General Motors Case Study
Historically, General Motors has been the largest and most successful automakers out of the “big three”, GM, Ford, and Chrysler. Some of the most classic vehicles on the road today were produced by General Motors. They not only produced older classic cars, but they continually produce some of the highest preforming cars and trucks we see on the road today. They have been able to produce cars that range from modest to some of the most sought-after cars in the world. Alfred P. Sloan, CEO of General Motors in the 1920s, said this, “a car for every purse and purpose” (Dugar).
General Motors Company was founded on September 16, 1908, as an American multinational corporation headquartered in Detroit, Michigan. General Motors set out to design, manufacture, and market their automobile company. They now produce vehicles in 37 countries under ten brands, Chevrolet, Buick, GMC, Cadillac, Opel, Holden, Vauxhall, Wuling, Baojun, Jie Fang, and Uzdaewoo. Up until 2008, General Motors was the world’s largest automobile manufacturer, which produced over nine million cars and trucks a year in over 30 countries. This changed in 2008 due to GM being taken over by Toyota (Dugar).
Mission and Vision Statements
‘G.M. is a multinational corporation engaged in socially responsible operations, worldwide. It is dedicated to provide products and services of such quality that our customers will receive superior value while our employees and business partners will share in our success and our stock-holders will receive a sustained superior return on their investment.’
‘Over the past 100 years, GM has been a leader in the global automotive industry. And the next 100 years will be no different. GM is committed to leading the industry in alternative fuel propulsion.’
‘GM’s vision is to be the world leader in transportation products and related services. We will earn our customers’ enthusiasm through continuous improvement driven by the integrity, teamwork, and innovation
of GM people.’
General Motors Company’s mission statement gives us a view into what the company is doing and continues to do to further their business and development. It shows the consumer its clear target and shows what the company as a whole would like to emphasize as a predominant automaker. The two-part vision statement promotes their past successes, while also showing the commitment to being a “…world leader in transportation products…” Not only does this point to their successes, but it also shows us how they are going to inspire the world through their products, by continuously driving to improve through their integrity, teamwork, and innovation. General Motor’s mission statement not only integrates its plans for moving forward, it also gives us a view of how important their stockholders are to them as a company, by saying, “…stockholders will receive a sustained superior return on their investment.”
General Motors Company’s NAICS code is 336111 – Automobile Manufacturing
Taking a look at the external environment of automobile manufacturing shows us that vehicle sales in the United States had a large “boom” period due to the individuals and businesses who did not purchase new vehicles during the Great Recession. But since then car sales have far past the cyclical peak. This is not only true of the United States, but other countries, including China. There is too much global automobile assembly capacity even though there is a lack of demand. On top of there not being a demand for manufacturers, there is a demand for small cars in the United States. For example, US consumers have not purchased Chevy’s hybrid, the Volt, like they had predicted. Each one of these factors being considered, they have taken a huge hit to General Motor’s plants in the United States. For example, the Chevy factory in Lordstown, Ohio, that produces the Cruze is only using one shift a day. This is a hit to the automobile industry, because in the past few year small cars have been a huge moneymaker. With a booming economy and not much need for a small economy car, the average US consumer has no need for a Chevy Cruze or Volt in their lives. The factory in Ohio only produced 180,000 vehicles this past year, compared to 248,000 in 2013 (Shih).
Unfortunately, these factories have a very high fixed cost and low variable cost for their operating model. Because this is true across the world these capital-intensive factories have greatly reduced their production of cars. The cars that they end up manufacturing have had to consume the left-over fixed costs which ends up pushing profit into a downward spiral. This downward spiral is happening all across automobile manufacturing and is bad news for many individual’s jobs. Especially those employed by General Motors in the United States. Each day, factories are not making the cut in terms of revenue, which forces automobile companies to make tough decisions. Market shifts is another detrimental issue that revolves around reallocating resources within the manufacturing segment.
The question of what is the best way to go about doing this is not asked enough, because of its sensitive nature. These market shifts and reallocation of resources have cost thousands of people their jobs. Though these shifts can affect thousands of people, companies have to understand that tastes change, and they have to be ready to reallocate resources to better match the market. This shift in the United States’ demand for small sedans to trucks and SUVs has really affected the car market. General Motors in particular has really been affected by it. Everyone had predicted that the United States would shift to electric and self-driving cars, but this is not quite yet true, and General Motors has really suffered because of it. Even though electric and self-driving cars is not “the now”, it might be the future, and I believe if General Motors Company reallocates their resources and funds into developing this market, it will pay off in the near future.
General Motors ability to capture such a large market and effectively position themselves decade after decade is unmatched. Their differentiation strategy comes with offering a range of premium automobiles for the common man to the rich and famous. Along with their product differentiation, they have been able to give the world a variety of products in the automobile industry that appeal to a wide range of people. They have their foot in every segment of the automobile arena, and excelling at every one (Denning).
This question in the car industry of how to reallocate one’s assets to be the best company they can possibly be is one General Motors has seemingly effortlessly been able to do for years. They have used bankruptcy to get rid of unnecessary assets. This first began at the peak of the Great Recession when they eradicated Saturn, Oldsmobile, Pontiac, and Hummer brands. General Motors was also able to use this bankruptcy tactic to eliminate labor, dealer, and renegotiable labor contracts. All of these contracts as well as assets were decades of work that were no longer needed in today’s markets. General Motors was able to realize through their own internal analysis that these were no longer needed. This use of bankruptcy was the perfect way to reallocate these resources to further the company (Pratap).
General Motors for the past few years has floundered and found themselves pushing economy cars, when in reality this is not exactly what the market wants or needs. They thought that electric cars (Chevy’s Volt) were the “now,” but, unfortunately, consumers are not quite ready to be fully on board with what General Motors has come up with. In a booming economy, consumers are more likely to be buying the expensive SUVs and crossovers, not the Chevy Volt. General Motors’ position in the global automotive industry has grown stronger in the past couple of years than it was during the recession. Since the passing of the recession their sales and profits has drastically increased, contrary to popular belief. One money making avenue that has not increased General Motors’ revenue since the recession was their push for sedans and smaller economic cars. Because of this decrease in profit from factories like the one in Lordstown, Ohio, General Motors has to decide what to do about this, and how to attack this problem at its core. Previously, their strategy was to capture the world’s interest in electric cars, but the Chevy Volt and other General Motors electric cars floundered and never really captured their audience like Toyota’s Prius once did. They did not bring substantial profits, and did not perform like they had originally predicted (Pratap).
The automotive industry is showing reports that the industry will double by the year 2020. This being said, this is a huge determining factor for General Motors and whether or not they will be relevant in the next two years. It is essential that they make the right decisions from here on out to ensure they grow and transition into the future. This future that might hold electric vehicles as well as autonomous driving. Because the world is enduring a rapid transition, it will be a fight as General Motors tries to manage and ensure a spot at the top. They will need to continuously fund new technologies, new ideas, and a new organizational model (Pratap).
General Motors Company’s problem is that its success depends on its ability to anticipate the needs of the automobile market and consumers within the market. Because of the changing economy and General Motors customer’s spending, the nature of the automobile markets are hard to predict.
Below depicts General Motor’s revenue:
Because General Motors has had some tremendously rough times in the past and they have pushed past this, I truly believe that a restructure of their operations and reallocation of their assets, manufacturing, and higher funding of research and development in the next few years is necessary to move forward as one of the largest automobile manufacturers in the world (Denning).
Reallocation of resources is a necessary step that GM will need to take in the near future to move forward as a company in need of adjusting their market. This is the strategy I suggest and would need to be done prior to discussions about closing its doors. I believe that the best path for General Motors is it to restructure their operations. Not only restructuring their operations, but also funding the research that is needed to ensure they foresee any changes in their market.
This reallocation of resources would, unfortunately, include closing down many of the factories that produce the Chevy Cruze and Volt in the United States. Because there is not a need for small sedans in the United States market, reallocating these resources by focusing strictly on larger SUVs and Crossovers would be money and time well spent.
On top of this restructure, I would also suggest a higher funding of electric cars, as well as, self-driving vehicles. Even though there is not a high demand in the United States market for electric cars, trends show that in the next decade if automobile companies are not a part of the electric car movement, they will then be irrelevant. To ensure that General Motors stays with the times, reallocating funds to research and development of these “futuristic” cars is necessary to ensuring a prosperous future for General Motors.
As of November 26, 2018, General Motors announced that they “plan to idle five factories in North America and cut roughly 14,000 jobs in a bid to trim costs.” This unfortunate news is not all bad. I believe it is the smartest move that General Motors has made in the last year. Even though it puts a bad reflection of the auto industry, adjustment and change is needed. Customer’s tastes and market shifts has forced General Motors’ hand. Many news outlets are reporting this as bad news and that is a detriment to many American jobs (Liker). While looking at the positives, General Motors has made the best move possible. It is much better to make the big moves now instead of waiting. General Motors will now be able to transfer or reallocate funds for researching future market trends and investing in the upcoming changes to the automotive industry (Boudette).
Might this closure of these factories be the restructuring of their operations that I mentioned, and that is needed if they want a prosperous future? This is exactly the move they needed to make to be capable of furthering research and development into electric cars, self-driving cars, and reallocating funds to be able to focus on what the market desires from General Motors. This conclusion to reallocate and reinvest in the future is exactly what General Motors needs to remain relevant. Overall, I suggest General Motors Company to use this decision to push their company to be the best they know how (Boudette).
Boudette, N. E. (2018, November 26). G.M. to Stop Production at 5 Plants in U.S. and Canada. Retrieved November 26, 2018, from https://www.nytimes.com/2018/11/26/business/general-motors-cutbacks.html
Denning, S. (2018, December 01). Why The General Motors Layoffs Were Strategic. Retrieved December 02, 2018, from https://www.forbes.com/sites/stephaniedenning/2018/11/29/why-the-general-motors-layoffs-were-strategic/#74bc33ae5d5e
Dugar, V. (2016, April 16). Case study of general motors. Retrieved December 01, 2018, from https://www.slideshare.net/VishalDugar/case-study-of-general-motors
Liker, J. (2018, March 07). Assessing the Sins of Volkswagen, Toyota, and General Motors. Retrieved November 20, 2018, from https://hbr.org/2015/09/assessing-the-sins-of-volkswagen-toyota-and-general-motors
Pratap, A. (2018, November 15). Strategic Analysis of General Motors (GM). Retrieved November 23, 2018, from https://www.cheshnotes.com/general-motors-gm-strategic-analysis/
Shih, W. C. (2018, December 01). The Challenges GM Is Facing, and the Reasoning Behind Its Plant Closures. Retrieved December 2, 2018, from https://hbr.org/2018/11/the-challenges-gm-is-facing-and-the-reasoning-behind-its-plant-closures