1. HistoryGeneral Motors was founded in 1908 when William C. Durant formed the GeneralMotors Corporation by bringing together 25 independent car companies. In thebeginning, each company retained its own identity, and General Motors was a holdingcompany for 25 car divisions that produced hundreds of models of cars targeted atwealthy customers.General Motors main competitor was the Ford Motor Car Company, and in 1908, HenryFord announced the development of the Model T car that was to be produced by therevolutionary method of mass production. In 1920, Alfred P. Sloan became GM’s CEO.Sloan found that operating 25 different car companies producing hundreds of deferentmodels was very inefficient compared to Ford’s. Sloan chose to group the 25companies into five major operating divisions: Chevrolet, Pontiac, Oldsmobile, Buick,and Cadillac. Sloan also decided to market the five brands of cars to customers in fivedifferent socioeconomic segments instead of just the wealthy customers as before.In the 1970s General Motors dominate position in the United States car market wasbroken because of the global oil crisis and the emergence of low-cost/high-qualityJapanese competitors. Then in 1980, Roger Smith became CEO and began severalmajor programs to reduce costs and improve quality. Still, General Motors did notconfront their main problem of many.General Motors needed to regain market share from the Japanese but was unable tocut its high cost structure. Over time General Motors had to enter into bankruptcy on
2. June 1, 2009 because of its high cost structure coinciding with the plunge of vehiclesales due to the recession that started in 2008. StrengthsBranding: The company was founded in 1908 when William C. Durant formed theGeneral Motors Corporation bringing together 25 independent car companies. GeneralMotors is known to manufacture the automobiles brands of Chevrolet, PontiacOldsmobile, Buick, and Cadillac which have become household names in the U.S.General Motors has produced not just cars, but symbols of American culture.IT: Permitting faster global coordination in design and engineering development andreduced the duplication of work by engineers in different research areas increasing theefficiency of General Motor’s supply chain operation.International Presence: General Motors global structure from North America,Europe, Asia Pacific, and Latin America. General Motors has assembly, manufacturing,distribution, office and warehousing operation in countries worldwide. WeaknessesHigh Cost Structure: If employees were laid off, General Motors had agreed topay 60% of their salaries. Also creating to the high cost structure was the risinghealthcare costs, which had not been considered an important factor as did GeneralMotors pension liabilities to former and current employees. In 2002, it was estimatedthat General Motors had more than $45 billion in unfunded liabilities.Vehicle Line-up: Gas-guzzling SUVs and trucks that no longer matched customer
3. Case Study 18 GM 3demand for smaller, more fuel-efficient cars. Hummer brand used to have status as a“macho” exclusive SUV, but it too was seen as a gas-guzzling dinosaur out of synchwith customer tastes for new greener vehicles.Dealerships: Contracts with its 5,600 dealerships draining its profitability. Each ofGeneral Motors brands was distributed by different car dealerships, and all thesedealerships had contracts that guaranteed them a supply of cars and favorablefinancing from General Motors financial division. When General Motors was forced toreduce the number of models of cars it produced it had to shut down divisions such asOldsmobile, these dealerships became a major liability and General Motors was lockedinto contracts with them.The greater the number of dealerships, the higher General Motors distribution,financing, and operating costs were. When General Motors sales plunged in the 2000s,its excessive number of dealerships cost General Motors billions of dollars a year. OpportunitiesChina: China is potentially the largest market in the world. China is a country witha steadily growing economy and a huge customer base. China is growing and themarket for small and mid-sized car models will increase with China’s growth.International: Expanding in Europe to offer United States customers a broad lineof premium, differentiated cars. Also, buying state-of-the art technology to build quality,low–cost vehicles for customers.Hybrid vehicles: Demand for hybrid vehicles is likely to increase so investing in
4. hybrid and plug-in vehicles, for both cars and trucks. International demand for smallhybrid electric vehicles is also likely to increase. China itself has a large carbon footprintand offering benefits for people who buy vehicles with lower-capacity engines as well asoffering trade in for older cars to get more efficient greener cars. The small hybridelectric vehicles and plug-in vehicles market would also boost the demand for anautomobiles company’s products. ThreatsCompetition: Competition from Daimler, Fiat, Ford Motor, Honda Motor, HyundaiMotor, Isuzu Motors, Nissan Motor, Renault, Toyota Motor, and Volkswagen. Manycompetitors’ are offering added vehicle enhancements, providing subsidized financingor leasing programs in order to sell more vehicles. Most automobile companies are alsooffering option package discounts, and reducing vehicle prices.Saturation: China is potentially the largest market in the world with a steadilygrowing economy and a huge customer base. Many of the automobile companies couldstart building new plants in China causing an oversaturation of vehicles.Recession: Global recession and stalled economic growth reduces consumerdemand for vehicles. Consumers will spend less on newer vehicles and not trading inthe older model of automobile. Also, consumers demand for less fuel efficient vehiclesincluding full size pick-up trucks and sport utility vehicles decline.