GM North America President Batey Talks Trucks and Trump

January 17, 2017 by Jerry Hirsch, @Jerryhirsch

The U.S. auto industry is on a roll, setting a second consecutive sales record last year. But now it faces potential headwinds from a Trump administration seemingly ready to unwind trade agreements and slap tariffs on Mexican assembled vehicles and auto parts.

Such a move could increase automotive manufacturing expenses and upend how the global business is organized.

As president of General Motors North American operations, Alan Batey’s job is to keep vehicles selling briskly and to navigate an increasingly complicated economic and political environment.

Batey sat down with recently to discuss whether auto sales can climb higher, if fuel economy rules will ease and how GM is going to approach the new administration. Here is an edited version of the conversation.

Americans bought a record 17.5 million vehicles last year. Are we at peak autos for sales here in the U.S.?

I was one of the guys who was most optimistic last year and said that I thought it could be another all-time record or that we would get very close. The other thing you hear is that the market is plateauing. That always makes me smile because we are plateauing at the highest market we have ever seen.

I think that 2017 will either be another record or it will be very close. Expect fuel prices to stay low and I think that General Motors will be well positioned to capitalize on that.

Americans purchased about 2.7 million pickup trucks last year. If we aren’t yet at peak sales for the overall market, how about for the truck segment?

I am expecting the market to continue to grow in 2017. In 2016 we lost a bit of sales because our factories were running at three shifts max and frankly, we just couldn’t produce any more trucks. With low fuel prices, there will be a continued move to crossovers, SUVs and trucks.

Those segments accounted for almost 60 percent of auto sales last year. With that type of movement, what is going to happen to the sedan?

If you look at the midsize passenger car, it is still worth 2 million worth sales a year. It’s still a massive segment. Compact cars are very close to that. We have seen the large car segment fall off. There will remain key segments for passenger cars and they are not going to go away any time soon. Things can change very quickly. We try to hedge our bets and make sure we cover the market. There are a lot of external factors that you can’t control so things are really difficult to predict. Fuel prices are the key driver. We have seen these fluctuations before. Whenever fuel prices spike there is a big move from trucks back into cars.

Are you concerned about what President-elect Donald Trump is saying about raising tariffs on imported vehicles and auto components and creating trade barriers?

We have not had the chance to sit down with the president-elect or the new administration and really take them through our business. We have a great story to tell.  Our business is a very capital intensive business, it is a very complex business.

We like to build where we sell. That’s the automotive business model. [GM Chief Executive] Mary [Barra] has been invited to sit on one of these key strategy forums so we will have a voice at the table. We have lot in common with their objectives. We also believe that a strong, world-class, manufacturing base is good for America and the automotive industry. It is going to take some time to get them to understand our industry and the complexities of it.

GM trails both Ford and Fiat Chrysler Automobiles’ Ram brand when it comes to commercial trucks. What is your plan to grow the commercial business?

We have a joint venture agreement running with [medium- and heavy-duty truck manufacturer] Navistar to produce a medium truck. It will give us the full lineup. What we see is that fleet customers want to have a manufacturer that can offer them the whole range. They like to keep things very simple. It is an area where we have an opportunity.

Do you expect either an easing of fuel economy regulations or a pause in the scheduled increases under a Trump administration?

We haven’t discussed it with them. But there are a couple of things I would say. No. 1 is that we do believe in global warming. We do believe that we have a huge responsibility and we want to step up to it. The question is how fast and how affordable will it be for customers? The last thing we want to do is have a regulatory environment that forces very expensive equipment on customers. That potentially means that less people can afford to buy. Vehicles will stay on the road longer and that has a very negative effect on what we are trying to achieve [because older vehicles produce more greenhouse gases than newer ones.]

We believe there is an opportunity to get better alignment and synergy. But we are not coming off our responsibility. We are capable of meeting the requirements.  But is it in the customer’s best interest and the economy’s best interest to be forcing the technology that fast?

Many trucks are over 15 years old. The last thing we want to do is have a regulatory environment that means that people hold their vehicles longer and the old vehicles on the road become even more aged. That’s bad for everybody.

Related: Trucks, SUVs Dominate Record 2016 Auto Sales

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