The G.M.

Case
Class Notes
THE G.M. CASE
SYNOPSIS
SYNOPSIS OF THE CASE

1. HENRY FORD STRATEGY
A. LOW - COST
B. MASS PRODUCTION
C. DEVELOPED MASS MARKET - ONE MODEL T
D. LIMITED PRODUCT DIFFERENTATION
E. MFG. DISTINCTIVE COMPETENCE -
STANDARDIZATION OF QUALITY COMPONENT PARTS FOR EASY
AND CHEAP ASSEMBLY
BROAD DIFFERENTIATION OF PRODUCT

DECENTRALIZATION - PROFIT CENTERS

FIVE DIVISIONS - FIVE MARKET SEGMENTS

CUSTOMER COULD UPGRADE WITHIN G.M. CHEVROLET,
PONTIAC, OLDSMOBILE, BUICK, AND CADILLAC

MASS PRODUCTION
THE G.M. CASE
SYNOPSIS
2. ALFRED P. SLOAN STRATEGY
THE G.M. CASE SYNOPSIS
VERTICAL INTEGRATION CARRIED TOO FAR - 60%

TRANSFER PRICING PROBLEMS - CORPORATE CONTROL

HIGH COST - POOR QUALITY
PRODUCT DIFFERENTIATION BETWEEN DIVISIONS BECAME
EXCESSIVE - DISTRUCTIVE COMPETITION

ROI DECLINED
TOO MANY MODELS AND PLATFORMS

3. DEVELOPING PROBLEMS AT G.M.
THE G.M. CASE
SYNOPSIS
SMALL CARS - G.M. LITTLE EXPERIENCE

LEAN PRODUCTION - LOW COST

HIGH QUALITY

G.M. EUROPEAN DIVISION HAD THESE SKILLS BUT COULD NOT
TRANSFER THEM TO U.S.

4. OIL CRISIS AND JAPANESE COMPETITION
THE G.M. CASE
SYNOPSIS
AN ATTEMPT TO REDUCE COST, INCREASE QUALITY, AND
IMPROVE CUSTOMER RESPONSIVENESS
FUNCTIONAL - LEVEL STRATEGY
$50 BILLION INVESTMENT
AUTOMATION AND ROBOTICS - PEOPLE IGNORED
TOYOTA NUMMI JOINT VENTURE - LEAN PRODUCTION
SATURN PROJECT

5. ROGER SMITH ERA - 1980S
THE G.M. CASE
SYNOPSIS
BUSINESS - LEVEL STRATEGY

80 MODELS AND 15 PLATFORMS
REDUCTION OF MODELS AND PLATFORMS
CONSOLIDATION OF FUNCTIONAL ACTIVITIES
LOST ITS DIFFERENTIATION - DIVISION MODELS ALL
BEGAN TO LOOK ALIKE
DIVISIONS LOST THEIR AUTONOMY
5. ROGER SMITH ERA - 1980S CONT.
THE G.M. CASE SYNOPSIS
CORPORATE - LEVEL STRATEGY

COSTS REDUCED BUT STILL TOO HIGH: $1,800 - $600

REDUCED LEVEL OF VERTICAL INTEGRATION - MORE
OUTSOURCING.

PURCHASED EDS AND HUGHES AIRCRAFT WITHOUT MUCH
SYNERGISTIC EFFECT.
5. ROGER SMITH ERA - 1980S CONT.
THE G.M. CASE SYNOPSIS
CORPORATE - LEVEL STRATEGY

CAR DIVISIONS DIVIDED AND COMBINED INTO TWO BUSINESS
GROUPS: CPC (SMALL CARS) - CHEV AND PONTIAC AND BOC
(LARGE CARS) - BUICK, OLDS, AND CADILLAC

DID NOT WORK: COSTS STILL HIGH, LACK OF
DIFFERENTIATION AMONG MODELS, DIVISIONS LOST
AUTONOMY

5. ROGER SMITH ERA - 1980S CONT.
G.M. CASE ISSUES
Leadership, Vision, And Mission: Focus
Technology Vs. People
Profit Vs. Market Share
Financial Considerations
Competition: Quality, Cost, And Product Differentiation
Vertical Integration Vs. Outsourcing
Strategy - Structure Link
EDS And Hughes Aircraft
The Oldsmobile division
THE G.M. VISION
GMs vision is to be the world leader
in transportation products and
related services. We will earn our
customers enthusiasm through
continuous improvement driven by
the integrity, teamwork, and innovation
of GM people.
G.M. CASE
MISSION STATEMENT

G.M. is a multinational corporation engaged
in socially responsible operations, worldwide.
It is dedicated to provide products and
services of such quality that our customers will
receive superior value while our employees
and business partners will share in our success
and our stock-holders will receive a sustained
superior return on their investment.

G.M. OBJECTIVES
BECOME PROFITABLE
SATISFY CUSTOMERS
WITH BETTER
PRODUCTS
GROW THE BUSINESS IN
FUTURE YEARS
G. M. SWOT ANALYSIS
STRENGTHS

SIZE AND MARKET SHARE
TECHNOLOGY POTENTIAL
NEW LEADERSHIP
QUALITY IMPROVEMENT AND PERCEPTION
THEREOF
MODEL ACCEPTANCE HAS IMPROVED
BENEFITS DERIVED FROM A NEW STRATEGY -
STRUCTURE APPORACH AND RELATIONSHIP.
G. M. SWOT ANALYSIS
WEAKNESSES

Failure To Make Technology Work

Too Much Vertical Integration

Bureaucratic Culture

Relationship With UAW

Relationship Of Strategy To Structure
G. M. SWOT ANALYSIS
WEAKNESSES cont.

Product Design Problems - Public Acceptance And
Reduction Of Cycle Time

Market Share And Profitability

Negative Effects Of Downsizing

Still Much To Learn About Lean Production - High Cost
Producer

Hughes Aircraft Situation
G. M. SWOT ANALYSIS
OPPORTUNITIES

USE OF KNOWLEDGE GAINED FROM SATURN
EXPERINCE AND TOYOTA (NUMMI) JOINT
VENTURE.
EXPANSION OF THEIR GLOBAL PRESENCE - THEIR
OWN EUROPEAN MODEL OPERATON AS AN
EXAMPLE.
CONTINUE TO BUILD ON THE NEWFOUND
CUSTOMER CONFIDENCE.
CHANGING CONSUMER DEMAND FOR NEW MODEL
TYPES AND STYLES - EXPANSION AND
LEADERSHIP.

G. M. SWOT ANALYSIS
THREATS
DOMESTIC AND FOREIGN COMPETITION

U.S. FEDERAL LEGISLATION AND REGULATION

CONSUMER LAWSUITS

FOREIGN LEGISLATION AND REGULATION

DECLINING QUALITY OF THE INFASTRUCTURE IN
THIS COUNTRY

DECLINING VALUE OF JAPANESE YEN
G. M. SWOT ANALYSIS
INDUSTRY ANALYSIS

MATURE

PRODUCT SEGMENTATION BY PRICE AND FUNCTION


TECHNOLOGY CHANGING IN MFG. PROCESS AND
PRODUCT DESIGN

OVERCAPACITY WORLDWIDE
G. M. SWOT ANALYSIS
INDUSTRY ANALYSIS

MEGADEALERS AND AUTO SUPERMARKETS

WORLDWIDE DEMAND - STAGNATION - DECLINE

MUST BE WORLD CLASS IN EVERY RESPECT - PRODUCT,
MFG. OPERATIONS, FINANCING, AND DISTRIBUTION
1992
RATIO ANALYSIS INDUSTRY G.M. COMMENTS

Current Ratio 1.4 1.1 Low

Quick Ratio 0.7 1.0 OK

Inventory Turnover 6.5 11.2 Good

Debt Ratio 64.5 96.7 Poor

ROA 4.6 0 Poor

ROE 6.6 0 Poor
COMPETITOR ANALYSIS
Cost - G.M. too high
Quality - G.M. marginal, competition continues to
improve
Styling - G.M. must watch
Product line and segmentation - price and function -
G.M. OK
Suppliers - G.M. too vertically integrated
Buyers - sport utility and pick-ups
New entrants - not likely a threat
STRATEGIC CHOICE
G.M. has been through some difficult times the
past 10 years or so and appears to have learned
some hard lessons. Based on these lessons G.M.
has begun to adopt a strategy of restoring
profitability to its North American operations, by
aggressive marketing, redesigned products,
decentralized MGT style, and a profit rather than
a market share goal.
RECOMMENDATIONS
Dropping Unsuccessful Product Lines

Trimming Its Product Line

Reduce the Number of Basic Platforms

Standardizing Component Parts Across Models

Reducing the Number of Parts Needed to Produce a Car

CUT COSTS BY:
RECOMMENDATIONS

Streamlining Operations by Consolidations Within the
Corporation

Decentralizing Decision Making

Integration of It Design & MFG Activities

Better Managing Its Supplier Relationships
CUT COSTS BY: cont
RECOMMENDATIONS
Focus resources on core products, cars, & trucks .
Realignment of organizational structure to support core products
and meet costs & quality goals.
Example: self managed creative work teams to figure out how to
speed-up product development & improve product development.

Implement common systems & processes where possible.
Balance needs of employees and unions with needs of the
company.

GM UP-DATE

MADE A PROFIT EVERY YEAR SINCE 1993
% OF THE MARKET APPROX. 30%
CONTINUE TO DOWNSIZE AND CUT COSTS
STILL HAVE SOME UNION PROBLEMS
HAVE REORGANIZED TOP MANAGEMENT
OUT-SOURCING MORE-VERTICAL INTEGRATION
DECREASING
INCREASING OVERSEAS OPERATIONS - EAST EUROPE,
RUSSIA, ASIA, AND SOUTH AMERICA
GM 1998 UP-DATE
GENERAL STRIKE DURING SUMMER 1998

ESTIMATED EARNINGS DOWN 20%

REORGANIZATION - MERGING ITS NORTH
AMERICAN AND EUROPEAN OPERATIONS UNDER
A SINGLE PRESIDENT WITH GLOBAL
RESPONSIBILITIES (RICHARD WAGONER, JR., 45)
COMBINED SALES OF $135 BILLION
GM 1998 UP-DATE cont


THERE ARE NOW FOUR REGIONAL DIVISIONS -
NORTH AMERICA, EUROPE, ASIA, AND LATIN
AMERICA

CHAIRMAN AND CEO JOHN (JACK) F. SMITH, JR.
MAY NOT BE THE MAN TO FIX G.M.

SPINNING OFF DELPHI AS AN INDEPENDENT
COMPANY
GM 1998 UP-DATE cont

COST CUTTING MEASURES--OPERATION
YELLOWSTONE--SMALL CARS--LOSING $1000 PER
CAR--SUPPLIERS WILL CODESIGN AND USE
MODULARITY

NEW PLANTS WILL BE HALF THE SIZE OF THE OLD
PLANTS AND COST ABOUT $300 MILLION

MORE ALUMINUM WILL BE USED TO KEEP THE
WEIGHT DOWN IN THE FUTURE
GM 1999 UP-DATE
1998 SALES $161.3 BILLION
1998 NET INCOME ALMOST $3.0 BILLION
EST. 1999 SALES $176.6 BILLION
EST. 1999 NET INCOME $6.0 BILLION

OUTSIDE NORTH AMERICA
1) CADILLAC 2) CHEVROLET 3) GMC
4) HOLDEN 5) ISUZU(49%) 6) OPEL
7) SAAB (50% - 100%) 8) VAUXHALL
9) NUMMI JOINT VENTURE WITH TOYOTA




GM 1999 UP-DATE cont
MARKET SHARE DOWN TO 30%

INVESTED IN OVERSEAS PLANTS IN BRAZIL,
CHINA, INDIA, POLAND, RUSSIA, THAILAND

SEEKING A 10% MARKET SHARE IN ASIA

SEEKING BROADER TIES WITH HONDA,
DAEWOO, AND SUBARU

GM 2000 UP-DATE
RICK WAGONER NEW CEO
JACK SMITH STILL CHAIRMAN OF THE
BOARD
JOHN SMALE, FORMER CEO OF P&G,
RETIRED FROM GM BOARD AFTER 19
YEARS(1982)
GM 2000 UP-DATE cont
US MARKET SHARE DOWN TO 28%
PURCHASED A 20% SHARE IN FIAT AUTO
OF ITALY
GM PUSHING SUVs AND TRUCKS
OLDS-ALL RELATIVELY NEW MODELS-
STILL SUFFERING LOW SALES
2001 G.M. Update
G.M. paid $600 million to double its stake in Suzuki to
20%
G.M. paid $340 million on a joint venture with Auto
VAZ (Russias biggest automaker) to build 75,000
SUVs a year
G.M. made a $400 million deal to take over many
assets of Daewoo Motors(Korean Automaker). This
gives G.M. a 67% stake in Daewoo.
2001 G.M. Update (Contd)
G.M. is working on a deal to combine Hughes
Electronics (and Direct TV) with Rupert
Murdochs news corporation, Echostar (no. 2
U.S. satellite TV business).
G.M. plans to discontinue the following
models:Camero and Firebird as well as the Olds
line.

2002 UP-DATE
MARKET SHARE INCREASED FOR THE SECOND STRAIGHT YEAR.
FIRST TIME THIS HAS HAPPENED SINCE 1976.
2000 27.8%
2001 28.1%
2002 28.4%

LAST YEAR GM POSTED ITS FIRST MARKET-SHARE GAIN SINCE
1987.

MUCH OF GMS GAIN CAME AT THE EXPENSE OF FORD. FORDS
TRADITIONAL BRANDS WERE DOWN NEARLY 9 PERCENT.
CHRYSLER GROUP SALES WERE DOWN ABOUT 3 PERCENT.

2002 UP-DATE (contd.)
CADILLAC SALES INCREASED 16%

CHEVY BECAUSE OF THE SUBURBAN AND SOME OTHER
TRUCKS IS THE LARGEST SELLING BRAND OF VEHICLES THAT
COST $30,000 OR MORE

OTHER BEST SELLERS
1. TRUCKS FORD F-150 SERIES (TOP SELLING VEHICLE IN US.)
2. SUV FORD EXPLORER
3. TOYOTA CAMERY NO. 1 & HONDA ACCORD NO. 2 CARS
4. TOYOTA 1.8 MILLION UNIT SALES, BEST
YEAR YET (45 YRS.). LEXUS WAS THE
MOST POPULAR LUXURY BRAND.