One of the most serious problems that GM faces is when the firm announced a $10. 6 billion loss, which was their first in 12 years. The auditors for General Motors even thought that the firm’s survival was in substantial doubt even if they received the additional $30 billion they were going to borrow from the federal government. The problems have grown as a result of mistakes by GM’s management over the last 30 years. They built up a bloated bureaucracy that supplied boring, low-quality cars for many years.
GM will also lose leadership of the United States market, having already been replaced by Toyota as the world’s largest automaker. GM has been burdened with a high cost structure result of contracts that they signed in order to end a prolonged strike by the United Automobile Workers. They faced the biggest challenge in dealing with health and retirement benefits that GM had. The huge costs made it difficult to cut back on the productions of GM, even if that meant they had to rely on incentives to get the cars of the lots.
They were also struggling with the sales of their lineups of passenger cars. Some people think that GM will not be able to move fast enough on their reorganization in order to become competitive again, and that they will fail in the meantime. Analysis: GM faces millions of dollars in losses; due to the government loans they were receiving in order to hopefully accomplish some restructuring play. The former heads such as Frederic Donner and Roger Smith were the reason that GM made mistakes, and resulted in making low quality cars.
GM claimed that they thought it made sense to give in to the union’s demands since the strike was started to be very costly, which resulted of the high cost of contracts that were signed to prolong the strike. GM had increased health costs that were causing them to have to cut back on the health care and retirement benefits that they were used to getting. The firm also dealt with the loss of smaller-car customers to more nimble and inventive Japanese competitors, which resulted in the struggle with the sales of the lineup of passenger cars.
GM faces several challenges, and seeking bankruptcy will have risk and place a heavy burden on them, and people will think twice about buying cars from GM, therefore GM will have trouble with becoming competitive again and reorganize fairly quickly. Alternatives: GM is planning on forming a restructuring plan to shrink the brands down to four, which would include Chevrolet, Cadillac, Buick and GMC. It also tends to lay off 47,000 of its 244,000 workers and close more than five plants.
GM has managed to negotiate with the United States Auto Workers for some relief from the escalating health care costs, which resulted in employees and retirees to pay for part of their health care-related costs for the first time. GM had decided to stick with the decision of their full-size, because they’re still generating a sufficient amount of revenue. The profits will be used in order to carry GM through their overhaul of its North America operation and offset its eroding market share. GM’s extensive brand lineup has been a primary weapon in beating back both domestic and foreign rivals.
GM is also searching for new terms for funding a trust fund for health care costs of retired workers. Recommendations: I would recommend that GM cut back on the firm’s production capacity, offered buyouts to hourly workers, and make pivotal agreements with the union to reduce health care costs for active and retired workers. GM has also been pushed to offer more attractive cars that would generate better reviews and improve profit margins. GM should work to restructure their four different geographic units in order to get them to collaborate with another on designing, manufacturing, and marketing cars.
GM believes that the additional loans from the Treasury Department and Energy Department will allow the firm to return to profitability, and they should finally be able to turn things around by 2012. I believe GM should use liquidity ratios in order to determine their financial analysis for their short-term progress. They need to use inbound logistics such as marketing and sales in order to help the business get aimed at selling their products, and to convince customers to buy their products compare to other competitors.