WELCOME

General Motors(Creation-Accelaration-Crisis-

Reborn)

COMPANY HISTORY

Creation: 1897-1909

General Motors was founded by William “Billy” Durant on

September 16, 1908.

In 1899, Opel entered the growing automobile market with the

Opel-Patent-Motorwagen System Lutzmann and became a part of

General Motors thirty years later

Acquire more than 20 companies including Oldsmobile, Cadillac,

and Oakland, today known as Pontiac.

Acceleration: 1910-1929

Philosophy and strategy of “a car for every

purse and purpose,”

The milestone 1927 Cadillac LaSalle, with

curves rather than sharp corners and a long,

low stance, made people see cars as far more

than just a mode of transport

Crisis 2000-2008

The case examines the problems faced by GM, the second largest

automaker in the world. These problems have brought the company

at the verge of bankruptcy. The major reasons for the crisis at GM

were its inability to bring out new vehicles that suit the needs of the

customers, poor business strategy, and high costs associated with

employee healthcare and pension benefits. These problems, coupled

with global financial crisis and recession in the economies of

several developed and developing countries adversely impacted the

revenues of GM, which fell by 11% in 2008 as compared to 2007. In

order to solve its liquidity crisis, GM approached the US

Government for financial aid.

TECHNOLOGY

General Motors continues to develop innovative

technologies to shape the future of the automotive

industry.  

The company was granted US$ 13.4 billion through a series of

federal loans. In December 2008, GM got a loan of US$ 4 billion.

The company was required to fulfill specific targets that included

reduction in debt, renegotiation of employee contract terms with the

unions etc, before a stipulated time as a part of the loan package.

If GM failed to meet these targets by the predetermined time, it

had to repay the loan amount with interest within 30 days.

AFTER CRISIS

On February 17, 2009, while submitting the 'Restructuring

Plan,' GM asked for additional financial aid from the US

government to carry on its operations after March 2009.

The case concludes with a note on the challenges GM is likely

to face in the near future if it is not able to meet the targets

specified.

It also debates on whether the US Government should have

offered any financial aid to GM at all and let the company file

bankruptcy.

General Motors SWOT Analysis

Strengths Weaknesses1.Global presence2.New vision and strategy3.Strong brand portfolio4.Strong presence in China5.Knowledge of home market6.4 well performing brands

1.High cost structure2.Brand dilution3.Bureaucratic culture4.Car recalls

Opportunities Threats

1.Positive attitude towards “green” vehicles2.Increasing fuel prices3.Changing customer needs4.Growth through acquisitions

1.Fluctuating fuel prices2.New emission standards3.Rising raw material prices4.Intense competition5.Exchange rates

Crisis Timeline -2001: GM detects the defect during pre-production testing of the

Saturn Ion.

2003: A service technician closes an inquiry into a stalling Saturn Ion

after changing the key ring and noticing the problem was fixed.

2004: GM recognizes the defect again as the Chevrolet Cobalt replaces

the Cavalier

March 2005: GM rejects a proposal to fix the problem because it would

be too costly and take too long.

May 2005: A GM engineer advises the company to redesign its key

head, but the proposal is ultimately rejected.

May 24, 2005: GM posts a $1.1 billion first-quarter loss, blaming it on

union overhead and high gas prices harming SUV sales.

December 2005: GM sends dealers a bulletin stating the

defect can occur when "the driver is short and has a large

and/or heavy key chain ... the customer should be advised of

this potential and should ... [remove] unessential items from

their key chain.“

July 29, 2005: Maryland resident Amber Marie Rose, 16, dies

when her 2005 Chevrolet Cobalt crashes into a tree after the

ignition switch shuts down the car's electrical system and the

air bags fail to deploy.

December 2005: GM issues a service bulletin announcing

the problem, but does not issue a recall.

July 26, 2006: GM loses $3.2 billion in the second quarter, absorbing

costs of early retirement buyout packages to 30,000 blue collar workers.

March 2007: Safety regulators inform GM of the issues involved in

Amber Rose's death; neither GM nor the safety regulators open a formal

investigation.

April 2007: An investigation links the fatal crash of a 2005 Chevrolet

Cobalt in Wisconsin to the ignition defect, but regulators do not conduct

an investigation.

September 2007: A NHTSA official emails the agency's Office of Defects

Investigation recommending a probe looking into the failure of air bags to

deploy in crashes involving Chevrolet Cobalts and Saturn Ions, prompted

by 29 complaints, four fatal crashes and 14 field reports.

Nov. 17, 2007: The Office of Defects Investigation at NHTSA

concludes that there is no correlation between the crashes and the

failure of air bags to deploy, ending the proposed probe.Dec. 12, 2008: The U.S. Senate votes to oppose a government bailout for GM, despite support from outgoing President George W. Bush and President-elect Barack Obama and GM's announcement that it's nearly out of cash and may not survive beyond 2009.Dec. 18, 2008: President Bush announces bankruptcy is an option, if it's "orderly" and involves unions and other stakeholders.Dec. 19, 2008: Bush approves a bailout plan, giving GM and Chrysler $13.4 billion in initial financing from the Troubled Asset Relief Program.

April 22, 2009: GM says it will not be able to make a June 1,

2009, debt payment.

April 24, 2009: GM says that it will scrap the Pontiac brand to

invest more in Buick, Cadillac, Chevrolet and GMC.

June 1, 2009: GM files for Chapter 11 bankruptcy.

July 10, 2009: The U.S. Treasury purchases GM assets, giving

the government primary ownership of the company.

February 2010: NHTSA again recommends a probe looking into

problems with air bags in Cobalts; ODI again decides that there

is no correlation and drops the matter.

Oct. 26, 2010: Consumer Reports says GM is considered "reliable"

based on scores from road tests and performance on crash tests.

2012: GM identifies four crashes and four corresponding fatalities (all

involving 2004 Saturn Ions) along with six other injuries from four

other crashes attributable to the defect.

Sept. 4, 2012: GM reports August 2012 sales were up 10 percent from

the previous year, with Chevrolet passenger car sales up 25 percent.

June 2013: A deposition by a Cobalt program engineer says the

company made a "business decision not to fix this problem," raising

questions of whether GM consciously decided to launch the Cobalt

despite knowing of a defect.

Chapter 11 is a chapter of Title 11 of the

United States Bankruptcy Code, which permits

reorganization under the bankruptcy laws of

the United States. Chapter 11 bankruptcy is

available to every business, whether organized

as a corporation, partnership or sole

proprietorship, and to individuals, although it is

most prominently used by corporate entities

?1. GM do after bankruptcy

2. Governmental demands by the Obama

administration

3. If GM produce a comperitively priced car, does

it will be a success

1. Mr Wagoner has gone, there has been no cull of GM's leaders—who

helped to get it into this mess.

2. Mr Henderson is an experienced financial manager, but GM may

need someone more inspiring to shake it out of its consensual,

bureaucratic ways.

3. Senior members of the auto task-force found Chrysler to be better

run in some ways than GM.

FIRST PHASE

SECOND PHASE

Although GM's cost base will be more in line with that of its

transplant rivals, it will still be handing about $600m a year to the

UAW in the form of dividends on preferred stock to comply with

the revised health-care agreement. On the rather rosy assumption

that GM sells 2m vehicles a year in America, each one will have to

carry $300 in health-care costs. Unresolved questions remain

about the firm's pension fund, which at the end of 2008 was

underfunded by about $13 billion.

THIRD PHASE

GM's market-share forecasts still look optimistic. It

expects its share to stabilise at around 18.5%, only

one percentage point below its figure for this year.

But GM will have fewer brands and dealers, and

rivals will be eager to exploit its withdrawal from

parts of the market.

FOURTH PHASE

There is a danger that with the government as its biggest

shareholder, GM will be pushed into making the kind of cars—

smaller and more fuel-efficient—that Mr Obama approves of

rather than the sort Americans want to buy.

Although new CAFE standards should encourage the shift away

from the thirstiest models, trucks still get off too lightly and the

administration seems to have no appetite for the one thing that

would radically change buying habits: a big increase in petrol

taxes or a more widely applied tax on carbon

FIFTH PHASE

GM has suffered as much from a price

problem as from a cost problem. GM's

vehicles sell for between $3,000 and

$10,000 less than Toyotas of the same size.

“This is a brand issue”, says Mr Warburton,

“and the brands won't be fixed by Chapter

11.”

GM emerges from bankruptcy, it will have shed

some of its burdens, but the damage done by

decades of mismanagement and union

intransigence will still weigh heavily. The new

GM will not be quite as new as either it or the

government would like Americans to believe.

THANK YOU!!!

Submitted To, Mrs Suma MathewDept. of MBASchool Of

Management Palai

Submitted By,Charles Jose &Sebin IgantiousS1 MBASJCET School of ManagementPalai