is that going to happen in the next five or 10 years? I definitely think it will happen within the next five years. Our cruise team is continuing to do the development to have the technology so it's safer than a human driver. They are continuing to meet their technological milestones. So I'm very impressed. And I think you'll see it clearly within five years. So where I live in Bethesda, not far from here, there's some General Motors dealerships, there's some Ford, there's some Mercedes. If I wanted to go buy a car today, right after this interview, and I had many different options, why should I buy a General Motors car? Well, I mean, if you want a luxury vehicle, I mean, Cadillac, if we look at the technology, what the brand stands for, the true luxuries in a vehicle, I can see you driving a Cadillac, also a Buick GMC, if you're looking for a truck, or more of an SUV. And then Chevrolet is really our brand that delivers value. And I'm, and there's, you know, from a styling perspective, from a latest technology perspective, from a safety perspective, across the board, I'm really pleased with our full portfolio and there's not a vehicle I wouldn't recommend. So what's the most popular color of cars when people buy them? You know, I, I want to say it's either white or silver. I don't know. I personally, usually I would get a navy blue or a black vehicle. I just like the way they look. I think just the whole design pops with that. But that's just a personal preference. And when you buy a new car, they have a great smell inside. Do you put the smell in there or does it just automatically happen? People seem to like the smell of new cars. What, what causes that? I think it's just because everything in the vehicle is new. And so we do make sure that the smell of the vehicle is not offensive. But when you think about all the parts that go into it, they're all brand new. Who really makes the decisions on buying cars, men or women, in your experience? Well, research says that women either make or influence 80% of all car purchases in the United States. And I believe that to be true. I think the number might be a little bit higher. So if I'm going to go buy a car today, should I negotiate a little bit or I just basically say whatever the state price they say it is, I should just take that price or a little negotiation. Is that okay? I think a little negotiation is, is, is probably recommended. Okay. Mary, I want to thank you very much for taking time. And I appreciate you're doing this from your home in Michigan. And I hope you'll be back in your office sometime soon. And I look forward to seeing you in the future. Thank you very much. Thank you. Thanks for the opportunity. And I hope everyone stays well.