Gm's asian alliances

General Motors’ Asian Alliance 16/24/2013

General Motors’ Asian Alliance

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GM Relationship Types

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GMJV with Toyota

Partnership with Small Asian car

makers

Fanuc Joint Venture

Alliance with parts makers


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Joint Venture with Toyota

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• 50-50 JV established in 1983• Invested $100 million eachNUMMI

• Approved by a three-to-two votes• JV could only run till 1996FTC

• 200,000 cars per year• Chevrolet NovaProduct

• Gain quick access to a world class small car (Nova)• To learn about Toyota’s production systemGM’s Reasons

• Familiarize itself with US market to establish long term presence there

• To get around export restraints by manufacturing in US

Toyota’s Reasons


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Result of GM-Toyota JVDrop in absenteeism from 22% to 2%

Produce 60 cars with 1/3 workforce

Toyota decided to manufacture Corolla FX-16 and Camrys also at the plant

GM implemented learning from NUMMI to other plants

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Partnership with Small Asian car makers

•Isuzu produced two vehicles for GM to sell in the US (Chevy Luv, Spectrums)•GM Spectrums comprised nearly 40% of Isuzu’s total production

Isuzu

•JV to manufacture small passenger cars•Daewoo entered into JV for capital and technology•Daewoo’s export accounted for 10% of all South Korean exports

Daewoo

•Manufactured Sprints for Gm•Established plant in Canada to manufacture the Sprint for GM and the Samurai SUV for Suzuki

Suzuki

•GM and Nissan were having trouble in Australia•Jointly produced Astra and VL Commodore•Nissan, GM and Deawoo produced passenger cars for sale in Korea and US

Nissan


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GM-Fanuc Joint Venture


Need:•GM largest buyer of robotic system in US•Desire to large-scale modernization of its plants•Dissatisfied with its present robotics vendors

GM Fanuc Robotics Corporation (GMF) was intended to operate independently of the two parent companies

75% of units manufactured by JV was sold to GM & rest

to other auto companies

GMF coordinated with GM and Fanuc to develop proprietary robotics

technology

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Alliance with Japanese parts makers

Hitachi: Microcomputerized control for + Robots

for Gm plants

Nihon Radiator: Next-generation

compressor for A.C. (V5 compressor)

Atsugi: Sells sensor to Monroe, which sells suspension system to GM

Akebono Brakes: 50-50 JV to

manufacture next-gen drum and disk brakes using electronic tech. 6/24/2013General Motors’ Asian Alliance

General Motors’ Asian Alliance 8

Key Problems

NUMMI

• GM had little control even after providing half the cash and use of its production facility

• NUMMI had given Toyota the opportunity to familiarize itself with doing business in GM’s home market – US

Isuzu

• Isuzu received considerable financial and technical support from GM and was free to use it in developing its own products

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Key Problems contd..Daewoo:

• GM gave up management control of ventures into which it had placed capital and technology, allowing Daewoo free reign with all the resources provided by GM

• GM lead Daewoo to become a major player in South Korean market and in return received a car which was already developed by its Opel subsidiary

Suzuki

• The JV provided Suzuki an opportunity to greatly expand its manufacturing and marketing operations outside Japan, GM was only able to export 4000 vehicles into Japan

• Suzuki’s JV with Izuzu increased the likelihood of Suzuki supporting vehicles that could compete with GM

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Key Problems contd..Fanuc

• GMF was taking on the high-cost and low-return work of installing and supporting robotics system while providing new sales opportunities for Fanuc’s hardware

• Low level of trust in partner which handicapped product development efforts

Parts and Components makers:

• Issue of loyalty

• Risk of information leakage to Japanese competitors6/24/2013


Core Problem with GM JVs• Greater benefits for partners than for GM

• GM failed to demand proper return for its investments, loyalty and proper level of control

• GM failed to find the right partners which would• Help achieve its strategic goals• Share its vision• Not try to exploit the alliance for its own agenda

• GM failed to acquire most knowledge possible about potential partners owing to its status as a relative newcomer to Asian market

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Alternatives

1.Withdrawal/Centralization

2. Decentralization/Globalization

3. Ownership and Effective Equity

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Withdrawal/Centralization• Toyota Keiretsu style High degree of centralization High level of

control

• GM problems loose relationships, solutions limiting business dealings ( with those who not willing to fall under its authority )

• Advantages:

•Lighter control structure

•More discipline and develop closer and more loyal relationships

•Geographical proximity will lead to efficient distribution system

• Disadvantages:

• Limited its ability to innovate

•Adversarial relationship with domestic automotive manufacturers

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Decentralization/Globalization• GM’s 1966 Policy : coordinated policy control of all of its operations through the

world

• Lead to aggressively pursuing new opportunities & was motive behind its many Asian partnerships

• GM can continue in its direction and learn from its mistakes and find best solution to its problems

• Advantages:

•Business at global scale Economies of scope

•Widest range of suppliers and partners(Best cost & quality)

•Remain truly international

• Disadvantages:

•Difficult to manage wide range of partnerships

•Trade-offs between trust and control

•Risk of losing knowledge and tech. to competitors

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Ownership and Effective Equity• GM didn’t have much control over its resources, knowledge, and technology

where in its partnerships.

• It can invest in only those partnerships where it does not have financial leverage so that it does not loose any control.

• Advantages:

•Dictate the terms of partnerships

•Can force suppliers to prioritize

• Harder for companies to end partnerships and start independent operations

• Disadvantages:

•Limit its options for suppliers

•Dependent on equity providers

•Ownership may not be desirable in each partnership

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Recommendation• Global markets are going through tremendous change, implementing any

one alternative may not work in all markets.

• GM should analyze all its current partnerships and determine pros and cons of implementing each alternative.

• Implement that strategy which will generate best result in GM’s interest and maximize return.

• In terms of loyalty of suppliers and its partners:

• GM should understand that cross cultural differences take longest time to overcome.

• It has to build long term relationships with its suppliers and partners which will help in building trust and loyalty towards GM.

• Finally GM should accept that not all of its partnerships will succeed, some will fail which will give be a lesson to strengthen its other relationships.

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Thank you
