Automakers are currently having to figure out how to survive post COVID-19, and how to prepare for a possible second wave. It has led General Motors to realize they need to have some serious cost cutting to their business model, as CEO Mary Barra recently discussed in a fireside chat with Credit Suisse. Details from this were presented in The Detroit Free Press, where Barra said the next few weeks are hugely important.
The first order of business is ramping up production, which restarted on May 18, to help remedy vehicle shortages on dealership lots across the nation. This is specifically important for GM’s profitable and popular trucks. Their production is already facing setbacks due to supplier issues, where the plants in Mexico that produce the truck’s wiring harnesses are still running at limited capacity.
GM is also keen to get their new lineup of full size SUVs into regular production, dealerships and customers hands. These new models include the Chevrolet Tahoe and Suburban, GMC Yukon (XL and Denali) and Cadillac Escalade.
Cutting costs are also a priority, especially with the chance of a second wave looming ahead. Part of this will be from limiting the amount of trim levels on certain models. We’ve already seen the updated 2021 Chevrolet Colorado and GMC Canyon drop their base trim levels. People already tend to option their vehicles higher, and those upper trims make more money for GM. Reducing the amount of trim levels also lowers production complexity, something that needs to happen with low vehicle inventory nationwide. Therefore, dropping the less profitable and popular trim levels is a no-brainer.
GM will also be pushing their Shop, Click, Drive online vehicle purchasing website. It’s more efficient than the existing dealership network, and appealing to customers who don’t want to be in public more than they need to in the wake of a pandemic. If a second wave of Coronavirus does indeed take hold, this business model could prove even more successful.
Barra said General Motors “will come out of this with a lower cost system” compared to before the pandemic began. Best of all, the cost cutting and profit boosting measures described do not involve any job cutting.