GENERAL MOTORS REASONS TO FAILURE

1. UNSUCCESSFUL LINES OF AUTOMOBILES

General Motors has produced some stellar cars. The Corvette, Pontiac
GTO, Camaro and Trans Am also manufactured some less-than-stellar automobiles such
as Chevy Vega. By the end of 1972, GM would issue recalls for over 500,000 Vegas to
cover defective axles, sticky throttles, and electrical issues that could cause a fire. GM had
a long and dismal history of losing cash flow in the low-price market segment, a legacy of
marketing a long series of cars of frequently poor quality and reliability (Chevrolet Corvair,
Chevette, and Vega. (Lucerne, Motors, & Hid, 2017)

2. STAGGERING LEGACY COSTS

General Motors was straddled with the 'legacy costs' of providing healthcare and
pensions to a host of retired workers, which cost GM millions of dollars every single year.
For a long time, GM was praised for providing health care coverage and generous pensions
to retired employees. When business was good, they were revered for their generosity.
However, once they could no longer afford these payments, investors were not as happy
with the choice. These obligations were beginning to eat away at the company. If they
foresaw the sudden financial crisis, they would probably never have agreed to these terms.
These costs translated to a couple thousand dollars a car, which of course was passed along
to the consumer. (Santhanam, Navethitha; TJ Kamalanabhan; Dyaram, 2013)

3. LOSS OF INNOVATION AND SHODDY MANAGEMENT

The innovative spirit was the driving force behind GM’s success for over a century.
New management entered the picture and ended up turning the company into
a bureaucratic mess. They failed to be proactive when deciding what the best financial
decisions for the organization were. Uncompetitive vehicles were poorly designed and
expense in cost. As a result, fewer customers purchased GM vehicles. They were more
focused on numbers than the quality products and new ideas that had made GM successful
in the first place. (Grünig, Queloz, Duò, & Sieber, 2009)
 4. FUEL ECONOMY STANDARDS

Federal fuel economy standards, especially the Corporate Average Fuel Economy
(CAFE) regulations, played a role in GM's demise. In 1975, Congress passed the Energy
Policy Conservation Act, which established fuel efficiency standards for cars, setting
standards for the average fuel economy of an automaker's entire fleet of cars. GM focus on
less fuel efficient cars and trucks. However, with the new fuel efficiency standards, GM
had to make a certain number of fuel-efficient cars in order to balance out the larger, less-
fuel-efficient ones. So GM cranked out these smaller cars at a loss so that they could
continue to produce the larger more profitable ones. Many customers wanted to
purchase greener fuel-efficient cars such as hybrids, but GM did not place much emphasis
on those lines

5. FAILED TO IGNORE COMPETITORS

Management failed to ignore competition. Over 64% of the businesses surveyed in the
Marketing category failed because of owners minimizing the importance of properly
promoting their business followed by ignoring their competition. GM management failure
to innovate failed in adjustments to change. For a long time, GM was one of a few key
players in an oligopoly industry. As a result, they failed to respond to new players in the
global marketplace. With the rise of the Japanese automakers (especially Toyota) in the
1980s, GM began to be threatened. The lack of a clear plan to respond to competition from
auto manufacturers in Japan and Europe resulted in significant losses in GM’s market
share. (Santhanam, Navethitha; TJ Kamalanabhan; Dyaram, 2013)

AVOIDANCE PLAN TO SUCCESS

1. KNOW YOUR COMPETITOR’S

GM management failed to ignore competition. Competition is any organizations fear.

Over 64% of the businesses surveyed in the Marketing category failed because of owners
minimizing the importance of properly promoting their business followed by ignoring their
competition. Management failing to unselectively research competitors will lead to
business failure.

2. FOLLOW CONSUMER AND ECONOMIC TRENDS

GM closed its eyes to changes in the environment it did business in when it ignored the
fact that customers didn’t want to pay for large gas guzzlers. Other companies have made
similar mistakes in different capacities. Before you invest in a company, you should also
ask yourself how they are responding to technological and economic changes in the
environment. Established companies like GM often turn a blind eye to these patterns and
feel that they are immune to their effects. (Pocarovsky, 2012)

3. DISCONTINUATION OF LESS PROFITABLE MODELS

GM has announced plans to discontinue many lines that have not been profitable over
the past years. These lines include Saturn, Hummer, and Saab. Many of these models have
been sold to foreign companies such as Sichuan Tengzhong Heavy Industrial Machinery
Company and Koenigsegg Automotive AB. Focusing on more profitable lines should help
ensure GM has a better future.

4. TRANSFER TO A GREENER COMPANY

Since President Obama declared that GM was to become a greener company with a
focus on hybrids, fuel cells, and other clean technologies, GM stated that its future was
going to be in fuel cells (Pocarovsky, 2012). It seems as though GM is living up to its word
to turn itself around and become a greener company.

5. HIRE MORE RESPONSIBLE MANAGERS OR EMPLOYERS WHOM CAN

FORESEE AND TAKE DYNAMIC ACTIONS

Leadership is all about taking initiative, taking action, getting things done, and making
decisions. This is one of the most important changes, as the previous management team
was held responsible for the misfortunes of the old General Motors. The main issue that
was the most efficient problem was the management inability to foresee and take dynamic
action to change. Organizations change in better interest of the customers. Management
has to be proactive when deciding on what changes requires active action. Failure to adapt
to a positive change will lead the organization to an unsuccessful path. Therefore, if
organizational performance changes negatively, the impact of the organization will fail.

REFERENCE

Grünig, C. R., Queloz, V., Duò, A., & Sieber, T. N. (2009). [ No Title ]. Mycological
Research, 113(2), 207–221.

Lucerne, B., Motors, G., & Hid, A. (2017). General Motors collision avoidance features,
34(6), 1–18.

Pocarovsky, J. (2012). The Case of General Motors, 94–152.

https://doi.org/10.1016/j.eururo.2012.04.022

Santhanam, Navethitha; TJ Kamalanabhan; Dyaram, L. (2013). Examining the moderating

effects of organizational identification between human resource practices and
employee turnover intention in Indian hospitality industry. Journal of Chemical
Information and Modeling, 53(9), 1689–1699. https://doi.org/10.5176/2010-4804