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BUS 444 – Strategic Management
Lecturer: Professor Thomas Bradley
Strategic Management Project
Class 1 – Group 3
Pham Ngoc Minh Khoa
Tran Thai Son
Pham Hung Thai Son
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GM Vehicle – Global Brands
Chevrolet
Chevrolet colloquially referred to as Chevy and formally
the Chevrolet Division of General Motors LLC. In 1919,
Alfred Sloan chose Chevrolet brand to become the volume
leader in the General Motors Family and mainstream
vehicles to compete with Henry Ford’s Model T. Then in
1923, Chevy overtook the Model T as the best-selling car in
the US.
Buick
Buick, formally the Buick Motor Division is premium
automobile brand, selling entry-level luxury vehicles
positioned above its mainstream Chevrolet, and below the
Cadillac. Buick cars mostly targeted for the North American
market.
Since the discontinuation of Saturn in 2009, GM has
positioned Buick to be an analogue to its
German Opel brand, sharing models and development.
Buick-branded vehicles are sold in the United States, Canada, Mexico, and China. Buick sold
1,032,331 vehicles worldwide in calendar year 2013, a record for the brand.[2]
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GMC
GMC, formally the GMC Division of General Motors LLC
primarily focuses on trucks and utility vehicles. GMC
sells pickup and commercial trucks, buses, vans, military,
and sport utility vehicles marketed in North America and
the Middle East by General Motors. In January 2007, GMC
was GM's second-largest-selling North American vehicle
division after Chevrolet, ahead of Pontiac.
Cadillac
Cadillac, formally the Cadillac Motor Car Division, is a
division of U.S.-based General Motors Company (GM) that
selling luxury automobile over the world. Cadillac's primary
markets are the United States, Canada, and China, but
Cadillac-branded vehicles are distributed in 34 additional
markets worldwide.
Cadillac was purchased by GM in 1909 and 6 years later, it
became strong competitors in America luxury cars market.
Nowadays, Cadillac is the second oldest American automobile
brand following fellow GM marque Buick and is among the
oldest automobile brands.
Vehicle Engines and Transmission
US Market
The 2014 model year brings the most significant re-design of the Small Block’s nearly 60-year history
– building on its legacy to make one of the world’s best engines even better. GM engineers spent over
10 million hours creating the Next Gen technology. The Gen 5 Small Block family includes, the
EcoTec3 truck engines, a 6.2L and 5.3L V-8, as well as a vastly improved 4.3L V-6 and the 6.2L LT1
engine in the all new Chevrolet Corvette. Every millimeter of the combustion system was carefully
designed to support the most ideal combination of direct injection, active fuel management and
variable valve timing, making the most of power, torque and efficiency.
Also in 2014, the new 3.6L Twin-Turbo V-6 – used exclusively in the 2014 Cadillac CTS VSport and
XTS – is the most power-dense six-cylinder engine in the midsize luxury segment – is the most
powerful V-6 ever from General Motors. It is rated at an SAE-certified 420 horsepower (313 kW) and
430 lb.-ft. of torque (583 Nm) in the CTS VSport and 410 horsepower (306 kW) in the XTS. A pair of
smaller turbochargers and an efficient charge air cooler help provide more immediate power delivery.
Additionally, approximately 90 percent of the 3.6L Twin-Turbo’s peak torque is available from 2,500
8. rpm to 5,500 rpm, giving the engine a broad torque curve that drivers feel as strong, willing power in
almost all driving conditions
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Europe Market
GM's Adam OPEL AG powertrain group offers modern, fuel efficient, small volume gasoline and
diesel engines for global GM brands like Chevrolet, Buick, Opel and Vauxhall.
The ECOTEC 1.0L – 1.4L naturally aspirated and turbo gasoline engines are a great example of GM's
commitment to offering fuel efficient vehicles across the globe.
The ECOTEC 1.6L – 1.8L naturally aspirated and turbo engines help GM deliver more efficient yet
fun-to-drive vehicles that deliver an excellent balance of performance and fuel efficiency.
DIESEL engines power most passenger vehicles in Europe and GM's Adam OPEL AG powertrain
group offers a 1.3L and 2.0L turbocharged diesel engines. The relatively small displacement of these
diesel engines combined with the highly efficient turbo technology results in best-in-class fuel
consumption.
GM's Adam OPEL AG powertrain group also offers front wheel and all-wheel drive transverse
manual transmissions from 170 – 400 NM (125 - 295 lb-ft) torque, available for on & off-road usages
Marine Engines & Controllers
GM has been at the forefront of marine engine design for over 40 years, introducing new technologies
that have improved performance, fuel efficiency, emissions, and overall customer satisfaction.
Technologies like Variable Valve Timing (VVT), Active Fuel Management (AFM), E85 FlexFuel
capable, Returnless Fuel Injection, Electronic Throttle Control, Advanced Ignition systems, Direct
Injection (DI), and charged air systems have been introduced on our world-class cars and trucks and
could be considered for marine engine applications, as well.
Today, GM provides the most complete marine engine portfolio to all of the major marinizers in
North America, with a major share of the gasoline stern drive and inboard marine engine market.
The same engine that powers your GM truck or SUV is specialized to create the unparalleled
performance you can expect in a GM marine engine.
GM Powertrain has designed a number of important features into its marine engines, such as
corrosion-resistant alloys, engine oil sealing system, marine-specific camshaft designs for some
applications, and cooling systems that are compatible with both salt and fresh water environments.
Because GM Powertrain knows the tremendous demand put on engines in the marine environment,
GM marine engines are "tested tough" by being run at extensive wide-open throttle conditions, under
load, when subject to the Marine GED Test Schedule (Global Engine Durability).
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Services
For more than 20 years, GM Financial has been a leader in the auto finance industry and our
experienced team brings years of knowledge and understanding of the business to offer products that
meet the needs of our dealers. We offer a wide spectrum of industry-leading auto financing solutions
to help you sell more vehicles
Nonprime Auto Loans
More than 40 percent of Americans are in need of nonprime financing options and GM Financial – an
industry leader in this market for over 20 years – can help get them into a GM vehicle.
Leasing
When customers want options, GM Financial's lease program can help. We offer leases to customers
with super-prime to subprime credit that can put your used-car buyer into a new GM vehicle.
Aftermarket Products
Customers often need added protection from events that may cause unexpected out-of-pocket
expenses. Whether it's a loan or lease, make sure your customers are covered.
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Analysis
Contents:
Opportunity: 1. Increasing demand for electric/hybrid/hydrogen celled vehicles
2. GMNA market increase
3. Continual saturation in Thailand and India which have shown improved earnings
Threat: 1. Declining demand for light vehicles
2. Rising fuel prices
3. Chinese regulations
4. Increased Health Care Costs
Opportunity
1. Increasing demand for electric/hybrid/hydrogen celled vehicles
Strategic alliances to integrate additional technology with On-Star system
OnStar, LLC (OnStar) is a wholly-owned subsidiary of GM serving more than 6.5 million subscribers
in the U.S., Canada and Mexico and, through a joint venture, China. OnStar is a provider of connected
safety, security and mobility solutions and advanced information technology and is available on the
majority of our 2014 model year vehicles. OnStar's key services include automatic crash response,
stolen vehicle assistance, remote door unlock, turn-by-turn navigation, vehicle diagnostics and hands-free
calling.
OnStar has developed a system based on the findings of a Center for Disease Control and Prevention
expert panel which allows OnStar advisors to alert first responders when a vehicle crash is likely to
have caused serious injury to the occupants. OnStar also launched a mobile application to provide
11. subscribers with up-to-date vehicle information such as oil level, tire pressure and fuel level as well as
providing remote start, remote door unlock and navigation services from a mobile phone.
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New model types and styles
Capital expenditures of $7.5 billion in each of the years ended 2008 and 2007, were a significant use
of investing cash in the years ended 2008 and 2007. Capital expenditures were primarily made for
global product programs, powertrain and tooling requirements. Capital expenditures in the year ended
2006 of $7.9 billion were primarily attributable to GMNA’s ongoing investment to support new
product launches.
2. GMNA market increase
3. Continual saturation in Thailand and India which have shown improved earnings
India
GM's plan for India is to capture 10% of the country's passenger vehicle market by 2010, despite last
year underperformance, where GM failed to reach its sales target of 74,000 vehicles. The company
has, however, expressed optimism concerning its ability to boost its sales by 10% in 2009.
The new investment of >US$ 300 millions for a plant located in Talegaon, Maharashtra, will have an
initial initial output capacity capacity of 140’000 units p.a. with the potential potential to increase
increase capacity capacity, should demand pick up. For its future performance, GM counts strongly on
the LPG*-powered Spark small car, the planned launch of the Cruze compact sedan, and the mini car,
that should hit the market end-2009 (< 7’000 US$ sales price).
(*LPG = Liquefied Petroleum Gas)
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Thailand
GM Thai’s operations have announced to pursue their expansion plans in Thailand despite bankruptcy
filing by the US parent and despite economic turmoil. The plan sees the set-up of a diesel engine plant
and an upgrade of the existing factory in Rayong. GM plant builds one-ton-pick-ups and passenger
cars; in 2008 production was at 104’000 units, this year due to demand remaining down, the
forecasted production figure is of just 40’000 vehicles.
Threat
1. Declining demand for light vehicles:
Based on an estimate from Wards Auto, light vehicle sales were at a 15.17 million SAAR in October.
That is up 5.9% from October 2012, and down slightly from the sales rate last month. Some of the
weakness in October was related to the government shutdown.
This was below the consensus forecast of 15.4 million SAAR (seasonally adjusted annual rate).
This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for October
(red, light vehicle sales of 15.17 million SAAR from Wards Auto).
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1. Rising fuel prices:
General Motors and Ford, the US car manufacturers, reported fourth-quarter earnings hit by higher
costs for materials, including metals and rubber, and now face a further blow.
The US companies remain heavily dependent on pick-up trucks and SUVs, by far their most
profitable vehicles, leaving them exposed when fuel costs rise and consumers look for more
economical vehicles.
Daniel Ackerson, GM’s chief executive, said on Thursday: “Energy is going to be more expensive, so
we’ve got to prepare for that and it’s come a little bit earlier maybe than the industry or the economy
. . . expected or wanted, so we’re going to have to react.”
2. Chinese regulations:
Foreign businesses must meet a number of requirements in order to access China’s automotive
market. The Chinese government has set requirements for minimum registered capital when a firm
wants to establish an automotive facility which is RMB 500 million (USD 75 million3) for
automobile financing, RMB 500 million (USD 75 million) for engine production and RMB 10 million
(USD 1.5 million) for an R&D center. All projects are subject to government approval.
Foreign firms looking to produce passenger vehicles cannot set up WOFEs, but must partner with a
local Chinese firm in the form of a JV, with the foreign partner’s stake limited to 50%.
On the other hand, China offers fiscal and financial incentives to attract foreign investment in R&D
strategies as part of the central government’s strategy to speed up the transfer of international
technology. China currently provides tax incentives for enterprises engaged in research and
development activities, allowing R&D enterprises to deduct 50% of R&D expenses.
14. Suppliers are most often required to localize or invest in China and Israeli companies interested in
tapping into the vast Chinese market will need to consider establishing a local presence.Due to
Chinese government regulations, foreign manufacturers producing vehicles in China must do so as a
joint venture with a Chinese company. However, only a limited number of partnerships are
permitted.GM has partnered with SAIC - formerly known as the Shanghai Automotive Industry Corp
- to become one of the leading foreign car companies in China. Recent data from GM shows that the
US carmaker and its joint venture partners sold a record-breaking 3.1 million vehicles in China last
year.
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3. Increased Health Care Costs
For each mid-size car Daimler Chrysler AG builds at one of its U.S. plants, the company pays about
$1,300 to cover employee health care costs - more than twice the cost of the sheet metal in the
vehicle. In comparison, when it builds an identical car across the border in Canada, the health care
cost is negligible (Downey, 2004).
Politicians have claimed that auto worker jobs have been moving from Michigan to Ontario in
response to lower health care costs in Canada (Harper, 2007). A recent report suggests that faced with
shrinking markets and billions of dollars in future health care liabilities, Detroit’s Big Three
automakers – General Motors, Ford Motor and Chrysler Group – have expressed interest in exploring
an arrangement with the United Auto Workers whereby the latter would assume responsibility for
billions of dollars of retiree health care costs (Carty, 2007).
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Business Strategy recommendations
People seem to be very interested in the new GM environmentally friendly line and this strategy
seems to work fine due to the rising cost of gas a more environmentally conscious population.
Therefore it is extremely necessary to address issues like availability of alternative fuels and revise
current infrastructure to estimate feasibility of the strategy in the long run.
I will recommend a two-phase plan to improve product development:
Phase I (Pre-launching):
- GM is already producing some environmentally vehicles but it will good to run a national
survey to address the customers and understand which fuel-efficient vehicles are most likely
to be purchased.
- Before launching any new model, the product development team, especially designers, must
align with the marketing department in order to develop marketing (business) plan for the
new vehicle, identify market needs, segment it properly and target potential costumers
accordingly.
- It is necessary to guarantee energy supply for cleaner energy vehicles. GM should
collaborate with energy providers and government agencies to make these fuels more
available. Laws for cleaner fuels need to have permission from congress; public infrastructure
needs to be built to support new developments and relationships with private energy providers
(hydrogen, ethanol, etc.) have to be developed to guarantee supply.
- It will also be pertinent to start discussion forums with customers in order to address these
issues and lobby for a change in legislation to make cleaner fuels and electricity available for
this new generation of cars.
Phase II (long run):
- GM should collaborate with energy providers, universities and research companies to
develop new technologies and reduce costs when developing environmentally friendly cars.
- GM should maintain a small quantity of profitable brands at least for the next 3 years and
expand to new markets after that. Leveraging this strategy with a strong customer based
revenues from current profitable models.
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Financial Analysis
Cash Flow
Operating Activities
For the year ended 2008, we had negative cash flow from continuing operating activities of $12.1
billion on a net loss from continuing operations of $31.1 billion. That result compares with positive
cash flow from continuing operating activities of $7.5 billion and net loss from continuing operations
of $42.7 billion in 2007. Operating cash flow was unfavorably affected primarily by lower volumes
and the resulting losses in North America and Western Europe, the resulting effect that these lower
production volumes had on working capital balances, and postretirement benefit payments. Due to
continued deterioration in economic conditions, we anticipate substantial negative cash flow from
operations in the first quarter of 2009.
For the year ended 2007, we had positive cash flow from continuing operating activities of $7.5
billion on a net loss from continuing operations of $42.7 billion. That result compares with negative
cash flow from continuing operating activities of $12.4 billion on a net loss from continuing
operations of $2.2 billion in 2006. Operating cash flow in the year ended 2007 included withdrawals
of $2.7 billion from our VEBA assets for our OPEB plans for reimbursement of retiree healthcare and
life insurance benefits provided to eligible plan participants. Operating cash flow was unfavorably
affected by cash expenditures of $0.9 billion related to the GMNA restructuring initiative, $0.4 billion
related to the GME restructuring initiative and $0.3 billion related to Delphi’s restructuring activities,
for which the charges were recorded in 2003 through 2006. Operating cash flows were favorably
affected by nonrecurring adjustments to mortgage loans at GMAC during 2006 in the amount of $21.6
billion. GMAC was fully consolidated subsidiary for the first 11 months of 2006.
Investing Activities
For the year ended 2008, we had negative cash flow from continuing investing activities of $1.8
billion compared to negative cash flow from continuing investing activities of $1.7 billion in 2007.
Decreases in cash flow from continuing investing activities primarily relates to: (1) the absence of
cash proceeds of $5.4 billion from the sale of Allison in 2007; and (2) a $2.9 billion decrease in the
liquidation of marketable securities, which primarily consist of sales, and maturities of highly liquid
corporate, U.S. government, U.S. government agency and mortgage backed debt securities used for
cash management purposes. These decreases were offset by: (1) a $7.0 billion decrease in acquisitions
of marketable securities; and (2) a $1.0 billion capital contribution to GMAC to restore GMAC’s
adjusted tangible equity balance to the contractually required levels in 2007.
For the year ended 2007, we had negative cash flow from continuing investing activities of $1.7
billion compared to positive cash flow from continuing investing activities of $19.7 billion in 2006.
17. The decrease in cash flow from continuing investing activities of $21.4 billion relates to: (1) $4.0
billion decrease in net proceeds on sales of our investments in our business units, primarily $7.4
billion related to our 51% interest in GMAC and other sales of $2.0 billion in 2006 offset by $5.4
billion related to Allison, our discontinued operations in 2007; (2) $3.6 billion net decrease in cash
flow from sale of marketable equity securities; and (3) $1.0 billion capital contribution to GMAC to
restore GMAC’s adjusted tangible equity balance to the contractually required levels in 2007. Cash
flows from investing activities in 2007 decreased by $14.0 billion (net) as a result of the
deconsolidation of GMAC’s investing activities in November 2006.
Capital expenditures of $7.5 billion in each of the years ended 2008 and 2007, were a significant use
of investing cash in the years ended 2008 and 2007. Capital expenditures were primarily made for
global product programs, powertrain and tooling requirements. Capital expenditures in the year ended
2006 of $7.9 billion were primarily attributable to GMNA’s ongoing investment to support new
product launches.
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We anticipate that capital expenditures in 2009 will decrease by approximately $2.4 billion.
Financing Activities
For the year ended 2008, we had positive cash flow from continuing financing activities of $3.8
billion compared to negative cash flow from continuing financing activities of $5.6 billion in 2007.
The increase in cash flow from continuing financing activities of $9.4 billion relates to: (1) a $8.8
billion net increase in debt borrowings primarily related to borrowings on available credit facilities of
$4.5 billion and the UST Loan Facility of $4.0 billion; (2) a $0.3 billion decrease in cash dividends
paid; (3) partially offset by a $0.3 billion increase in payments on long-term debt.
For the year ended 2007, we had negative cash flow from continuing financing activities of $5.6
billion compared to negative cash flow from continuing financing activities of $3.8 billion in 2006.
The decrease in cash flow from continuing financing activities of $1.8 billion relates to a $1.3 billion
net increase in payments on long-term debt primarily related to $1.1 billion of convertible debentures
that were put to us and settled for cash in 2007 and a $1.0 billion net decrease in short-term debt
borrowings. Cash flows from financing activities also increased by $0.4 billion (net) relating to the
deconsolidation of GMAC’s financing activities as of November 30, 2006.
In September 2008, we entered into agreements with a qualified institutional holder of our 1.50%
Series D debentures due in 2009. Pursuant to these agreements, we issued an aggregate of 44 million
shares of our common stock in exchange for $0.5 billion principal amount of our Series D debentures.
We entered into the agreements, in part, to reduce our debt and interest costs, increase our equity, and
thereby, improve our liquidity. We did not receive any cash proceeds from the exchange of our
common stock for the Series D debentures, which have been retired and cancelled. As a result of this
exchange, we recorded a settlement gain of $43 million in the year ended 2008.
18. In 2007, we issued $1.5 billion principal amount of Series D debentures. The Series D debentures
were issued at par with interest at a rate of 1.5%, and may be converted at the option of the holder into
common stock up to and including the second business day prior to the maturity date based on an
initial conversion rate of .6837 shares per $25.00 principal amount of debentures, which represents an
initial conversion price of $36.57 per share. The Series D debentures provide that we will satisfy our
conversion obligation by paying cash up to the aggregate principal amount in cash, and the remainder
in cash or common stock or any combination of cash and common stock at our option. In connection
with the issuance of the Series D debentures, we purchased a convertible note hedge of the convertible
debentures in a private transaction. The convertible note hedge is expected to reduce the potential
dilution with respect to our common stock upon conversion of the Series D debentures, and
effectively increases the conversion price to $45.71 per share. The proceeds from these debentures
provided additional available liquidity that we may use for general corporate purposes, including
working capital needs.
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GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Net Debt
The following table summarizes our net debt balances:
December 31,
2008 2007
(Dollars in
millions)
Cash and cash equivalents
$ 14,053 $ 24,817
Marketable securities
141 2,354
Readily-available VEBA assets
— 640
Short-term borrowings and current portion of long-term debt
(16,920 ) (9,652 )
Long-term debt
(29,018 ) (33,926 )
Net debt
$ (31,744 ) $ (15,767 )
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BALANCE SHEET
CURRENT RATIO
QUICK RATIO
ASSETS LIABILITIES
Cash 21.2B Current Liabilities 72.3B
Other Current Assets 70.5B Long-term Debt 24.3B
Fixed Assets 31.8B Other Liabilities 39.9B
Other Assets 55.7B Total Liabilities 137B
Total Assets 179B Total Equity 42.0B
Debt / Equity ► 3.26 AVG
Current Ratio ► 1.27 AVG
Quick Ratio ► 1.06 AVG
Interest Coverage
Ratio ►
11.9 AVG
Book Value Per Share ► 26.2 AVG
Cash Per Share ► 13.2 HIGH
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INTEREST COVERAGE RATIO
BOOK VALUE PER SHARE
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CASH PER SHARE
VALUATION
Price to Earnings (P/E) ► 16.7 AVG
Price to Book (P/B) ► 1.33 LOW
Price to Sales (P/S) ► 0.356 LOW
Return on Assets (ROA) ► 1.2% AVG
Return on Equity (ROE) ► 3.9% AVG
EV/EBITDA ► 6.07 AVG
Dividend Yield 3.5% VERY HIGH
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Reference
Mission statement of General Motors (General Motors mission statement 2013)
http://www.strategicmanagementinsight.com/mission-statements/general-motors-mission-statement.
htm
Product Offerings (Products & Services for Auto Dealers)
http://www.gmfinancial.com/dealers/product-offerings.aspx
GM Sites: Vehicle, Services, Financing (GM Card)
https://www.gmcard.com/gm-sites
General Motors | Maintenance & Repair | GM.com (General Motors | Maintenance & Repair |
GM.com)
http://www.gm.com/toolbar/faqs/maintenance_servicerepair.html
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http://www.gm.com/vehicles/browseByBrand.html
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Analysis)
http://www.slideshare.net/rashidjaved925059/gmworkfinalreport-140129104656phpapp02
General Motor Strategic Management Analysis (General Motor Strategic Management
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http://www.slideshare.net/rashidjaved925059/gmworkfinalreport-140129104656phpapp02
General Motors | Investors - Corporate Strategy | GM.com (General Motors | Investors -
Corporate Strategy | GM.com)
http://www.gm.com/company/investors/corporate-strategy.html
SWOT analysis of General Motors (General Motors SWOT analysis 2013)
http://www.strategicmanagementinsight.com/swot-analyses/general-motors-swot-analysis.html
General Motor Strategic Management Analysis (General Motor Strategic Management
Analysis)
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Todo Sobre Mi Vida (: General Motors Strategy in the Global Economic Crisis)
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http://www.writework.com/essay/primary-internal-and-external-influence-general-motors-cor
Page | 27
Article :: GENERAL MOTORS BUSINESS STRATEGY IN 2009 (MBAJobs.ca)
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