General Motors Asian Alliances

Introduction•General Motors struggling with new competitors in the Asia Pacific region•An urgent requirement of  developing new manufacturing technologies•Put in  better mechanisms to control costs and quality in its American manufacturing facilities•Beginning 1970, Japan and Korea emerged as economic powerhouses, presenting new challenges and opportunities to GM.•GM responded to the challenge through a number of business alliances with Asian partner companies.

Examining the case facts

Identifying the strategic benefits of the business alliances formed by GM

Identifying the Problem with the business alliance

Recommendation and Conclusion

Case Analysis

GM-Toyota JVBenefits to GM Benefits to Toyota

Opportunity to enter the small car segment and expand its marketing mix

Learn the famous Toyota Production System and incorporate the same into their operations

A chance to revive the Fremont plant

To be able to tap the US market despite the export restrictions in Japan

Establish a base for a long term presence in US

Full Control of Production: Japanese management and principles would be used in the plant

Problem Identification GM had very limited control over the production and operations even though it

contributed equally in the JV The risk of UAW and NUMMI leadership’s relations to affect GM and UAW’s

relations in other wholly owned plants The risk of supplier relations getting impaired due to high quality standard set by

Toyota

GM-Isuzu JVBenefits to GM Benefits to Isuzu

JV resulted in GM’s production volume getting boosted by Isuzu vehicles

Lotus-Isuzu 10 year contract to supply engines to Lotus owned by GM

JV helped to save it from bankruptcy◦ GM bought 34% Isuzu stocks◦ GMAC bought 51% of Isuzu

Finance Boosted exports of Isuzu

despite the export restrictions EDS-Isuzu JV helped Isuzu

receive upgrades and technology benefits

Problem Identification GM didn’t have full control over the JV as both the President and chairman of the

board were from Isuzu The JV was heavily skewed towards Isuzu even though GM invested heavily time and

again Both spectrum and partnership with Lotus allowed Isuzu to leverage the financial and

technical help from GM to develop their own product

GM-Daewoo JVBenefits to GM Benefits to Daewoo

Exports from Daewoo for the GM’s US market

Successful in marketing Pontiac Le Mans in US which was produced and exported by Daewoo

GM provided Daewoo enough resources to come out of their financial difficulties

Boosted both exports and domestic sales for Daewoo

Daewoo had full control over the ventures

Became a major player in the Korean market

Problem Identification

GM allowed Daewoo to fully control the JVs Daewoo used GM’s technology and designs to produce a car which GM could have

easily produced on their own Daewoo also used GM’s marketing expertise to become a strong player in the domestic

market and in the export market once the JV dissolved

GM-Suzuki JVBenefits to GM Benefits to Suzuki

Increase product range without overburdening Isuzu

Suzuki was the best mini car producer in Japan and could offer them international presence in the mini car segment

Gain GM’s assistance to design and produce a mini car greater than 550 cc

Could gain more sales in US through 1300 cc Samurai by pricing it lower than existing competitors.

Expand manufacturing and marketing operations outside Japan.

Problem Identification

• The centrepiece of the arrangement, Cultus, failed to attract consumer interest in Japan.• GM financed half the Canadian manufacturing plant, giving management control to Suzuki. This allowed

Suzuki to escape unsuccessful Japanese market and gain benefits outside Japan.• Partnership allowed Suzuki to expand greatly outside Japan, but GM could only export a paltry 4000

vehicles to Japan.• Suzuki’s partnership with Isuzu allowed Suzuki to market other vehicles that could compete

more directly with GM

GM-Nissan JVBenefits to GM Benefits to Nissan

Obtain supply of engines and transmission for Holden’s new VL Commodore.

Partner with an automaker facing similar problem in Australian market and come up with solutions to address the problem.

Overcome competition at home, expand overseas.

Arrest fall in market share and profits.

Maintain presence in the tightening Australian market.

Problem Identification

Both the GM and Nissan faced problem in Australian market. The JV was aimed at solving problems faced in the Australian market at large. But it was mainly Nissan that relied heavily on GM to provide it new market for its

products . The JV had inherently less value for GM as compared to Nissan.

GM- Fanuc JVBenefits to GM Benefits to Fanuc

Dissatisfied with the existing vendors, wanted to forge relationship with a new credible vendor.

Devise ways to sell newly developed robotics products and expertise through alliance with Fanuc.

Prevent losing its robotic personnel and technology to other robotic companies.

Increase market share in the robotic market.

Japanese economy was slowing down and the partnership could offer a new market.

Problem Identification GMF had become a systems integrator, taking on the high-cost and low-return work of

installing and supporting robotics systems Low level of trust in GM’s partner, which handicapped product development efforts GE-Fanuc began reselling GMF systems after Fanuc reaped the large profits from

selling GMF the hardware, and GMF undertook the low-profit work of systems integration

The rationale behind a JV is to benefit mutually, which didn’t happen in case of GM

GM’s Asian alliances yielded more benefits to the partners rather than to GM

GM let its partners become more competitive and productive than itself

GM failed to:◦ Improve its internal product development program◦ Demand a proper return on its investment from its partners◦ Loyalty from its partners◦ Maintain control over its partners and develop long-term

relationships and trust◦ Defend its own interest in a strategic manner

Conclusions