General Motors faced many challenges in the external environment in the late 20th century. [1] Their US market share fell from 60% in 1975 to 25% in 2005 as foreign automakers produced more fuel efficient and higher quality vehicles. [2] GM struggled to compete and failed to properly address issues like rising fuel costs and environmental regulations. [3] Attempts to respond like the Saturn brand lost an estimated $15 billion and faced resistance due to a lack of clear communication and flexibility.

1. General Motors & Saturn
Emily Aeschliman • Kareem Albaba • Mercedes Hazard
Morgan Thune • Jordan Weidner

2. Introduction to GM
$4 billion
loss in automotive operations
in 2005

3. Introduction to GM
60%
market share
25%
market share
in 1975 in 2005

4. Introduction to GM
8 83
brands models

5. External Environment
S
T • SUVs and trucks more popular than small
cars
E • Michael Moore’s Roger & Me
• Bad experiences with older used models
E • Fallen US market share
P

6. External Environment
S
• Japanese plants created more fuel efficient
T and higher quality cars
E • Honda and Toyota invested money to
constantly improve with new models
E • New technologies introduced, but seniority
rights barred implementation
P

7. External Environment
S
T • Competitors creating engines running on
gas, hydrogen or electricity
E • Kyoto Protocol prompted foreign
manufacturers to commit to lowering CO2
E emissions
P

8. External Environment
S • Volatile economies in Africa, the Middle East
and other foreign countries
T • Recession in the US during the 80s
• Doubling of the import market between
E 1970 and 1985
• Non-union labor lowered costs for foreign
E automakers
P • Factories and distribution centers throughout
the world increased global competition

9. External Environment
S • Foreign automakers subject to same cross-
T border tariff concessions under NAFTA
• Governments offered money for new plans
E and R&D
• Corporate average fuel economy (CAFE)
E • Financial incentives to create
environmentally safe vehicles
P

10. Instability in the
automobile industry

11. Response to Pressures
• Able to temporarily improve public image
• Unable to compete with quickly innovating
technologies of foreign automakers
• Could not repair organizational
inefficiencies
• Did not properly meet governmental and
environmental expectations

12. Did not respond to
external pressures
strategically

13. Net Income by Region (in $ millions)
2,992
3,000
GMNA GME
GMLAAM GMAP
2,250
1,583
1,500
811 729
750 577
188
85
0
(181)
(331)
(504)
-750
(1,011) (976)
-1,500
2002 2003 2004

14. Assess costs of
continuing and
discontinuing
operations

15. Introduction of Saturn
• Compete with foreign
import vehicles
• Location away from
Detroit to create more
positive corporate
culture
• Differentiate from
existing GM brands

16. $15 billion
estimated loss from Saturn strategy

17. Resistance to Change
• Failure to perceive benefits
• Fear of uncertainty and loss
• Belief that Saturn received more attention
than it deserved
• Smith’s personal investment in the project led
him to ignore the advice of other executives

18. Saturn’s External Pressures
• Product did not meet demand for trucks and
SUVs
• Poor manufacturing quality compared to
Japanese cars
• Strategy was not flexible and adaptive

19. Strategies for Success
Saving Saturn
• Executives did not agree with Smith’s decision
to start Saturn — communication was not
two-way
• Smith was making decisions with blinders
• Concentration on improving already-existing
brands

20. Strategies for Success
Saving Saturn
• Communication with employees in order to
relieve their fears
• Unify GM and Saturn employees
• Integration of Saturn innovations into GM
bureaucracy
• Upgrade Saturn models more frequently to
compete with Honda and Toyota

21. Strategies for Success
Saving General Motors
• Work on more aggressive contracts with
UAW to cut pension and healthcare costs
• Moderate seniority rights to promote
introduction of technological and
organizational changes
• Consider entering Chapter 11 bankruptcy to
shed increasing liabilities

22. Strategies for Success
Saving General Motors
• Differentiate in product lines and marketing
between brands
• Eliminate redundancy by promoting unique
innovations and a focused brand image
• Develop smaller, more fuel-efficient cars to
compete directly with foreign manufacturers
• Persist in development of innovative
technologies like the EV1

23. Questions?