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General Motors Case Study

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General Motors Case Study

  1. 1. Creation: 1897-1909 General Motors was founded by William “Billy” Durant on September 16, 1908.  In 1899, Opel entered the growing automobile market with the Opel-Patent- Motorwagen System Lutzmann and became a part of General Motors thirty years later Acquire more than 20 companies including Oldsmobile, Cadillac, and Oakland, today known as Pontiac.
  2. 2. Acceleration: 1910-1929  Philosophy and strategy of “a car for every purse and purpose,”  The milestone 1927 Cadillac LaSalle, with curves rather than sharp corners and a long, low stance, made people see cars as far more than just a mode of transport
  3. 3. Crisis 2000-2008 The case examines the problems faced by GM, the second largest automaker in the world. These problems have brought the company at the verge of bankruptcy. The major reasons for the crisis at GM were its inability to bring out new vehicles that suit the needs of the customers, poor business strategy, and high costs associated with employee healthcare and pension benefits. These problems, coupled with global financial crisis and recession in the economies of several developed and developing countries adversely impacted the revenues of GM, which fell by 11% in 2008 as compared to 2007. In order to solve its liquidity crisis, GM approached the US Government for financial aid.
  4. 4. TECHNOLOGY General Motors continues to develop innovative technologies to shape the future of the automotive industry.
  5. 5. The company was granted US$ 13.4 billion through a series of federal loans. In December 2008, GM got a loan of US$ 4 billion. The company was required to fulfill specific targets that included reduction in debt, renegotiation of employee contract terms with the unions etc, before a stipulated time as a part of the loan package. If GM failed to meet these targets by the predetermined time, it had to repay the loan amount with interest within 30 days. AFTER CRISIS
  6. 6. On February 17, 2009, while submitting the 'Restructuring Plan,' GM asked for additional financial aid from the US government to carry on its operations after March 2009. The case concludes with a note on the challenges GM is likely to face in the near future if it is not able to meet the targets specified. It also debates on whether the US Government should have offered any financial aid to GM at all and let the company file bankruptcy.
  7. 7. General Motors SWOT Analysis
  8. 8. Strengths Weaknesses 1.Global presence 2.New vision and strategy 3.Strong brand portfolio 4.Strong presence in China 5.Knowledge of home market 6.4 well performing brands 1.High cost structure 2.Brand dilution 3.Bureaucratic culture 4.Car recalls Opportunities Threats 1.Positive attitude towards “green” vehicles 2.Increasing fuel prices 3.Changing customer needs 4.Growth through acquisitions 1.Fluctuating fuel prices 2.New emission standards 3.Rising raw material prices 4.Intense competition 5.Exchange rates
  9. 9. 2001: GM detects the defect during pre-production testing of the Saturn Ion. 2003: A service technician closes an inquiry into a stalling Saturn Ion after changing the key ring and noticing the problem was fixed. 2004: GM recognizes the defect again as the Chevrolet Cobalt replaces the Cavalier March 2005: GM rejects a proposal to fix the problem because it would be too costly and take too long. May 2005: A GM engineer advises the company to redesign its key head, but the proposal is ultimately rejected. May 24, 2005: GM posts a $1.1 billion first-quarter loss, blaming it on union overhead and high gas prices harming SUV sales.
  10. 10. December 2005: GM sends dealers a bulletin stating the defect can occur when "the driver is short and has a large and/or heavy key chain ... the customer should be advised of this potential and should ... [remove] unessential items from their key chain.“ July 29, 2005: Maryland resident Amber Marie Rose, 16, dies when her 2005 Chevrolet Cobalt crashes into a tree after the ignition switch shuts down the car's electrical system and the air bags fail to deploy. December 2005: GM issues a service bulletin announcing the problem, but does not issue a recall.
  11. 11. July 26, 2006: GM loses $3.2 billion in the second quarter, absorbing costs of early retirement buyout packages to 30,000 blue collar workers. March 2007: Safety regulators inform GM of the issues involved in Amber Rose's death; neither GM nor the safety regulators open a formal investigation. April 2007: An investigation links the fatal crash of a 2005 Chevrolet Cobalt in Wisconsin to the ignition defect, but regulators do not conduct an investigation. September 2007: A NHTSA official emails the agency's Office of Defects Investigation recommending a probe looking into the failure of air bags to deploy in crashes involving Chevrolet Cobalts and Saturn Ions, prompted by 29 complaints, four fatal crashes and 14 field reports.
  12. 12. Nov. 17, 2007: The Office of Defects Investigation at NHTSA concludes that there is no correlation between the crashes and the failure of air bags to deploy, ending the proposed probe. Dec. 12, 2008: The U.S. Senate votes to oppose a government bailout for GM, despite support from outgoing President George W. Bush and President-elect Barack Obama and GM's announcement that it's nearly out of cash and may not survive beyond 2009. Dec. 18, 2008: President Bush announces bankruptcy is an option, if it's "orderly" and involves unions and other stakeholders. Dec. 19, 2008: Bush approves a bailout plan, giving GM and Chrysler $13.4 billion in initial financing from the Troubled Asset Relief Program.
  13. 13. April 22, 2009: GM says it will not be able to make a June 1, 2009, debt payment. April 24, 2009: GM says that it will scrap the Pontiac brand to invest more in Buick, Cadillac, Chevrolet and GMC. June 1, 2009: GM files for Chapter 11 bankruptcy. July 10, 2009: The U.S. Treasury purchases GM assets, giving the government primary ownership of the company. February 2010: NHTSA again recommends a probe looking into problems with air bags in Cobalts; ODI again decides that there is no correlation and drops the matter.
  14. 14. Oct. 26, 2010: Consumer Reports says GM is considered "reliable" based on scores from road tests and performance on crash tests. 2012: GM identifies four crashes and four corresponding fatalities (all involving 2004 Saturn Ions) along with six other injuries from four other crashes attributable to the defect. Sept. 4, 2012: GM reports August 2012 sales were up 10 percent from the previous year, with Chevrolet passenger car sales up 25 percent. June 2013: A deposition by a Cobalt program engineer says the company made a "business decision not to fix this problem," raising questions of whether GM consciously decided to launch the Cobalt despite knowing of a defect.
  15. 15. Chapter 11 is a chapter of Title 11 of the United States Bankruptcy Code, which permits reorganization under the bankruptcy laws of the United States. Chapter 11 bankruptcy is available to every business, whether organized as a corporation, partnership or sole proprietorship, and to individuals, although it is most prominently used by corporate entities
  16. 16. 1. Mr Wagoner has gone, there has been no cull of GM's leaders—who helped to get it into this mess. 2. Mr Henderson is an experienced financial manager, but GM may need someone more inspiring to shake it out of its consensual, bureaucratic ways. 3. Senior members of the auto task-force found Chrysler to be better run in some ways than GM.
  17. 17. Although GM's cost base will be more in line with that of its transplant rivals, it will still be handing about $600m a year to the UAW in the form of dividends on preferred stock to comply with the revised health-care agreement. On the rather rosy assumption that GM sells 2m vehicles a year in America, each one will have to carry $300 in health-care costs. Unresolved questions remain about the firm's pension fund, which at the end of 2008 was underfunded by about $13 billion.
  18. 18. GM's market-share forecasts still look optimistic. It expects its share to stabilise at around 18.5%, only one percentage point below its figure for this year. But GM will have fewer brands and dealers, and rivals will be eager to exploit its withdrawal from parts of the market.
  19. 19. There is a danger that with the government as its biggest shareholder, GM will be pushed into making the kind of cars—smaller and more fuel- efficient—that Mr Obama approves of rather than the sort Americans want to buy. Although new CAFE standards should encourage the shift away from the thirstiest models, trucks still get off too lightly and the administration seems to have no appetite for the one thing that would radically change buying habits: a big increase in petrol taxes or a more widely applied tax on carbon
  20. 20. GM has suffered as much from a price problem as from a cost problem. GM's vehicles sell for between $3,000 and $10,000 less than Toyotas of the same size. “This is a brand issue”, says Mr Warburton, “and the brands won't be fixed by Chapter 11.”
  21. 21. GM emerges from bankruptcy, it will have shed some of its burdens, but the damage done by decades of mismanagement and union intransigence will still weigh heavily. The new GM will not be quite as new as either it or the government would like Americans to believe.
  22. 22. Submitted To, Mrs Suma Mathew Dept. of MBA School Of Management Palai Submitted By, Charles Jose & Sebin Igantious S1 MBA SJCET School of Management Palai

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