GM in Trouble
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Case Code: BSTR320 Case Length: 20 Pages Period: 2008-2009 Pub Date: 2009 Teaching Note: Not Available |
Price: Rs.400 Organization: General Motors Industry: Automobiles Countries: US Themes: Managing in Tough Times, Slowdown in Global Automobile Industry |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
GM - Losing Market Share
In the 1970s, GM had to face new challenges such as issues related to environmental pollution and rising gas prices. It also started facing competition from foreign car manufacturers such as Honda Motor Company (Honda) and Toyota Motor Corporation (Toyota)...
Other Problems
In the early 2000s, GM had to face a number of challenges like rising fuel prices, rising costs for healthcare and pension benefits of employees, and competition. In December 2000, GM announced that it would phase out its Oldsmobile division and cut 16,000 jobs in the US and Europe. Started in 1897, Oldsmobile was considered as the oldest car brand in the US...
What Went Wrong?
According to the analysts, the major reasons for GM's financial problems were its huge pension and healthcare liabilities and poor business strategy. The global financial crisis in 2008 only resulted in further deterioration of the company's financial health...
GM's white collar retirees had been enjoying pension benefits from the 1940s. In 1950, the company had created a defined benefit pension plan for hourly and salaried employees who had worked for the company for more than five years....
Financial Aid for GM?
On December 02, 2008, GM submitted a plan for long-term viability to the US Congress in order to secure financial aid from the government. The company stated that this aid was necessary for it to survive a decline in sales due to the credit crisis and consequent global recession. In the plan, GM announced that it would reduce its total US workforce from 96,537 in 2008 to about 65,000 salaried and unionized workers by 2012. The total number of US plants would also be reduced to 38 by 2012 from 47 in 2008. GM had already cut nearly 50 percent jobs from the 2000 levels of 191,465 people...
The Trouble Continues...
GM expected the ongoing tight credit situation and global economic slowdown to continue to affect auto sales in the year 2009 as well. Jonathan Browning, Vice President, Global Sales, Service and Marketing at GM, said, "The challenges in the global financial markets, including credit tightening, the drop in commodity prices, and economic uncertainty continue to negatively impact overall demand for new vehicles."...
Exhibits
Exhibit I: Highlights of GM's Restructuring Plan
Exhibit II: GM's Vehicle Models
Exhibit III: GM's Financial Performance (2000-04)
Exhibit IV: GM's Financial Highlights (2005-07)
Exhibit V: Comparison of Financial Results of GM (Third Quarter of 2008 and 2007)
Exhibit VI: Market Share of GM in the US (%) (1991-2008)
Exhibit VII: Stock Price Chart of GM (February 1999 - December 2008)
Exhibit VIII: Restructuring Targets as Specified in Secured Term Loan Facility
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