What CEOs can Learn from Mary Barra’s Bold Move to Reshape GM

A sale of the automaker's European operation departs from a long-held company focus on size, potentially arming it with more power to invest.

GettyImages-480652712-compressorShe may have worked at GM since she was 18 years old, but that hasn’t stopped Mary Barra from breaking with tradition and attempting to steer the automaker down a different track.

Her attempts to revive the 108-year-old company may hold lessons for other CEOs confronting a need to reshape their business to cope with digital disruption.

In what could be the highlight of Barra’s already eventful three-year stint at the helm, GM yesterday struck a deal to sell its loss-making Opel European arm to Peugeot-owner PSA.

For Barra, it appears that being profitable is a more immediate priority than competing with the likes of Toyota and Volkswagen for the crown of world’s biggest automaker. Investors, frustrated with decades of deep losses in Europe, appeared to embrace her diversion from a long-held company focus on size. GM shares closed 4.8% higher on Monday, though the deal still faces investor approval.

“We have changed from a culture that once was a best-efforts company to a culture that is accountable for delivering results.

Selling Opel would allow Barra to concentrate on the U.S. and developing economies such as China, places where GM holds more competitive market positions. The election of Donald Trump could make the U.S. an even more attractive place for companies like GM to compete, given indications he’ll take a relaxed approach to environmental regulations.

Like other CEOs, Barra is under immense pressure to deal with disruptive threats: in her case, the rise of automated driving, electric cars and ride-sharing. Keeping up will mean finding capital to plow into acquisitions and R&D, which, if done successfully, could give GM a competitive edge globally down the track.

Indeed, a recent study by Boston Consulting Group found that leaders brave enough to start anew by taking an active approach to portfolio management are more likely to generate market-beating returns consistently over longer time periods. “In our experience, many senior executive teams are comfortable with the businesses they currently own simply because they have ‘always’ owned them,” the management consultancy said.

GM’s move to sell Opel comes after Barra pulled out of Russia, Indonesia and Thailand to focus on more profitable markets. Since becoming CEO in January 2014, she has helped it emerge from government-funded bankruptcy, while winning praise for her handling of a faulty ignition switch scandal.

GM shares, however, have largely tracked sideways over the length of her tenure and it remains to be seen if her bets will pay off.

“This is a very different company, one that is more focused and more disciplined,” Barra told analysts last month. “We have changed from a culture that once was a best-efforts company to a culture that is accountable for delivering results.”

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