Table of Contents

Introduction ................................................................................................................................1
American Automobile Industry ................................................................................................1
History of General Motor ........................................................................................................2
General Motors Timeline ........................................................................................................3
Objectives ...............................................................................................................................4
External Environment Analysis ....................................................................................................5
Global Financial Crisis ..............................................................................................................5
Price of Fuel & Gas ..................................................................................................................5
Mega Competitive Market.......................................................................................................5
Bankruptcy of Supplier ............................................................................................................5
Global Car Sales .......................................................................................................................6
Porters Five Forces Model ......................................................................................................6
Strategic Group Mapping ........................................................................................................8
Internal Environment Analysis .....................................................................................................9
SWOT Analysis of General Motors .........................................................................................11
External and Internal Factors that contributed to GMs Decline ................................................12
Present State of the New Smaller General Motor ......................................................................14
GMs failure or its competitors enormous success that brought about GMs demise ...............15
Conclusion ................................................................................................................................16
Recommendation ......................................................................................................................17
References ................................................................................................................................18


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Introduction
Am erican Autom obile Industry
The Automotive Industry in the USA began in the 1890s and, as a result of the size of the domestic
market and the use of mass-production, rapidly evolved into the largest in the world. However,
the United States was overtaken as the largest automobile producer by Japan in the 1980s, and
subsequently by China in 2008. The U.S. is currently second among the largest manufacturer in
the world by volume, with approximately 8-10 million vehicles are manufactured annually.
Notable exceptions were 5.7 million automobiles manufactured in 2009 (due to crisis), and peak
production levels of 13-15 million units during the 1970s and early 2000s. The motor vehicle
industry began with hundreds of manufacturers, but by the end of the 1920s it was dominated
by three large companies: General Motors, Ford, and Chrysler. After the Great Depression and
World War II, these companies continued to prosper, and the U.S. produced nearly three quarters
of all automobiles in the world by 1950 (8,005,859 of 10,577,426). Beginning in the 1970s, a
combination of high oil prices and increased competition from foreign auto manufacturers
severely affected these companies. In the ensuing years, the companies periodically bounced
back, but by 2008 the industry was in turmoil due to the aforementioned crisis. As a result,
General Motors and Chrysler filed for bankruptcy reorganization and were bailed out with loans
and investments from the federal government. Prior to the 1980s, most manufacturing facilities
were owned by the Big Three (GM, Ford, Chrysler) and AMC. Their US market share has dropped
steadily as numerous foreign-owned car companies have built factories in the USA.

Figure: Market Share of the Major players in the US automobile industry


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History of General M otor
General Motor (GM) was once the largest and most profitable car manufacturing company in the
world, and was dominant in the car industry for more than half a century. It was founded by
Willam Durant in 1908, and has its headquarters in Detroit, Michigan. In 1909, Durant brought in
five more car companies, including Cadillac and Oakland, the latter of which would eventually
become Pontiac, and two commercial truck companies (Reliance Motor Truck and Rapid Motor
Vehicle) which would be the predecessors of GMC Truck. In 1925 the English company Vauxhall
Motors joined the fold, and four years after that GM bought an 80% stake in Germany's Adam
Opel AG. This was increased to a 100% stake in 1931. During the same time period (the late
1920's), GM, surpassed Ford Motor Company's sales figures, largely by paying attention to new
management techniques and to listening to customer demands and offering power, prestige, and
style, instead of the cheapest model, and they also created a finance plan which help consumers
in buying a new car with affordable monthly payments.
While General Motors continued to succeed through the 1970's, the 1980's saw the company
under the controversial leadership of Roger B. Smith, who was full of good intentions that never
seemed to work out. For the first time since the 1920's the company was losing money mainly
to foreign companies with better quality and production practices. Smith tried to incorporate the
Japanese methods into GM's corporate culture by forming joint ventures with Toyota (NUMMI)
in California and with Suzuki (CAMI) in Canada, but corporate politics and bureaucracy prevented
any success. He also launched the Saturn Corporation as a corporate experiment using Japanese
methods in a strictly GM environment. While NUMMI, CAMI, and Saturn remained successful,
neither effort was enough to turn the company around.
In 1998, GM's Massive layoffs triggered a seven-week auto workers strike, which made the
national news because of GM's long history and position within the American economy. GM
managed to fully fund its pension fund, but other benefits suffered, and the company began
offering buyouts which were accepted by more than 35,000 hourly workers. By 2006 GM's stock
was rising once again, though it began the year at $19 a share, and despite conjecture that the
company was headed for bankruptcy court, and another strike by the UAW in 2007, the company
is still afloat, though it did fall to 2nd place (behind Toyota) in the list of world's largest
automakers for a few months.
Today, GM remains a large automaker in the world, but many of its original brands are no longer
being marketed. On June 8, 2009, GM was reorganized by bankruptcy protection under the
provisions of Chapter 11, Title 11, United States Code. On July 10, 2009, with financing partially
provided by the US Government, General Motors emerged from reorganization and was re-listed
on major stock exchanges on November 18, 2010. The current list includes Buick, Cadillac,
Chevrolet, GMC, Holden (Australia, New Zealand), Opel (Europe, Middle East, Africa, Asia, Chile),
Vauxhall (UK), and Daewoo (South Korea and Vietnam).

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General M otors Tim eline
Year Event
1908 GM founded in Flint, Michigan.
1921 GM accounts for 12 percent of U.S. car market.
1937 After a bitter strike, GM recognizes the United Auto Workers (UAW) as the
bargaining representative for its hourly workers.
1954 GM's U.S. market share reaches 54 percent. Company makes 50 millionth car.
1971 GM buys 34.2 percent of Isuzu Motors Ltd. GM raises stake to 49 percent in
1998 and later sells it.
1979 GM's U.S. employment peaks at 618,365, making it the largest private
employer in the country. Worldwide employment is 853,000. Decade features
sales decline, recession, Arab oil embargo and gains by Japanese automakers.
1999 GM buys 20% of Subaru-maker Fuji Heavy Industries Ltd. GM later sells all of
the stake.
2007 GM signs deal with the UAW, which includes shifting GM's retiree health care
liabilities to an independent trust.
July 2008 GM announces plans to cut costs by $10 billion and raise $5 billion through
borrowing and asset sales.
Nov 2008 GM warns its liquidity will fall short of the minimum needed to run its business
by the first half of 2009.
Dec 2008 GM seeks U.S. government aid of up to $18 billion. GM and Chrysler granted
$17.4 billion in government loans.
Jan 2009 Toyota Motor Corp surpasses GM as the world's largest automaker for the
first time.
Feb 5, 2009 GM announces plan to slash its global salaried workforce by about 10,000, or
14 percent, and cut the pay of most remaining white collar U.S. workers.
Feb 17, 2009 GM raises U.S. funding request to a total of $30 billion, announces plans to
cut global workforce by 47,000 and close five U.S. plants by 2012.
Mar 30, 2009 President Barack Obama, a day after firing CEO Rick Wagoner, tells GM it
hasn't done enough to restructure and gives the company until June 1 to make
aggressive cuts.
April 27, 2009 GM asks 90 percent of its bondholders to participate in a debt-for-equity swap
to rid the company of $24 billion by giving them 225 shares for every $1,000
in bond for a combined 10 percent stake in the company.
May 26, 2009 United Auto Workers agrees to job cuts, 14 plant closures and a 20 percent
equity stake in the company to cover retiree health care costs.
June 1, 2009 GM files for Chapter 11 bankruptcy protection in a deal that will give taxpayers
a 60 percent ownership stake and expand the government's reach into big
business. It's the fourth-largest bankruptcy filing in U.S. history, and the
largest for an industrial company. The company said it has $172.81 billion in
debt and $82.29 billion in assets.


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Objectives
The main objectives of this case study report is to find out the following questions with a brief
external and internal environment analysis.
Critically analyze the internal and external factors that contributed GMs decline and
eventual bankruptcy protection application.

Discuss the latest state of the new (smaller) GM.

Critically analyze whether it was GMs fault or its competitors enormous success in cost
savings and innovation that brought GMs demise.


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External Environm ent Analysis
External environment analysis is very important for a company for its current business strategy
and future growth. Through external environment analysis, a company can learn about the global
economic and financial condition, customer preferences, its major competitors, market leader,
and its opportunities for growth and potential threats. We have briefly analyzed the external
environment of the US automobile industry where General Motor operates. The external
environment includes all relevant factors and influences outside the boundary of the company,
such as:
Global Financial Crisis
The global economic recession of 2008-2009 was a major factor that influenced the performance
of the automobile companies in the US market. Stiglitz (2010) defined that struggling US market
as a toxic combination of low liquidity, low interest rates, a global real estate bubble, and
skyrocketing subprime lending. The unemployment rate in US had jumped from 5%in 2007 to
10.1% in 2009. There was high fiscal and trade deficit in the US economy and of US mortgage
market and credit market collapsed. Due to this global economic crisis, consumer preference of
big sized luxury cars was replaced by less expensive cars.
Price of Fuel & Gas
Since 1980s, the price of fuel and gas are constantly increasing all over the world and this highly
affected the consumer choice favoring fuel efficient cars over less fuel efficient ones.
M ega Com petitive M arket
Since 1960s, Japanese auto makers like Toyota, Honda started entering the US market and made
the vehicle industry more competitive. In the early 1980s, Toyota started to gain serious ground
in the US market because of its lower manufacturing cost, lower production time and more fuel-
efficient vehicles compared to its major competitors. In 2008, Toyota overtook GM after Toyota
achieved 2.35 million of vehicles sales in the first quarter of 2007 (Hawkes 2007).
Bankruptcy of Supplier
Delphi Corp had been the biggest automotive parts supplier for General Motor. GM was heavily
dependent on its supplies in order to keep its factories up and running. However during the global
economic recession, the business of Delphi Corp was badly affected and in 2005m it was forced
to file for bankruptcy protection.

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Global Car Sales
After the global financial crisis, the car sales dropped drastically all over the world. In the US, the
world's largest auto market, the car sales dropped to the lowest level in 30 years. Before the
economic recession, US market had an average of 16 to 17 million vehicle sales per year for most
of the decade, but after the recession, the US auto sales dropped to 13 million in 2008 (White
2009). Furthermore, consumers became more interested for more fuel-efficient vehicles instead
of luxury fuel expensive ones. In foreign markets - and especially in Asian markets the traditional
big size and fuel-consuming vehicles were not suited either.
Porters Five Forces M odel
The competitive structure of an industry is another important component of identifying factors
that are a threat to diminish profitability. One of the most efficient ways to assess competitive
issues is to consider Porter's five-force analysis. Porter has highlighted five such factors:
1. Rivalry with existing competitors
2. Threat of entry by new competitors
3. Threat from substitute products
4. Bargaining power of buyers
5. Bargaining power of suppliers



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Rivalry w ith Existing Com petitors
With the rise of foreign competitors like Toyota, Honda and Nissan in the 1970's and 80's, rivalry
in the American auto industry has become much more intense. The price competition erodes
profits by drawing down price-cost margins while non-price competition drives up fixed cost and
marginal cost. One of the other reasons there is such high rivalry is that all the companies make
cars, trucks or SUVs.
Threat of entry by New Com petitors
The presence of new firms in an industry may force prices down and put pressure on profits.
There are, however, barriers to entry that tend to protect established firms. Entry in the
automobile industry requires a large capital investment for any new firm to setup factories and
R&D facilities, which is a substantial barrier to entry.
Threat from Substitute Products
Rising fuel prices and decreasing purchasing power causes automobile consumers to reconsider
their transportation options. Although automobiles still tend to be the preferred method of
transportation in many areas, the threat of substitutes is increasing due to the global economic
recession and constant rise of fuel prices. Substitutes for standard automobiles include bicycles,
walking, public transportation such as bus and train services, and even energy-efficient vehicles
including hybrid and electric automobiles. In general, the threat from these substitute products
in the US automobile industry is still weak to moderate.
Bargaining Pow er of Buyers
Buyer power refers to the ability of individual customers to negotiate prices that extract profit
from the seller. Individual consumers have some influence over price within a given dealership,
but little power over manufacturers. Customers can easily, and with little cost, switch to other
auto dealers. Furthermore, customers now have access to market information (prices and costs)
from the Internet that enhances their negotiating power. But when you have many individual
customers, each representing a small proportion of total sales, they will have little bargaining
power with manufacturers and therefore pose a weak threat to industry profit.
Bargaining Pow er of Suppliers
Auto manufacturers require inputs-labor, parts, raw materials and services. The cost of these
inputs can have a significant effect on profitability. Nevertheless, the United Auto Workers
(UAW), the only supplier of labor, has historically exerted a great deal of leverage over the
benefits and wages provided by the big three. The uncertain results of their current negotiations
with the big three, one has to characterize supplier power, a strong threat to profits.


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Strategic Group M apping

From this strategic group mapping of the world auto mobile industry, we can see that, Hyundai
and Kia have very limited product lines with low price. Ferrari, Lamborghini and Porsche also have
limited product lines, but their price range is the highest targeting only the luxury market.
Marcedes and BMW are in the premium category. General Motors have very good number of
product lines, where Toyota, Ford, Honda and Chrysler are GMs major competitors.


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Internal Environm ent Analysis
Internal environment analysis involves identifying the business' strengths and weaknesses, by
analyzing its competencies. It also involves highlighting the business' competitive advantage. For
strategies to be effective, the organization must exploit and expand on its strengths, as well as
reduce or eliminate its weaknesses; thus furthering its competitive advantage, in order to achieve
profitability. Now we are going to analyze different components and parts of General Motors
internal environment.
Skilled Hum an Resources
General Motor has more than 200,000 workers working from six continents, they speak more
than 50 languages and touch 23 time zones. GM also has more than 21,000 dealers, who are
also important members of the team, and are integral to its business.
Global Presence
From electric and mini-cars to heavy-duty full-size trucks, minicabs and convertibles, General
Motors dynamic brands offer a comprehensive range of vehicles in more than 120 countries
around the world. GM also has a major joint ventures in China.
Brand Value
General Motor (GM) was once the largest and most profitable car manufacturing company in the
world, and was dominant in the car industry for more than half a century. After the global
economic recession, its business dropped, however it still possesses a strong brand value as one
of the top car manufacturers in the US automobile industry.
Strong Know ledge of US m arket
General Motor has been doing its business in the US automobile market for more than a century.
So it has a very strong knowledge about the US automobile market.
Strong R& D Centers
General Motor had a very strong R&D units, because of which it could manufacture lots of
different types of vehicles and lead the US market for more than half a century. Currently it has
8 major R&D labs: Chemical Sciences & Materials Systems Lab, Electrical & Controls Integration
Lab, Operations Research Lab, Propulsion Systems Research Lab, Vehicle Development Research
Lab, Manufacturing Systems Research Lab, Electrochemical Energy Research Lab and GM
Advanced Technology Silicon Valley Office.


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Em ploym ent Benefits
GM is a benefit-paying organization masking itself as an auto dealer, Donald Coxe, chairman of
Coxe Advisors LLC. General Motors used to pay higher wages, higher pensions and higher medical
benefits to its workers. GM paid an average of 35 USD for each employees pension and medical
benefits compared to its major competitor Toyotas 11 USD for the same benefits. GM's annual
pension obligation was as high as 119 billion USD and healthcare benefit cost was as high as 64
billion USD (Loomis 2006). Moreover, General Motor had a long term contract with the United
Auto Workers (UAW) union to pay generous wages, pension and health care.
Product Lines
General Motor had always been the pioneer for creating new styles of vehicles which met market
needs. For example, GM introduced the first tailfins in 1948, more sharp-edged vehicles in 1959,
implemented emission controls for the first time in 1975 (The New York Times 2009). GM had
mainly relied on SUVs, trucks and expensive big sized cars for the majority of their profits.
However since 1980s, the demand for these expensive vehicles started to drop very quickly, as
customers started opting for low cost smaller sized cars.
M anufacturing Cost and Tim e
The vehicle manufacturing cost of General Motor was around 50%higher than its major
competitors. This higher manufacturing cost is mostly contributed by its high fixed cost.
Moreover, GMs manufacturing time per vehicle of 34.3 hours was worse than Toyotas 27.9
hours.
Innovative Designs
General Motor had been the pioneer of various new styles of vehicles. Since 1980s GM started
lacking in innovation and it was producing many look alike vehicles. For example, a Pontiac
branded car by General Motor used to cost around only 9000 USD whereas a Cadillac branded
car used to cost much higher - 25000 USD. Although it was very difficult to differentiate the design
between these two brands.
Cutting Edge Technology
GM's major competitors, especially the Japanese auto makers, Toyota and Honda, made a good
investment developing hybrid technology to manufacture quality cars at low cost through their
lean manufacturing system . On the other hand, General Motor didnt invest enough money
acquiring cutting-edge technology, rather it invested mostly on acquiring premium car makers
like Saab, Fiat etc.


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SW OT Analysis of General M otors

STRENGTH WEAKNESS

Global presence

Strong knowledge of home market

One of the oldest manufacturers

Large skilled employee base

Government investment

Brand portfolio

High cost structure

Sensitive to fuel prices

Lack of innovation

Poor quality and repetitive designs

Less use of cutting edge technology

Little diversification

Bureaucracy

OPPORTUNITY THREAT

Opportunities in emerging markets

Growing economy of car market

Demand for hybrid electric vehicles

New Vehicle Styles and Models

Global economic recession

Rising fuel prices

Rising raw material supply cost

Strong competition from Japanese
manufacturers

Bankruptcy of Supplier


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External and Internal Factors that contributed to GM s Decline
There are several internal and external factors which contributed to General Motors poor state
of its business and its need for bankruptcy protection application. The factors are critically
analyzed below:
Global Financial Crisis
General motor had been a pioneer of manufacturing expensive and luxury big sized cars. But
after the global economic crisis, consumer preference of big sized luxury cars was replaced by
less expensive economy cars. As a result, GM's sales volume hugely declined.
Price of Fuel & Gas
GMs most of the profitable product lines such as SUVs were fuel expensive vehicles and they
experienced severe sales erosion during the price rise of fuel and gas (Economic Outlook 2008).
M ega Com petitive M arket
US automobile market became highly competitive when Japanese manufactures like Toyota,
Honda entered the US market. GM had higher manufacturing cost, longer production time and
more fuel-expensive larger sized vehicles compared to Toyota. As a result, in 2008, Toyota
overtook GM in the US automobile market.
Bankruptcy of Supplier
GM was heavily dependent on its supplies from its biggest supplier, Delphi Corp. However during
the global economic recession, Delphis bankruptcy increased the risk of costly supply disruptions
and hence added to the financial pressure on General Motor.
Global Car Sales
During the economic recession, as the global car sales dropped drastically all over the world, it
also badly affected the business of General Motor. Furthermore, GM's less fuel-efficient and
luxury cars failed to meet consumer demands due to the popularity of fuel-efficient less
expensive vehicles.
Em ploym ent Benefits
Higher wages, pension and healthcare benefits to workers resulted in a huge fixed cost for
General Motor, which eventually offered a cost advantage to its major competitors like Toyota
and Honda (Hill & Jones 2010; Loomis 2006). It was difficult for GM to lay off or close down the
factory without paying large amount of compensations, because it had a long term contract with
the United Auto Workers (UAW) union.
Innovative Designs
Since 1980s GM lacked in innovative designs and it was producing many look alike vehicles.

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Choice of Product Lines
Since 1980s, customers started opting for low cost smaller sized fuel efficient cars. General Motor
failed to quickly adapt to this market change, rather it kept on manufacturing trucks, SUVs and
expensive cars even though its sales were falling (Maynard & Quinn 2009 & The New York Times
2009).
M anufacturing Cost and Tim e
Japanese car manufacturer, Toyota and Honda had 1300 USD cost advantage per car compared
to General Motor (Hill & Jones 2010; Loomis 2006). Moreover, GMs manufacturing time per
vehicle was higher than Toyotas.
Cutting Edge Technology
GM's major competitors, especially the Japanese auto makers, Toyota and Honda, made a good
investment developing hybrid technology to manufacture quality cars at low cost through their
lean manufacturing system . On the other hand, General Motor didnt invest enough money
acquiring cutting-edge technology.

These are the major factors which contributed to the drastic decline of General Motor in the US
car market. GMs losses were 30.9 billion USD in 2008 and 82 billion USD over the previous four
years. GM could not sell sufficient cars to cover its costs and to conduct its business. This put GM
on the brink of bankruptcy (Vlasic & Bunkley 2009). At the same time, the company's current
assets could not cover its current liabilities.
The continuous deficit cash flow forced GM to take 19 billion USD from US government aid and
9 billion Canadian dollars from Canadian government aid, and in return, GM offered partial
ownership to the US and Canadian governments until it could restructure and reorganize itself to
become a profitable company again.


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Present State of the New Sm aller General M otor
Governm ent Ow ned Com pany
General Motor didnt have any other option than taking loans from US government aid and
Canadian government aid to cover its operational cost for business. As a result, US government
held nearly 62%of the GM through its huge investment of 60 billion USD. The Canadian
government and a United Auto Workers (UAW) union health care trust and bond holders owning
the rest. As a result, General Motor has now become a US government owned automobile
company General Motors Company (New York Times, 18 July 2010). It was even referred to as
Government Motors by some in the USA.
Reorganization and Dow nsizing
When General Motors became a US government owned company, its reorganization process
started. Through this reorganization process, the company was downsized through the sale or
closing of some of its brands which includes Saturn, Hummer and Pontiac. Brands like Chevrolet,
Cadillac and GMC were folded into the newly formed company. General Motor also had to close
down thousands of its dealerships and slim down its sales network.
Cost Reduction
During the reorganization process, General Motors gave high emphasis on the reduction of its
huge cost structure. General Motors laid off its tens of thousands of workers. It also made a new
labor contracts with all the existing workers where it offered less wages, pension and health care
benefits compared to its old contracts in order to slash down its huge fixed cost.
Flatter Organizational Structure
Before reorganization, General Motor used to have hierarchical organizational structure with
many layers of management, each with a narrow span of control. The decision making process
was slower due to bureaucracy. During the reorganization process, General Motors took steps
to shed down the number of management layers to have flatter organizational structure, where
each management layer had wider span of control. This helped General Motors to make decision
faster by eliminating the old bureaucratic environment.
Im proved Financial Condition
In April 2010, GM repaid a government loan of 8.1 billion USD to the US and Canadian
governments, which was five years earlier than its original loan repayment schedule. The
following month, GM reported earned 865 million USD in the first quarter which was its first
profit since 2007. Its annual revenue went up 40%to 31.5 billion USD with a positive cash flow
of 1 billion USD. So, GM is currently in the process of recovery and it is really a positive sign.

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GM s failure or its com petitorsenorm ous success that brought
about GM s dem ise

The General Motor management failed to recognize and address the core problem of GM its
high cost structure. General Motor had a long term contract with the United Auto Workers
(UAW) union to offer higher wages, pensions and medical benefits to its workers compared to
its competitors. Moreover, General Motor had a very high cost for good quality supplies of car
parts from its suppliers. This high cost structure was not a major problem for General Motor
during its high profitability period when it had complete dominance in the US car market. But
after the global financial crisis, when its car sales drastically dropped, GM faced difficulty to
achieve cost cutting and cost savings, because most of its costs were fixed cost.
In general, if sales of a company go down, then the company usually cuts down its operational
and manufacturing costs through layoffs, reductions in material purchases, reductions to
variable costs etc. But in case of General Motor, it was difficult to lay employees off, decrease
the employment benefits or close down the redundant factories without paying huge amount of
compensations due to its long term contract with UAW union (Alam & Majumdar, 2011).
The car manufacturing cost of General Motor was much higher than its major competitors which
was mostly contributed by its high fixed cost (Hill & Jones 2010; Loomis 2006). Most of its
competitors had a lean manufacturing system to produce high quality cars with lower cost, on
the other hand, GM had the mass assembly-line techniques, which was more expensive. This
high manufacturing cost resulted in high price of General Motor cars and other vehicles, which
offered competitive price advantage to its competitors.
GM's competitors were much more successful than GM in terms of cost savings. Its Japanese
competitors continued to generate more than double the cost savings of GM each year (Hill and
Jones, 2010). This shows that, despite GM's improvement in performance, it was still lagging
behind its competitors.
General Motors was also lacking in innovation. Most of its cars started to look similar; they were
fuel expensive, poorly designed and built. On the other hand, GMs major competitors like
Toyota, Honda etc. were continuously manufacturing fuel efficient cars with slicker and more
innovative designs with lower cost. Moreover, General Motor did not invest enough on R&D and
for acquiring cutting edge technology in order to manufacture good quality cars with lower cost.
GM indeed was lacking the know-how of its Japanese competitors on how to efficiently run its
automotive factories in a cost-effective manner (Alam & Majumdar, 2011).
So we can say that, it was more General Motors failure in cost savings and innovation compared
to its competitors which brought about GMs demise.


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Conclusion

General Motor has a long successful story as the number one car maker in the market. However,
as shown throughout this report, since the global economic recession GM faced a number of
strategic issues, because of which it failed to sustain its golden past and had to file for bankruptcy
for restructuring. The strategy that had gained the automaker a wealth of success in the 20
th

century, a car for every purse and purpose, is no longer practical in the current global
marketplace in which it operates. GMs very high cost structure, incorrect choice of product lines,
lack of innovation, no use of cutting edge technology, resistance to quickly adopt with trend
change, in addition to the recent economic recession, led to the firm's state of unpaid debts and
financial failures.
Currently, GM, with the financial help from US government, is trying to restructure its company
to prove to the USA Government, its shareholders, and to the world that it can recover from its
poor financial condition and again succeed. As it stands now, the company is downsizing,
planning to focus on its few core brands, and is eliminating unneeded costs at all possible steps.
And so far, the company is heading towards the right direction. General Motors must continue
with its new strategy; keeping up-to-date with the latest technologies and focus more on todays
consumer demands. Whether the Detroit-born automaker will ever reign again as the largest car
manufacturer in the world is hard to predict, but with the correct measures put into play,
General Motors has a chance of saving its company with the hopes of a brighter, more successful,
and certainly more sustainable future.


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Recom m endation

High cost structure was one of the most important factors which resulted in General Motors
financial failure. GM has already started reducing its high cost, specially its fixed cost. It should
continue its effort for cost savings.
GMs manufacturing cost and time per vehicle is still higher than some of its competitors. It
should develop lean manufacturing system as well as just-in-time supply chain management
system which will eventually enable it to produce high quality cars with lower cost and lower
time.
General Motor should give more focus on the current and future consumer needs and
manufacture cars according to their needs. GM should manufacture various types of Hybrid
vehicles having high performance with low fuel consumptions. This will allow GM to keep up
with the pace of the competitive environment.
GM should give more emphasis on innovative car designs. Different models of their cars should
have different designs instead of similar design. Their cars must stands out from the cars of their
competitors.
General Motor can invest more on R&D and on cutting edge technology to manufacture high
quality futuristic cars based on deep analysis on consumers current and future needs.
GM should have little more diversification in its product lines. It can offer cars and vehicles of
different types, sizes, prices, performance and fuel efficiency. For example, it can offer more
fuel efficient and less expensive cars in the Asian market, whereas, it can offer more high
performance in the US and European market.
The brand image of General Motor was badly affected during its recent financial crisis. GM can
invest more on for their brand promotion using traditional media like TV, newspaper etc. It can
be bit more involved in the social media. GM can also involve more on corporate social
responsibility practices both in-house and in the community.
GM should continue to minimize the number of its management layers to have flatter
organizational structure which will eventually help it in faster decision making by eliminating
bureaucracy.
Nowadays, people all over the world are more concerned about environment. So General Motor
can invest more on environment friendly Green vehicle development.


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References
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