MANAGEMENT FINAL PROJECT GENERAL MOTORS

Background

General Motors Corporation has been in business for 100 years. GM develops, produces and markets cars, trucks and parts worldwide. GM has produced nearly 450 million vehicles globally, and operates in virtually every country in the world. GM also provides automotive financing services through General Motors Financial Company. While over the years GM has enjoyed rapidly growing sales and revenues outside the United States, the US remains GMs largest single market. But due to the recent economic downturn, US auto sales across all manufacturers and specifically as it relates to GM, foreign and domestic have declined by more than 30% which is the largest decline in 50 years. The Auto industry today remains one of Americas top employers with 1 out of 10 American individuals working in the industry and while the drop in auto sales has affected GMs bottom-line, it has also affected the livelihood of the people GM employ as well. These major economic shifts demand a fundamental change in the way GM does business.

Internal Issues
The recent economic conditions have shown that at GM the status quo is no longer enough to remain Americas top automobile brand. The recent crisis has forced GM to look into the future of the automobile industry and contemplate what place GM will have in the evolving automobile market. GMs mission is to be a multinational corporation engaged in socially responsible operations worldwide. GM is dedicated to provide products and services of such quality that our customers will receive superior value while their employees and business partners will share in the success and the stockholders will receive a sustained superior return on their investment. 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 integrity, teamwork and innovation of GM people. GMs vision is also a streamlined brand that represents quality and fuel efficiency through innovative design with utmost respect for quality. GM must also appeal to the modern day environmentally friendly and economical American citizen in order to regain the trust and confidence GM once enjoyed. It is through the rebuilding and strengthening of GMs core business that they can successfully expand not only domestically but multinationally, and share their vision of the new and improved GM to Americans and the entire world.

Organizational Structure
GM's organizational structure is shown below. Daniel Akerson is the Chairman of the Board and he has direct control of the company CEO since 2011. Thomas Stephens is Vice Chairman of the Board and Global Chief Technology Officer (2011) and Stephen Girsky is also Vice Chairman of the Board. There are eleven (11) vice presidents and nine (9) Independent Directors. Their portfolio responsibilities are specified below. Daniel Ammann 2011 Michael Millikin 2011 Mary Barra 2011 Nicholas Cyprus 2009 Terry Kline 2009 Joel Ewanick 2011 Jaime Ardila 2010 Selim Bingol 2010 Timothy Lee Operations 2009 David Reilly 2009 Mark Reuss 2009 Patricia Russo 2010 Independent Lead Director Vice President Global Communications Vice President & President International Vice President, Chief Accounting Officer Vice President, Chief Information Officer Vice President, Global Chief Marketing Officer Vice President & President South America Chief Financial Officer, Senior Vice President Senior Vice President, General Counsel Senior Vice President, Global Product Development

Vice President & President Europe Vice President & President North America

David Bonderman 2009 Erroll Davis 2009 E. Neville Isdell 2009 Robert Krebs 2009
Philip Laskawny 2009 Kathryn Marinello 2009 Carol Stephenson 2009

Independent Director Independent Director Independent Director Independent Director

Independent Director Independent Director Independent Director

Finance
GM's consolidated financial statements for the past three years are shown below. It is important to note that GM's Total Revenue has been steadily declining for the years 2007 2009 but is showing signs of increase in 2010. Gross Profits was positive in 2007 but showed a decline in 2008 and 2009 and again showed increase in 2010.

GM Consolidated Income Statement 2007 2010 (in $ millions)

2010

2009

2008

2007

Total Revenue Gross Profit Operating Income Income Before Tax Income After Tax

135,592.00 16,479.00 5,280.00 5,737.00 5,065.00

104,589.00 -8,079.00 105,943.00 102,493.00 104,659.00

148,979.00 -1,525.00 -21,187.00 -29,471.00 -31,237.00

179,984.00 12,021.00 -4,309.00 -6,346.00 -43,209.00

Net Income Before Extra. Items Net Income

6,172.00 6,172.00

104,821.00 104,821.00

-30,943.00 -30,943.00

-43,091.00 -38,542.00

GM Consolidated Balance Statement 2007 2010 (in $ millions)

2010
Assets Total Current Assets Total Assets Liabilities and Shareholders' Equity Total Current Liabilities Total Liabilities Total Equity Total Liabilities & Shareholders Equity 47,157.00 102,718.00 36,180.00 138,898.00 52,435.00 108,048.00 28,247.00 136,295.00 75,608.00 176,599.00 -85,560.00 91,039.00 0 0 0 0 53,053.00 138,898.00 59,247.00 136,295.00 44,267.00 91,039.00 0 0

2009

2008

20 07

Competitors
GM's top competitors are Ford Motor Company, Toyota Motor Corporation and Chrysler Group LLC. Honda is also a strong rival of GM. A summary of financial comparison is shown below. With the recent downturn of the auto industry in the US with companies such as GM and Chrysler filing for bankruptcy, GM is now using stimulus money from the government to restructure the company. Along with that, GM and other auto companies are developing electric cars as a means of gaining market share in hopes that it will boost the bottom line and jumpstart GMs plan to remain the number one automaker in the world. A synopsis of each of GMs competitor is shown below. Ford Motor Company primarily develops, manufactures, distributes, and services vehicles and parts worldwide. It operates in two sectors, Automotive and Financial Services. The Automotive sector offers vehicles primarily under the Ford and Lincoln brand names. This sector markets cars, trucks, and parts through retail dealers in North America, and through distributors and dealers outside of North America. It also sells cars and trucks to dealers for sale to fleet customers, including daily rental car companies, commercial fleet customers, leasing companies, and governments. The Financial Services sector offers various automotive financing products to and through automotive dealers. It offers retail financing, which includes retail installment contracts for new and used vehicles; direct financing leases; wholesale financing

products that comprise loans to dealers to finance the purchase of vehicle inventory; loans to dealers to finance working capital, purchase real estate dealership, and/or make improvements to dealership facilities; and other financing products, as well as provides insurance services. Ford Motor Company was founded in 1903 and is based in Dearborn, Michigan. Toyota Motor Corporation designs, manufactures, assembles, and sells passenger cars, minivans, and commercial vehicles. It offers conventional engine vehicles, minivehicles, passenger vehicles, commercial vehicles, and auto parts under Toyota brand name; mid-size cars under the Camry, luxury cars under the Lexus and Crown brands; sports cars under the Scion tC and Lexus brands; sport-utility vehicles under the Sequoia, 4Runner, RAV4, Highlander, FJ Cruiser, and Land Cruiser brands; pickup trucks under the Tacoma and Tundra brands. The company also provides hybrid cars under Prius and Crown brands. In addition, Toyota offers a range of financial services comprising retail financing, retail leasing, wholesale financing, and insurance; and credit cards and housing loans. The company was founded in 1933 and is headquartered in Toyota City, Japan. Chrysler hopes its crisis remains in its rearview mirror. The company has engineered an automotive resurrection by choosing a back-to-basics alliance with Fiat. Chrysler continues to manufacture its Chrysler brands, as well as Dodge, Jeep, and Ram vehicles; it will also produce smaller Chrysler-brand cars based on Fiat design and technology. Chrysler's trademarked MOPAR (Motor Parts) division, with its 30% industry market share, carries almost 300,000 parts, options, and accessories for vehicle customization; it is expanding to incorporate Fiat parts. Chrysler sold its GEM (Global Electric Motor Cars) to Polaris in mid-2011. The company was founded by Walter Chrysler on June 6, 1925

GM Direct Competitor Comparison Chrysl GM er

Market Cap: Employees: Qtrly Rev Growth (yoy): Revenue (ttm): Gross Margin (ttm): EBITDA (ttm): Operating Margin (ttm): Net Income (ttm): 46.79B 205,000 15.00% 140.31B 12.66% 12.34B 4.24% 6.95B N/A 516,231 N/A 41.95B1 N/A N/A N/A -652.00M1

Ford
53.02B 164,000 4.90% 130.50B 16.01% 14.72B 7.18% 7.03B

Toyota
132.12B 317,716 -12.10% 235.24B 12.52% 20.36B 2.47% 5.06B

Industry
17.05B 96.04K 7.70% 64.07B 20.02% 9.05B 4.21% N/A

EPS (ttm): P/E (ttm): PEG (5 yr expected): P/S (ttm):

4.18 7.47 0.68 0.33

N/A N/A N/A N/A

1.77 7.89 0.83 0.41

3.22 26.14 1.07 0.56

3.22 7.97 0.83 0.52

External Environment
General Motors is an omnipresent company in the United States, a company so essential to the overall health of the U.S economy that it spawned the phrase as GM goes, so goes the nation. Long known for the manufacturing of cars, trucks and automobiles, General Motors has also engaged in finance and insurance. However, most recently the global recession has had a devastating impact on its, cash flows, financial condition and operations. To survive, the company has had to accept a government bailout plan and its employees the United Autoworkers of America, has also made concessions. A swot analysis of GM is listed below. STRENGTHS

Branding - GM has produced a stable of automobiles such as Chevrolet, Pontiac Cadillac and Buick which have become household names in the U.S. As such, the General Motors Brand is well rooted not only in America but throughout the world. Worldwide Presence GMs international presence is well known with factories in Poland, Russia, South Africa Ecuador, Egypt, Germany, Argentina, Australia, Belgium, Brazil, China, Colombia, South Korea, Spain, Sweden, and Thailand. GM is even in Viet Nam, and in addition, it also has assembly, manufacturing, distribution, office and warehousing operations in 55 other countries.

WEAKNESSES

Diminishing Dealer Network During the bankruptcy, GMs has compiled a list of more than 1,000 dealerships market for closure. GM also announced that it will not renew its franchise agreements with nearly one quarter of its U.S. dealerships. As of December 31, 2008, GM had 715 dealerships in Canada, as recent as May of 2009 plans called for an anywhere from 40 to 200 closures.

Insufficient Liquidity - GM has experienced a reduction in liquidity to $14 billion in FY2008 from $27.3 billion in 2007. Losses are attributed to lower sales volumes and a reduction in working capital. Research and development, as well as relationships with suppliers are negatively affected by the reduced liquidity. Inadequate Performance among Some Business Segments - In 2008 the GME segment accounted to 21.8% of the total revenues and its revenues decreased 8.8% to $32,440 million. Other business segments experiencing declines include GMNA which fell 23.9% to $82,938 million, and GMAP which stood at $12,477 million for FY 2008, a decline of 15%. Low Debt Ratings - Four independent credit rating agencies assess GMs debt ratings and ability to pay interest, dividends and principal on securities. Moodys Investor Service, Fitch Ratings DBRS and Standard & Poors evaluate GM. As of 2008, all four had downgraded their assessment ratings for GM.

OPPORTUNITIES

Growth Potential in India and China - There are positive projects for GM business in China and India. In China the market for new cars is in the midst of a 14% growth rate projected to reach over $97 billion in 2008. Meanwhile in India, the market for new cars grew by 15.5% in 2008 to a dollar value of $28 billion. A sign that India will play an even bigger is the projected increase to 2.5 million units by the end of 2013. Increased Global Truck Market - Steady growth rates are projected in the next few years. The market's volume is expected to rise to 21.5 million units by the end of 2013. The light commercial vehicles segment was the markets largest in 2008, generating total volumes of 9.8 million units, equivalent to 58.1% of overall value. Rising Demand for Hybrid Vehicles - General Motors produces six hybrid models in the US including the Saturn Vue and Aura Hybrids, Chevrolet Malibu and Tahoe Hybrids, GMC Yukon Hybrid as well as a Cadillac Escalade Hybrid. The company is also investing in hybrid and plug-in vehicles, for both cars and trucks. It is anticipated that GM will produce up to nine hybrid models following the introduction of the Chevrolet Silverado Hybrid and GMC Sierra Hybrid. International demand for light hybrid electric vehicles (HEVs) is expected to increase. It is expected to rise to 800,000 units in 2009 and estimated to reach 4.5 million units in 2013. Therefore, a positive outlook for light hybrid electric vehicles and plug-in vehicles market would boost the demand for GMs products.

THREATS

The Continuing Global Recession - Dire predictions for the global economy were realized in 2009 and stalled economic growth continued into 2010. The economic decline reduced consumer demand for less fuel efficient vehicles, including full size pick-up trucks and sport utility vehicles, which had been GMs most profitable products. In addition, the economic climate has resulted in tighter credit markets making it harder for consumers to finance automobile purchases. Weakness in Global Automobile Industry - Consumer Requirements for commercial vehicles declined in the NAFTA region, Western Europe and Japan. The Western European automobile markets suffered as well particularly the volume markets of Spain down 28.1%, Italy down 13.4% and the UK down 11.3%. Germany declined 1.8%) and France 0.7% also experienced downward trend in the second half of 2008. In total, 8.4% fewer automobiles were sold in Western Europe. The Japanese car market also declined, with a drop in sales of nearly 4% in 2008. Intense competition - GMs financial status makes it vulnerable to fierce competition from fits such as AB Volvo, Daimler, Fiat Group Automobiles, Ford Motor, Honda Motor, Hyundai Motor, Isuzu Motors, Mazda Motor, Nissan Motor, Toyota Motor and Volkswagen. Many have responded to the crises by adding vehicle enhancements, providing subsidized financing or leasing programs in order to sell more vehicles. They are also offering option package discounts, other marketing incentives and are reducing vehicle prices in certain markets. These actions are expected to have a negative effect on GMs vehicle pricing, market share and operating results particularly on the low end of the market.

GM Strategic Plan
GMs strategic plan will focus on five (5) areas; Brand Re-structuring, Fuel Efficiency, Cost Cutting, Emerging Markets and Marketing and Promotions Brand Re-Structuring Over the next five years GM will be focusing on restructuring of their brand while focusing on their core business. Chevrolet, Cadillac and Buick will remain at the core of GMs business plan. Other brands such as Saab, Saturn and Hummer will either be sold or closed. The decision to sell Saab, Saturn and Hummer was based on sales statistics that are lagging in the domestic market. Saab and Saturn sales lag behind throughout the board and introducing new models and re-branding of these franchises this late in the game would only push GMs breakeven point further rather than having a positive impact on the bottom line. Hummer doesn't fit with GM's strategy of fuel efficiency and sustainability but only promotes a lifestyle of excess that doesn't promote the green initiative. Although the brand is still profitable today its viability for the future is in question.

The youth demographic is increasing rapidly; over 3 Billion People will be between 15 and 44 in 2020. This statistic emphasizes the need to recognize the needs of todays youth and cater that need through vehicles with options and features that appeal to that market. Pontiac will fill this market niche and will cater to the increasing youth demographic offering entry to mid level vehicles Such as the G5, G6, Grand Prix and Grand Am. This will effectively reduce the number of SKU's thereby reducing manufacturing and overhead costs. With this brand restructuring, there will also be a significant number of GM dealer closings to further reflect cost cutting initiatives. See chart below. Plan 2013
40 4500

2000 Total Nameplates GM Dealer Count

Fuel Efficiency
51 8138

2004
63 7497

2008
48 6450

Scientific research on the effects of global warming and green technology has pushed industries across the board, including GM to become more sustainable and environmentally friendly in their practices. This new environmental initiative isn't only forcing industry to evolve but the consumer as well. This is reflected throughout the automobile industry with new product lines that offer fuel efficient choices to consumers including electric, hybrid and FLEX fueled automobiles. Coupled with the average price of oil spiking over recent years fuel efficiency and environmentally conscious automobiles have been top priority for consumers. Many foreign brands have been industry leaders in fuel efficiency and GM has been forced to play catch up. But over the past five years GM have more than doubled their models that can average 30mpg or more. And in the next five years GM plan to increase their fuel efficiency capabilities through our Flex-Fueled cars. According to GMs projections about 50% of the GM cars on the road will be Flex-Fueled. The table below shows GMs plan to increase fuel efficiency through 2013. Plan 2013
38 28 25 50%

2000 Car Fleet Average (MPG) Truck Fleet Average (MPG) Models >30 mpg Flex-Fuel (% of US
27.7 21 8 2%

2004
29 21.8 8 6%

2008
31.6 24.6 20 17%

Sales) Hybrid Models Car/Crossover Nameplates

0 61%

2 52%

6 65%

18 75%

Cost Cutting

Through the reduction of GM brands and models GM can gain significant cost savings. With the sale of these brands will bring about many dealership closings that will be another cost reduction opportunity. But this is not enough to offset the lack liquidity and self sufficiency that General Motors currently faces. There needs to a reduction in salary expense at GM as well. To do so, GM executives will be asked to take pay cuts. Upper level executive pay in the tens of millions of dollars plus stock options and bonuses will be a thing of the past. A more modest compensation model will to be adopted. A maximum salary cap of $500,000 plus incentives will be implemented with the opportunity for increases based on key performance indicators. Emerging Markets Emerging markets such as China, India and Eastern Europe are increasing their buying power per capita therefore increasing their demand for automobiles. The Indian government supports a comprehensive system that will rapidly increase growth in the industry with the creation of the Automotive Mission Plan (AMP) and the Automotive Testing and R&D infrastructure project (NATRIP). Meanwhile the Chinese government is loosening financing restrictions in the automotive industry and allowing automotive dealers to create their own financing structures. These rapidly expanding countries present an opportunity for GM to expand their global brand and become the center of these new markets. In order to capitalize on this global effort GM will establish manufacturing facilities which will not only create jobs in these countries but also establish favorable relationships with their governments. Marketing and Promotion GM must re-establish itself as America's brand. Commercials and advertisements in the US must promote this sentiment while also emphasizing the developments in sustainability and fuel efficiency. Throughout this marketing effort GM should be forthcoming with the American people about its plans for change perhaps even sharing specific strategies in restructuring and

expanding its business. In our current economic condition the taxpayers are bearing much of the financial burden and a reassuring effort on the part of GM may go a long way in regaining its market share and consumer trust in the United States.

Conclusion
The General Motors strategy is to position itself in emerging markets so that the company will grow simultaneously with the economy. GM is still trying hard to restructure its finances in North America and therefore needs to invest in emerging markets in order to keep up with the rest of the other automakers. GM is also needs to stretch its manufacturing capacity to produce products that will cater to buyers in different markets. With GMs bankruptcy complete in July 2009, the new GM is smaller and leaner. Brands like Saturn, Hummer and Pontiac were shutdown or sold. Hourly labor costs were cut by more than two-thirds from $16 billion in 2005 to $5 billion in 2010. Based on GMs new strategy, the automaker is proving that it can be profitable at a lower sales volume which resulted in profit-sharing checks in 2011 averaging $4,300 for its 4500 union workers.