General Motor

At the new General Motors, they are passionate about designing, building and selling the world’s best vehicles. This vision unites of GM as a team each and every day and is the hallmark of their customer-driven culture. Based on an article published by Uncommon Thought in 2005, one of the biggest concerns relating to the day to day operations of General Motors was the increasingly erratic cost of fuel. Because GM relies on a steady supply of fuel for transportation of their vehicles and vehicle parts, high gas prices caused a significant reduction in General Motor’s profits,resulting in cutbacks wherever possible.

While cutbacks in staff, advertising and operations presented a temporary solution to GM’s budget, their long term affects were harmful to the company, resulting in reduced quality, reduced sales and a sharp decline in GM stock. According to a report published by Bloomberg Business Week in 2005, another issue that was directly contributing to problems at General Motors at that time had to do with the company’s inability to compete with its foreign competition. With foreign automakers manufacturing and selling vehicles at prices far less than GM could afford to, budget conscious consumers turned to foreign autos as a means to save money.

Because of the economic issues General Motors was facing, the company simply could not lower their prices enough to compete without creating economic hardship to its employees and investors. The cost of operations also played a large part in the problems faced by General Motors.

Already facing economic hurdles, governmental demands for tougher fuel standards posed an increased risk of economic hardship, forcing the company to spend money it did not have to redesign and improve its fuel models. According to an article published by Economist’s View, in as early as 2006, General Motors management was in heated negotiations with union representatives from United Auto Workers (UAW) over high wage and benefit demands for its workers. Salary increases and the cost of benefits for GM workers caused the already struggling company to spend money it simply could not afford.

Of all of the issues that contributed to the problems at GM, one of the largest contributing factors was a lack of consumer spending. The high rate of foreclosures and job losses in the United States, which began reaching crisis levels in the year 2006, resulted in a reduced level of spending on luxury items including new cars. Despite General Motor’s best efforts to lower prices and offer buying incentives in a bid to draw consumers, the reduction in sales proved too much for the automotive manufacturing company to bare, leading to its eventual.

As General Motors struggles to recover, it faces seven types of problems. First, the company needs to rationalize its product portfolio by decreasing its large reliance on light trucks, by reducing duplication in its model offerings, and by creating cars that will gain more profit. This also means aligning its product portfolio more closely with the income distribution in the United States. Second, the company’s position in the technologies of the future is uneven, so GM should at least consider rebalancing its efforts among these technologies.

Third, GM’s product development processes require improvement. Fourth, it must shrink itself to the smaller market share it will actually have and reduce its costs to the decreased revenues this share will produce. The bankruptcy GM went through in the spring of 2009 was wrenching, but did slash costs. However, the company will continue to need cost containment. Fifth, GM must maintain enough capital to get through the current very deep recession. Sixth, General Motors will have to create different and more beneficial relationships both with its foreign automotive competitors and with the United States government.

Finally, solving the first six types of problems probably requires changes in GM’s organizational structure and company culture. The structure that Alfred P. Sloan, Jr. created for the company requires some updating to aid GM in being competitive in a global industry, but part of the difficulty is that some of the beneficial parts of Sloan’s structure have been diminished or abandoned. This has meant that GM has been prone to make poor decisions. The United States government is the primary owner of General Motors at this time. It is uncertain whether the new Board of Directors the government has established for GM will help GM change its structure and culture in beneficial ways.

The very deep international recession has done great damage to General Motors, as well as to Ford and Chrysler, but less harm to some of their foreign competitors. Part of the threat that GM faces is that its productive model has become less relevant to its current markets. As we discuss General Motors’ strategies for conquering the types of problems it faces, we highlight how we think the company must alter its productive model. Our emphasis is on GM’s operations in the United States, as that is where it is experiencing the most serious reverses.