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History


General Motors was founded in 1908 when William C. Durant formed the General

Motors Corporation by bringing together 25 independent car companies. In the

beginning, each company retained its own identity, and General Motors was a holding

company for 25 car divisions that produced hundreds of models of cars targeted at

wealthy customers.


General Motors main competitor was the Ford Motor Car Company, and in 1908, Henry

Ford announced the development of the Model T car that was to be produced by the

revolutionary method of mass production. In 1920, Alfred P. Sloan became GM’s CEO.

Sloan found that operating 25 different car companies producing hundreds of deferent

models was very inefficient compared to Ford’s. Sloan chose to group the 25

companies into five major operating divisions: Chevrolet, Pontiac, Oldsmobile, Buick,

and Cadillac. Sloan also decided to market the five brands of cars to customers in five

different socioeconomic segments instead of just the wealthy customers as before.


In the 1970s General Motors dominate position in the United States car market was

broken because of the global oil crisis and the emergence of low-cost/high-quality

Japanese competitors. Then in 1980, Roger Smith became CEO and began several

major programs to reduce costs and improve quality. Still, General Motors did not

confront their main problem of many.


General Motors needed to regain market share from the Japanese but was unable to

cut its high cost structure. Over time General Motors had to enter into bankruptcy on
June 1, 2009 because of its high cost structure coinciding with the plunge of vehicle

sales due to the recession that started in 2008.


                                        Strengths


Branding:     The company was founded in 1908 when William C. Durant formed the

General Motors Corporation bringing together 25 independent car companies. General

Motors is known to manufacture the automobiles brands of Chevrolet, Pontiac

Oldsmobile, Buick, and Cadillac which have become household names in the U.S.

General Motors has produced not just cars, but symbols of American culture.


IT:    Permitting faster global coordination in design and engineering development and

reduced the duplication of work by engineers in different research areas increasing the

efficiency of General Motor’s supply chain operation.


International Presence:     General Motors global structure from North America,

Europe, Asia Pacific, and Latin America. General Motors has assembly, manufacturing,

distribution, office and warehousing operation in countries worldwide.


                                      Weaknesses


High Cost Structure:        If employees were laid off, General Motors had agreed to

pay 60% of their salaries. Also creating to the high cost structure was the rising

healthcare costs, which had not been considered an important factor as did General

Motors pension liabilities to former and current employees. In 2002, it was estimated

that General Motors had more than $45 billion in unfunded liabilities.


Vehicle Line-up:     Gas-guzzling SUVs and trucks that no longer matched customer
Case Study 18 GM 3


demand for smaller, more fuel-efficient cars. Hummer brand used to have status as a

“macho” exclusive SUV, but it too was seen as a gas-guzzling dinosaur out of synch

with customer tastes for new greener vehicles.


Dealerships:            Contracts with its 5,600 dealerships draining its profitability. Each of

General Motors brands was distributed by different car dealerships, and all these

dealerships had contracts that guaranteed them a supply of cars and favorable

financing from General Motors financial division. When General Motors was forced to

reduce the number of models of cars it produced it had to shut down divisions such as

Oldsmobile, these dealerships became a major liability and General Motors was locked

into contracts with them.


The greater the number of dealerships, the higher General Motors distribution,

financing, and operating costs were. When General Motors sales plunged in the 2000s,

its excessive number of dealerships cost General Motors billions of dollars a year.


                                         Opportunities


China:           China is potentially the largest market in the world. China is a country with

a steadily growing economy and a huge customer base. China is growing and the

market for small and mid-sized car models will increase with China’s growth.


International:          Expanding in Europe to offer United States customers a broad line

of premium, differentiated cars. Also, buying state-of-the art technology to build quality,

low–cost vehicles for customers.


Hybrid vehicles:        Demand for hybrid vehicles is likely to increase so investing in
hybrid and plug-in vehicles, for both cars and trucks. International demand for small

hybrid electric vehicles is also likely to increase. China itself has a large carbon footprint

and offering benefits for people who buy vehicles with lower-capacity engines as well as

offering trade in for older cars to get more efficient greener cars. The small hybrid

electric vehicles and plug-in vehicles market would also boost the demand for an

automobiles company’s products.


                                           Threats


Competition:          Competition from Daimler, Fiat, Ford Motor, Honda Motor, Hyundai

Motor, Isuzu Motors, Nissan Motor, Renault, Toyota Motor, and Volkswagen. Many

competitors’ are offering added vehicle enhancements, providing subsidized financing

or leasing programs in order to sell more vehicles. Most automobile companies are also

offering option package discounts, and reducing vehicle prices.


Saturation:           China is potentially the largest market in the world with a steadily

growing economy and a huge customer base. Many of the automobile companies could

start building new plants in China causing an oversaturation of vehicles.


Recession:            Global recession and stalled economic growth reduces consumer

demand for vehicles. Consumers will spend less on newer vehicles and not trading in

the older model of automobile. Also, consumers demand for less fuel efficient vehicles

including full size pick-up trucks and sport utility vehicles decline.

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Gm

  • 1. History General Motors was founded in 1908 when William C. Durant formed the General Motors Corporation by bringing together 25 independent car companies. In the beginning, each company retained its own identity, and General Motors was a holding company for 25 car divisions that produced hundreds of models of cars targeted at wealthy customers. General Motors main competitor was the Ford Motor Car Company, and in 1908, Henry Ford announced the development of the Model T car that was to be produced by the revolutionary method of mass production. In 1920, Alfred P. Sloan became GM’s CEO. Sloan found that operating 25 different car companies producing hundreds of deferent models was very inefficient compared to Ford’s. Sloan chose to group the 25 companies into five major operating divisions: Chevrolet, Pontiac, Oldsmobile, Buick, and Cadillac. Sloan also decided to market the five brands of cars to customers in five different socioeconomic segments instead of just the wealthy customers as before. In the 1970s General Motors dominate position in the United States car market was broken because of the global oil crisis and the emergence of low-cost/high-quality Japanese competitors. Then in 1980, Roger Smith became CEO and began several major programs to reduce costs and improve quality. Still, General Motors did not confront their main problem of many. General Motors needed to regain market share from the Japanese but was unable to cut its high cost structure. Over time General Motors had to enter into bankruptcy on
  • 2. June 1, 2009 because of its high cost structure coinciding with the plunge of vehicle sales due to the recession that started in 2008. Strengths Branding: The company was founded in 1908 when William C. Durant formed the General Motors Corporation bringing together 25 independent car companies. General Motors is known to manufacture the automobiles brands of Chevrolet, Pontiac Oldsmobile, Buick, and Cadillac which have become household names in the U.S. General Motors has produced not just cars, but symbols of American culture. IT: Permitting faster global coordination in design and engineering development and reduced the duplication of work by engineers in different research areas increasing the efficiency of General Motor’s supply chain operation. International Presence: General Motors global structure from North America, Europe, Asia Pacific, and Latin America. General Motors has assembly, manufacturing, distribution, office and warehousing operation in countries worldwide. Weaknesses High Cost Structure: If employees were laid off, General Motors had agreed to pay 60% of their salaries. Also creating to the high cost structure was the rising healthcare costs, which had not been considered an important factor as did General Motors pension liabilities to former and current employees. In 2002, it was estimated that General Motors had more than $45 billion in unfunded liabilities. Vehicle Line-up: Gas-guzzling SUVs and trucks that no longer matched customer
  • 3. Case Study 18 GM 3 demand for smaller, more fuel-efficient cars. Hummer brand used to have status as a “macho” exclusive SUV, but it too was seen as a gas-guzzling dinosaur out of synch with customer tastes for new greener vehicles. Dealerships: Contracts with its 5,600 dealerships draining its profitability. Each of General Motors brands was distributed by different car dealerships, and all these dealerships had contracts that guaranteed them a supply of cars and favorable financing from General Motors financial division. When General Motors was forced to reduce the number of models of cars it produced it had to shut down divisions such as Oldsmobile, these dealerships became a major liability and General Motors was locked into contracts with them. The greater the number of dealerships, the higher General Motors distribution, financing, and operating costs were. When General Motors sales plunged in the 2000s, its excessive number of dealerships cost General Motors billions of dollars a year. Opportunities China: China is potentially the largest market in the world. China is a country with a steadily growing economy and a huge customer base. China is growing and the market for small and mid-sized car models will increase with China’s growth. International: Expanding in Europe to offer United States customers a broad line of premium, differentiated cars. Also, buying state-of-the art technology to build quality, low–cost vehicles for customers. Hybrid vehicles: Demand for hybrid vehicles is likely to increase so investing in
  • 4. hybrid and plug-in vehicles, for both cars and trucks. International demand for small hybrid electric vehicles is also likely to increase. China itself has a large carbon footprint and offering benefits for people who buy vehicles with lower-capacity engines as well as offering trade in for older cars to get more efficient greener cars. The small hybrid electric vehicles and plug-in vehicles market would also boost the demand for an automobiles company’s products. Threats Competition: Competition from Daimler, Fiat, Ford Motor, Honda Motor, Hyundai Motor, Isuzu Motors, Nissan Motor, Renault, Toyota Motor, and Volkswagen. Many competitors’ are offering added vehicle enhancements, providing subsidized financing or leasing programs in order to sell more vehicles. Most automobile companies are also offering option package discounts, and reducing vehicle prices. Saturation: China is potentially the largest market in the world with a steadily growing economy and a huge customer base. Many of the automobile companies could start building new plants in China causing an oversaturation of vehicles. Recession: Global recession and stalled economic growth reduces consumer demand for vehicles. Consumers will spend less on newer vehicles and not trading in the older model of automobile. Also, consumers demand for less fuel efficient vehicles including full size pick-up trucks and sport utility vehicles decline.