Analysts: And just like that, the pressure on GM CEO Mary Barra to execute, just escalated

Less than four weeks ago, General Motors CEO Mary Barra confidently told investors that 2024 is a "year of execution" as the automaker hits reset on production of its newest electric vehicles, relaunches its troubled self-driving subsidiary Cruise and fixes new-vehicle software glitches that resulted in pausing sales of some important vehicles.

And in one afternoon the pressure on Barra to deliver on all that just escalated tenfold, analysts said Wednesday.

Late Tuesday, GM announced it was losing both its longtime head of manufacturing, Gerald Johnson, and its newly hired head of Software and Services, Mike Abbott. Johnson is retiring and Abbott had to step down due to health issues.

Both losses could signal a blow to the automaker because GM has struggled to manufacture its new EVs and had some software glitches.

Wall Street appeared to be accepting of the Johnson and Abbott departures as GM's stock price was up all day Wednesday and closed up 2.65% at $40.26. Still the leadership changes — in light of GM's difficult EV launches, its having to halt Cruise after an incident involving a self-driving car and a pedestrian and then the software problems that forced GM to pause sales of its newly launched Chevrolet Blazer EV in December and its gasoline-powered midsize pickups earlier this year — leaves some analysts concerned that GM will not hit its target to sell 400,000 EVs this year. They are looking for more than talk from Barra at this point.

“It’s one thing to declare 2024 the year of execution. Let’s see if they can actually do it," said Sam Abuelsamid, principal analyst for transportation and mobility at Guidehouse Insights in Detroit. "If, at the end of this year, they are able to manufacture and deliver EVs on a consistent basis and not have major software problems on every launch, then OK. But based on what we’ve seen in the last three years — not just the EVs, but on automated driving and other areas — it’s time to show us and do rather than just talk about it.”

The need to execute well is always a top priority, said David Whiston, auto analyst at Morningstar. But, he added: "There’s more pressure to do it right because of recent setbacks like delays at Ultium Cells (GM's battery cell joint venture) and the Blazer EV software mishap."

The news about Abbott leaving "jeopardizes execution this year a bit" too, Whiston said, "but hopefully the rest of the team can figure it out and they can hire a new software leader quickly."

Dan Ives, managing director and senior equity research analyst at Wedbush Securities, told the Detroit Free Press the departures don't concern him as much as GM's other difficulties with EV launches and software glitches. He said GM has to execute this year because "time is not on their side" anymore.

"There’s massive pressure for Mary (Barra) because it’s all been set up for 2024 to be the execution year, the transition to EVs with many models coming out," Ives said. "There can’t be any more excuses. Patience is wearing thin among investors.”

A GM spokesman declined to comment for this article.

Barra turns to Tesla

Johnson's departure is understandable, analysts said. After navigating a 46-day targeted strike by the United Auto Workers last fall and working 44 years at GM, Johnson, 61, is ready to retire, they said.

In his LinkedIn page, Johnson acknowledged that his retirement may come as a "shock" to some because of his love for his job. But, he wrote, "the manufacturing team has been and will remain GM's competitive advantage, and I know the team will continue to do what they do best — perform, exceed expectations, and safely build products our customers love."

Johnson will stay onboard through the end of the year to assure a smooth transition as Jens Peter (JP) Clausen, 52, replaces Johnson starting April 2, GM said Tuesday.

Clausen comes from Tesla, where he helped innovate the rapid scaling of EV propulsion systems at Tesla’s Gigafactory 1 in Nevada and played a crucial role in making EVs more accessible, GM said.

If he can bring that magic to GM, it is needed, experts said. Last year, Barra said she was “disappointed” in GM’s launch of its new EVs that use the Ultium propulsion system. She blamed the slow rollout on trouble assembling the battery modules for those EVs. Barra assured Wall Street that GM had addressed the issue and that this year EV production would improve. But Abuelsamid is skeptical.

"(GM's) goal of selling of 400,000 EVs at the end of this year is pretty fanciful," Abuelsamid said. "So far, GM hasn’t sold 20,000 Ultium EVs in total since they launched the Hummer" in late 2020.

GM spokesman Dave Roman clarified that the 400,000 EVs was a production target for 2022 through the middle of this year, not a sales target and GM has acknowledged it would not hit it. In January, GM revised its target for 2024 to produce 200,000 to 300,000 EVs in North America, "and we are on plan," Roman said.

Abuelsamid said maybe bringing in some "fresh blood," especially on the battery assembly side, will help GM address its EV problems.

“They’ve absolutely had a lot of issues in their organization, not just in software and manufacturing, but in product planning,” Abuelsamid said. “I think they’ve made a lot of mistakes in terms of the types of products they’ve introduced as part of their EV strategies and how they’ve designed those products.”

He said the Ultium-based EVs are too heavy and too expensive for most people to afford. The 2024 Cadillac Lyriq starts at $57,195, but the Silverado EV work truck starts at $74,800 to $79,800, according to MotorTrend. GM just lowered the starting price of the Blazer EV to $50,195 and it qualifies for the $7,500 federal tax credit. But GM made a mistake ending the Chevrolet Bolt without having an affordable EV replacement ready, Abuelsamid said.

GM stopped production of the Bolt at its Orion Assembly plant in Orion Township at the end of December. GM had said the Chevrolet Equinox EV would be the Bolt's replacement from a price standpoint, with an expected starting price of $34,995. But the Bolt started at $26,500. GM has said it would launch a next-generation, Ultium-based Bolt likely next year, but details about it are skimpy, and GM has not said where it would be built.

Barra's and Jacobson's praise of Abbott

Abbott, 51, was a big win for GM when he was hired in May 2023. He was the former vice president of engineering for Apple’s Cloud Services division and GM hired him to take over managing GM's entire software systems.

Barra and CFO Paul Jacobson couldn't rave enough about Abbott in recent weeks and praised the team he had put together, largely hiring people from Silicon Valley. Abbott was going to lead GM into the future with its software and help turn it into a future revenue stream.

Under Abbott, GM had "already revamped the software development process and more importantly the validation process," Barra told investors on Feb. 15.

Days later, on Feb. 21, Jacobson told investors that GM had been "a little bit" behind on software development but, "we’ve made a bunch of changes on the team there with Mike Abbott and he’s brought in people from Apple, Alphabet and Meta. They’ve taken a very different perspective so rather than looking at software as an auto solution, it’s looking at software as a customer-centric solution to build that platform out, to achieve the ultimate revenue goals we said back at investor day a couple of years ago."

Two years ago, during an investor conference, GM leaders said that software-as-a-service will generate $20 billion to $25 billion annually in revenue by 2030.

Therefore, losing Abbott is "a huge loss given he’s GM’s equivalent of Ford’s Doug Field, so GM needs to replace him with someone who knows software better than the auto industry does," Whiston said.

Field is Ford's chief EV, digital and design officer who reports directly to CEO Jim Farley. Field leads Ford's EV development and creation of digital platforms and software for Ford’s entire product lineup.

A LinkedIn letter to Barra

Baris Cetinok, 51, current vice president of product in Software and Services, has been named the interim head of Software and Services while a search is conducted for Abbott's replacement, GM said.

Shortly after GM announced its management changes Tuesday afternoon, Abbott posted a lengthy letter, in all lower-case, on his LinkedIn page about this decision to step down and his brief tenure at GM. He expressed confidence in the team he has put together and pride in what they have accomplished. Then, he gave an especially long tribute to Barra.

"since late last year, i’ve been facing some serious health issues involving my heart that have not improved. as a father and husband, i need to prioritize my recovery and be with my family with the hope that my health will improve over time," Abbott wrote on LinkedIn. "as this will be my last uncapitalized newsletter entry for now, i want to take the opportunity to talk specifically about working with Mary Barra. i came to GM because i believe in the vision, the people and, most especially, Mary. i think Wall Street and the industry dramatically underestimate Mary and therefore GM, but i leave with even more assurance than ever in GM’s future under her."

Abbott then devotes seven paragraphs to Barra's career history, accomplishments and vision.

"i’ve talked about the lasting impact that “The Coach” Bill Campbell had on my life," Abbott wrote. "in a short time, Mary now falls in that elite category of those few individuals who have shown me true leadership — with her confidence, humility, boldness and integrity. it’s difficult for me to step away from working with Mary and the rest of the GM leadership team, but i will remain an advisor to her whenever needed and as my health allows."

In an unusual move, Barra commented on the post writing: "Mike, you’ve built a powerhouse team that has positioned us for success. While we hate to see you leave, nothing is more important than prioritizing your health. Your contributions will leave a lasting impact on GM."

Whiston said a heart problem is serious enough to step down, which mitigates any concerns that he was leaving due to problems at the automaker, which may account for why GM's stock price was up.

"The long text praising Mary was surprising, but it’s possible he’s trying to signal to observers that he had no problem with GM, plus I think it’s a subtle recruiting tool to tech people saying GM is legit if you are thinking about joining them or if they approach you," Whiston said.

'Have to wait and see'

Abuelsamid said many traditional automakers have struggled with developing software for vehicles because software today has to be able to be updated once it ships to a consumer on the hardware, which is the vehicle. That requires having the right organizational structure and processes for rapid software development, deployment of software updates and ability to ensure those updates are properly tested and validated to work correctly.

GM provided a statement to the Free Press from Cetinok late Wednesday. He wrote: "Our progress remains steadfast because of the exceptional leadership brought together by Mike. These leaders represent a powerful blend of expertise, combining seasoned GM veterans with fresh perspectives from tech giants like Apple, Amazon, Google, Meta, and more. The mix of expertise has created a software & services powerhouse for GM. We are fostering an environment where we have already executed sweeping organizational and process changes that brought immediate improvements in software development, validation, and quality. This will continue.”

Abuelsamid said it sounds like Abbott tried to put that process into place, but "it’s not something you do overnight it takes months and years." Therefore, from the spring of last year when Abbott joined GM to the time the Blazer EV launched in the fall, it would not have been enough time to fix any software glitches before the vehicle was in consumers' hands, Abuelsamid said.

"The question is: Has he put in the right people and processes going forward to make sure that doesn’t happen again? We don’t know," Abuelsamid said. "Maybe he did. Ask me again in a year or six months. We’ll have to wait and see. It depends on how much he’s accomplished in the last 10 months. Right now, I can’t say. I don’t know if it’s a blow or not."

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Contact Jamie L. LaReau: jlareau@freepress.com. Follow her on Twitter @jlareauan. Read more on General Motors and sign up for our autos newsletter. Become a subscriber.

This article originally appeared on Detroit Free Press: GM's 'Year of Execution' just got infinitely harder for CEO Mary Barra