General Motors 10k

“Any increases in the price of oil in the U. S. or in our other markets or any sustained shortage of oil, including as a result of political instability in the Middle East and African nations, could weaken the demand for such vehicles, which could reduce our market share in affected markets, decrease profitability, and have a material adverse effect on our business. ” Page 26 “The majority of our vehicle sales are generated outside the U. S. We are pursuing growth opportunities for our business in a variety of business environments outside the U. S. Operating in a large number of different

regions and countries exposes us to political, economic, and other risks as well as multiple foreign regulatory requirements that are subject to change” Page 37 Understanding: The political statements above are part of PESTLE because the fluctuation price of oil and the multiple foreign regulatory requirements caused by political instability affects the demand for cars which in turn disturbs the business prosperity for General Motors. Assessment: Political instability is an important factor to understand since all auto manufacturers must abide by the rules set forth in a geopolitical world.

General Motors is no different since the political instabilities affect the price of oil which largely influences the demand for their vehicles. Also, Expanding to different regions brings multiple foreign regulatory requirements that change the amount of business they can obtain. Overall, there are many changes General Motor must adhere to in an ever altering geopolitical realm and having a competitive advantage is being able to modify their business strategy to better suit their needs. 2. Economic Statement:

“Failure of our suppliers, due to difficult economic conditions affecting our industry, to provide us with the systems, components, and parts that we need to manufacture our automotive products and operate our business could result in a disruption in our operations and have a material adverse effect on our business. ” Page 27 Understanding: This statement represents the economic portion of PESTLE because the economic conditions are what affect the suppliers, components, and parts needed for the production of General Motors. Assessment:

The economic conditions manufacturers must face are a critical component of how they run their business activities. As stated above, the difficult economic conditions General Motors’ faces causes strain on their production. These conditions not only affect General Motors but also their suppliers which overall causes a domino effect in the chain of productivity. In conclusion, economic conditions are factors that cannot be ignored since companies must be ready to react to variable circumstances at any moment. 3. Sociocultural Statement:

“Our ability to change public perception of our company and products is essential to our ability to attract a sufficient number of consumers to consider our vehicles, particularly our new products, which is critical to our ability to achieve long-term profitability. ” Page 26 “The automotive industry, particularly in the U. S. , is very competitive, and our competitors have been very successful in persuading customers that previously purchased our products to purchase their vehicles instead as is reflected by our loss of market share over the past three years.

We believe that this is due, in part, to a negative public perception of our products in relation to those of some of our competitors. ” Page 26 “If we are unable to change public perception of our company and products, especially our new products, including cars and crossovers, our results of operations and financial condition could be materially adversely affected. ” Page 26 Understanding: These multiple statements correspond to the sociocultural area of PESTLE since perception and cultural values are what influences General Motors sales and long-term productivity.

Assessment: It is significant in understanding the cultural values and perception of the consumers you are trying to target since cultural values can change over time. Recent observation of the vehicles General Motors offered was viewed negatively by society. This allowed competitors to expose that weakness by comparing their vehicles in a greater light. In summary, changing the public perception of General Motors is vital, especially with their upcoming products since their standards need to adhere to the current cultural values. 4. Technological Statement:

“We generate and hold a significant number of patents in a number of countries in connection with the operation of our business. While none of these patents by itself is material to our business as a whole, these patents are very important to our operations and continued technological development. ” Page 12 “The pace of our development and introduction of new and improved vehicles depends on our ability to implement successfully improved technological innovations in design, engineering, and manufacturing, which requires extensive capital investment.

” Page 27 “Any capital expenditure cuts in these areas that were made in the past or that we may determine to implement in the future to reduce costs and conserve cash could reduce our ability to develop and implement improved technological innovations going forward, which may materially reduce demand for our vehicles. ” Page 27 Understanding: These statements embody the technological facet of PESTLE because with the rapid evolution of technology, General Motors needs to be swift with their technological advances to have a competitive advantage. Assessment:

Technology in current society is perpetually growing at a rate faster than any other period. General Motors is aware of this and in order to stay technologically ahead of the curve they must constantly invest greatly on their technological innovations to maintain a competitive advantage. The reason they must always have a technical edge on everyone is because of the current aggressive environment dictating that competitors will be coming out with greater and innovative products than the last. Therefore, General Motors continues to strive for technical advancement through their designs, engineering, and manufacturing.

5. Legal Statement: “Our products must satisfy legal safety requirements. Meeting or exceeding government-mandated safety standards is difficult and costly because crashworthiness standards tend to conflict with the need to reduce vehicle weight in order to meet emissions and fuel economy standards. While we are managing our product development and production operations on a global basis to reduce costs and lead times, unique national or regional standards or vehicle rating programs can result in additional costs for product development, testing, and manufacturing. ”

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“We are committed to meeting or exceeding these regulatory requirements and our product plan of record projects compliance with the anticipated federal program through the 2016 model year. ” Page 34 Understanding: These statements satisfy the legal component of PESTLE because General Motors must abide and follow certain requirements and policies to maintain business in a domestic and global scale. Assessment: All companies in a domestic and global setting must comply with various laws in order to effectively execute their operations which can range from competition regulations to labor laws.

General Motors is no different since they must adhere to strict regulations and policies in their business activities in order to meet safety standards. Even though these requirements are costly to their productivity, General Motors is committed to meeting and exceeding the regulatory requirements in a global level. To sum up, General Motors upholds standards through policies and regulations because they are a reality in a legal environment but also are an essential component in production for the safety of their consumers. 6. Environmental

Statement: “We are actively working on aggressive near-term and long-term plans to develop and bring to market technologies designed to further reduce emissions, mitigate remediation expenses related to environmental liabilities, improve fuel efficiency, monitor and enhance the safety features of our vehicles and provide additional value and benefits to our customers. ” Page 19-20 “The conversion of many of our manufacturing facilities to landfill-free status has shown our commitment to mitigate potential environmental liability.

We believe that the development and global implementation of new, cost-effective energy technologies in all sectors is the most effective way to improve energy efficiency, reduce greenhouse gas emissions and mitigate environmental liabilities. ” Page 20 Understanding: The environmental section of PESTLE is represented in these statements because it demonstrates how General Motors is committed to reducing the environmental liabilities by setting up plans to reduce their waste from manufacturing productions.

Assessment: With the current trend in wanting to make products environmentally safe for the world, competitors are striving to reach that epitome by creating vehicles and methods to reduce their waste. General Motors is conscious of this fact and is taking the proper measures and steps to become the industries leader in reducing emissions, mitigating remediation expenses, improving fuel efficiency, and enhancing safety features.

What is important to note about this strategy is the fact that General Motors wants to help the world by reducing the amount of waste created as well as bettering the company’s prestige by becoming an environmental leader in the marketplace. 7. Current Competitors (and intensity of rivalry among them) Statement: “We operate in a highly competitive industry that has excess manufacturing capacity and attempts by our competitors to sell more vehicles could have a significant negative effect on our vehicle pricing, market share, and operating results.

” Page 28 “Many manufacturers have relatively high fixed labor costs as well as significant limitations on their ability to close facilities and reduce fixed costs. Our competitors may respond to these relatively high fixed costs by attempting to sell more vehicles by adding vehicle enhancements, providing subsidized financing or leasing programs, offering option package discounts or other marketing incentives, or reducing vehicle prices in certain markets.

Manufacturers in lower cost countries such as China and India have emerged as competitors in key emerging markets and announced their intention of exporting their products to established markets as a bargain alternative to entry-level automobiles. These actions have had, and are expected to continue to have, a significant negative effect on our vehicle pricing, market share, and operating results, and present a significant risk to our ability to enhance our revenue per vehicle. ” Page 28 ” Many of our competitors operate and control their own captive financing subsidiaries.

If any of our competitors with captive financing subsidiaries are able to continue to offer consumers and dealers financing and leasing on better terms than our customers and dealers are able to obtain, consumers may be more inclined to purchase our competitors’ vehicles and our competitors’ dealers may be better able to stock our competitors’ products. ” Page 31 Understanding: These statements embody current competitors force from Porter’s Five Forces because it shows the foreign competitor and their financial subsidiaries General Motors has to compete with in a global market.

Assessment: In the auto manufacturing industry there are many competitors battling to be the industry’s leader and hold the largest market share. General Motors is no different, facing heavy opposition from many companies foreign and domestically trying to sell similar products but with marginal added value differences. Some of the ways the opponents try to gain an upper hand in the marketplace is by selling more vehicles with bundled discounts as well as offering subsidized financing or leasing programs that General Motors may not keep up with at all.

Overall, competition in the auto manufacturing industry is enormously intense since no one company will be at number one for a long time without heavy resistance from opposition. 8. Threat of new entrants (and exit/barriers more generally) Statement: “Our business in China is subject to aggressive competition and is sensitive to economic and market conditions. ” Page 35 “Maintaining a strong position in the Chinese market is a key component of our global growth strategy.

The automotive market in China is highly competitive, with competition from many of the largest global manufacturers and numerous smaller domestic manufacturers. As the size of the Chinese market continues to increase, we anticipate that additional competitors, both international and domestic, will seek to enter the Chinese market and that existing market participants will act aggressively to increase their market share. Increased competition may result in price reductions, reduced margins and our inability to gain or hold market share.

In addition, our business in China is sensitive to economic and market conditions that drive sales volume in China. If we are unable to maintain our position in the Chinese market or if vehicle sales in China decrease or do not continue to increase, our business and financial results could be materially adversely affected. ” Page 35 Understanding: The threat of new entrants from Porter’s Five Forces is portrayed in the statements because to compete in a global scale General Motors must contend against China and the many up and coming companies it contains.

Assessment: In any industry there will be various threats of new entrants, but in the auto manufacturing industry having such a high barrier of entry and exit causes it to have highly competitive and established competitors. The enormous amount of resources and investment required to enter the auto manufacturing market is so large that most companies without heavy backing from other financial institutions would not be able to compete or shortly fail after entering.

General Motors acknowledges the Chinese market as a threat in their global growth because as the foreign economy increases so will the amount of competitors entering the industry. In summary, the high barriers as well as the exits make this industry a heavily invested marketplace but those that manage to compete are there because of multiple supports from various financial units who are betting their success in the auto manufacturing industry. 9. Suppliers (and their bargaining power) Statement:

“We rely on many suppliers to provide us with the systems, components, and parts that we need to manufacture our automotive products and operate our business. In recent years a number of these suppliers have experienced severe financial difficulties and solvency problems, and some have sought relief under the Bankruptcy Code or similar reorganization laws. ” Page 27 “When comparable situations have occurred in the past, suppliers have attempted to increase their prices, pass through increased costs, alter payment terms, or seek other relief.

In instances where suppliers have not been able to generate sufficient additional revenues or obtain the additional financing they need to continue their operations, either through private sources or government funding, which may not be available, some have been forced to reduce their output, shut down their operations, or file for bankruptcy protection. Such actions would likely increase our costs, create challenges to meeting our quality objectives, and in some cases make it difficult for us to continue production of certain vehicles.

To the extent we take steps in such cases to help key suppliers remain in business, our liquidity would be adversely affected. It may also be difficult to find a replacement for certain suppliers without significant delay. ” Page 27 Understanding: These statements represent suppliers of Porter’s Five Forces because it portrays all the suppliers General Motors relies on for their manufacturing parts as well as the tight negotiations that happen when the economy is not favorable. Assessment: In the value chain analysis, suppliers participate in a critical role because companies need them for the resources they supply for daily manufacturing.

General Motors recognizes this importance and takes such steps to help certain key suppliers continue to stay in business by aiding them in their financial needs. Suppliers on the other hand also have large bargaining power, especially the essential providers because when they are not able to meet their revenue needs they end up increasing the prices of their resources which in turn pass on the costs to the auto manufacturers. To sum up, General Motors is in critical need of important providers to maintain business, exposing itself to price and supply risk allowing suppliers to have large bargaining power.

10. Buyers (and their bargaining power) Statement: “Our ability to achieve long-term profitability depends on our ability to entice consumers to consider our products when purchasing a new vehicle. The automotive industry, particularly in the U. S. , is very competitive, and our competitors have been very successful in persuading customers that previously purchased our products to purchase their vehicles instead as is reflected by our loss of market share over the past three years.

We believe that this is due, in part, to a negative public perception of our products in relation to those of some of our competitors. Changing this perception, including with respect to the fuel efficiency of our products, as well as the perception of our company in light of Old GM’s bankruptcy and our status as a recipient of aid under the Troubled Asset Relief Program (TARP), will be critical to our long-term profitability.

If we are unable to change public perception of our company and products, especially our new products, including cars and crossovers, our results of operations and financial condition could be materially adversely affected. ” Page 26 Understanding: Buyers from Porters Five Forces is illustrated in this statement because it depicts the consumers General Motors has to deal with and the current perceptions of their products they want to change allowing clients to have an upper hand in their needs. Assessment:

Buyers are an important part of the auto manufacturing industry because products are modified to meet the needs of consumers. General Motors realizes how important buyers are to their growth in the market by adding value to their products and passing on the savings to the consumer. Since recent years, the current perception of General Motors vehicles is that they are inferior to their competitors. They understand this notion and continue to customize their products to meet the values of customers so that perception can change for future success.

In turn, this needed change for opinion is what allows buyers to have large bargaining power because General Motors wants to be deemed the best amongst its competitors. 11. Threat of substitute’s products/services Statement: “There can be no assurance that these advances will occur in a timely or feasible way, that the funds that we have budgeted for these purposes will be adequate, or that we will be able to establish our right to these technologies. However, our competitors and others are pursuing similar

technologies and other competing technologies, in some cases with more money available, and there can be no assurance that they will not acquire similar or superior technologies sooner than we do or on an exclusive basis or at a significant price advantage. ” Page 34 Understanding: Threat of substitute’s products/services from Porter’s Five Forces is portrayed in this statement because it explains how the competitors against General Motors are pursuing similar or competing technologies to have a competitive edge against them. Assessment:

Substitutes are always a concern for companies who want to become leaders of their perspective industry and General Motors is no exception to the rule. Since the auto manufacturing industry is extremely competitive, General Motors must always consider its opponents when developing a product since most likely they will mirror or create better featured vehicles to gain a competitive advantage in the market. Certain cases are that competitors will have more resources or better technologies that will allow an upper hand in the industry so General Motors must anticipate this and react accordingly to gain leverage.

Overall, General Motors realizes when new technology becomes available in their latest products, rivals will be ready to meet them with similar if not advanced features developed in their vehicles for substitution superiority. 12. Strengths Statement: “Our future competitiveness and ability to achieve long-term profitability depends on our ability to control our costs, which requires us to successfully implement restructuring initiatives throughout our automotive operations.

” Page 27 “We are continuing to implement a number of cost reduction and productivity improvement initiatives in our automotive operations, including labor modifications and substantial restructuring initiatives for our European operations. Our future competitiveness depends upon our continued success in implementing these restructuring initiatives throughout our automotive operations, especially in North America and Europe.

While some of the elements of cost reduction are within our control, others such as interest rates or return on investments, which influence our expense for pensions, depend more on external factors, and there can be no assurance that such external factors will not materially adversely affect our ability to reduce our structural costs. Reducing costs may prove difficult due to our focus on increasing advertising and our belief that engineering expenses necessary to improve the performance, safety, and customer satisfaction of our vehicles are likely to increase. ” Page 27 Understanding:

Strength aspect of SWOT is represented in these statements because it describes General Motors competitive edge for long-term profitability and success. Assessment: The future success of a company relies on their competitive advantage with the current industry and no company can stay the same for a long period of time and expect the same results. General Motors understand this and acknowledges the fact that in order to stay competitive in today’s marketplace changes need to be made, starting off with the continued success in implementing restructuring initiatives through their automotive operations.

In turn, being able to restructure their initiatives will allow them to cut costs which will result in long-term profitability in their industry. To put it briefly, General Motors’ strengths relies on their ability to restructure their initiatives because staying stagnant in their industry will allow competitors to gain a competitive advantage over them. 13. Weaknesses Statement: “Given the nature and global spread of our business, we have significant exposures to risks related to changes in foreign currency exchange rates, commodity prices, and interest rates, which can have material adverse effects on our business.

For example, at times certain of our competitors have derived competitive advantage from relative weakness of the Japanese Yen through pricing advantages for vehicles and parts imported from Japan to markets with more robust currencies like the U. S. and Western Europe. In preparing the consolidated financial statements, we translate our revenues and expenses outside the U. S. into U. S. Dollars using the average foreign currency exchange rate for the period and the assets and liabilities using the foreign currency exchange rate at the balance sheet date.

As a result, foreign currency fluctuations and the associated translations could have a material adverse effect on our results of operations. ” Page 37 Understanding: Weaknesses part of SWOT is symbolized in this statement because it illustrates the weakness General Motors faces with the currency exchange in foreign markets. Assessment: With strengths comes weaknesses and General Motors is no exception since the past few years has been tough on them economically.

Recently, General Motors has had financial strains with the current exchange rates in foreign markets since most of their revenue is converted from their acquired foreign currency into U. S. Dollars. The fluctuation of foreign currency exchange rates exposes General Motors to risks “related to changes in foreign currency exchange rates, commodity prices, and interest rates. ” In general, General Motors wants to continue expanding globally to reach many foreign markets, but in the process can end up hurting them financially since exchange rates can fluctuate wildly at any moment. 14. Opportunities Statement:

“As part of our long-term strategy to reduce petroleum consumption and greenhouse gas emissions we are committed to continuing development of our hydrogen fuel cell technology. We and Old GM have conducted research in hydrogen fuel cell development spanning more than 40 years, and we are the only U. S. automobile manufacturer actively engaged in all elements of the fuel cell propulsion system development in-house. ” Page 10 “In the U. S. , passenger cars and light-duty trucks are subject to state and local motor vehicle noise regulations. We are committed to designing and developing our products to meet these noise regulations.

Since addressing different vehicle noise regulations established in numerous state and local jurisdictions is not practical, we attempt to identify the most stringent requirements and validate to those requirements” Page 19 Understanding: The opportunities piece of SWOT is presented in these statements because General Motors is committed in the continuing development of hydrogen technology and to meet the future noise regulations in their products. Assessment: As technology advances so too will the opportunities, General Motors comprehend this and as a result invest heavily into research and development.

General Motors sees an opportunity to succeed in the fuel segment of their industry because of their commitment to continuing development of their hydrogen fuel cell which will allow them to be the only manufacturer “engaged in all elements of the fuel cell propulsion system development. ” Another opportunity they are seeking to fulfill is creating future products to meet noise regulations which will add value to their vehicles. In essence, General Motors uses these opportunities through hydrogen fuel cell and noise regulations to gain a competitive advantage unparalleled by their competitors.

15. Threats Statement: “On October 1, 2010 we completed our acquisition of AmeriCredit, which we subsequently renamed General Motors Financial Company, Inc. through which we offer leasing and sub-prime financing for our customers. Our failure to successfully develop our own captive financing unit, including through GM Financial, could result in our loss of customers to our competitors with their own captive financing subsidiaries and could adversely affect our dealers’ ability to stock our vehicles if they are not able to obtain necessary financing at competitive rates from other sources.

”Page 31 “Several of the agreements governing our indebtedness, including our secured revolving credit facility and other loan facility agreements, contain covenants requiring us to take certain actions and negative covenants restricting our ability to take certain actions. In the past, we have failed to meet certain of these covenants, including by failing to provide financial statements in a timely manner and failing certain financial tests.

A breach of any of the covenants in the agreements governing our indebtedness, if uncured, could lead to an event of default under any such agreements, which in some circumstances could give the lender the right to demand that we accelerate repayment of amounts due under the agreement. Therefore, in the event of any such breach, we may need to seek covenant waivers or amendments from the lenders or to seek alternative or additional sources of financing, and we cannot assure you that we would be able to obtain any such waivers or amendments or alternative or additional financing on acceptable terms, if at all.

Any covenant breach or event of default could harm our credit rating and our ability to obtain additional financing on acceptable terms. ” Page 36 Understanding: Threats feature of SWOT is depicted in these statements above because General Motors states they have failed in the past to meet certain covenants as well as failure to develop their own captive financing unit. Assessment: With opportunity come threats and they can come in many ways for a company.

General Motors has to deal with two kinds of threats which are developing their own financial unit and the failure to meet their covenants. Since General Motors does not have its own financing unit to provide to their clients, they fail to offer leasing and sub-prime financing which some competitors do, allowing a competitive edge against General Motors. Also, in the past General Motors has not been able to meet certain covenants or provide financial statements in appropriate time frame as well as failing financial tests.

With breaching a covenant, “could lead to an event of default under any such agreements, which in some circumstances could give the lender the right to demand that we accelerate repayment of amounts due under the agreement. ” Therefore, if General Motors does not find a way to solve these threats head on, it could spell the beginning of the end for their long-term prosperity. Competitive Strategy Statement: “Our top priority for research is to continue to develop and advance our alternative propulsion strategy, as energy diversity and environmental leadership are critical elements of our overall business strategy.

Our objective is to be the recognized industry leader in fuel efficiency through the development of a wide variety of technologies to reduce petroleum consumption. To meet this objective we focus on five specific areas: | |• | |Continue to increase the fuel efficiency of our cars and trucks; | | |• | |Develop alternative fuel vehicles; | | |• | |Invest significantly in our hybrid and electric technologies; | | |• | |Invest significantly in plug-in electric vehicle technology; and | | |• | |Continue development of hydrogen fuel cell technology.

” Page 8 | Competitive Strategy Represented: The type of competitive strategy General Motors aims to pursue is the “energy diversity and environmental leadership” strategy to have a competitive edge against their competitors and gain a large customer base. Assessment of Strategy: Since the turn of the 20th century, General Motors has been considered a prestigious company and how they set themselves apart from the rest of their competitors is with an “energy diversity and environmental leadership” strategy.

The importance of this strategy is that General Motors strives to develop products that will serve their customers with energy diversity instead of having to rely greatly on oil which is environmentally harmful and rapidly depleting. Other ways which they exemplify their strategy is by investing into technologies that will offer hybrid and electric technologies to better serve the environment by reducing the fuel emissions of the vehicles today.

The company also attempts to become the fuel efficiency leader since they are invested in making current vehicles more fuel efficient so customers will not be cost burdened by having to fill up their tanks constantly. General Motors also tries hard to become the environmental leaders in their industry by investing heavily in plug-in electric vehicle technology. The ability to be able to use electricity instead of petroleum to fuel cars will be a critical step in the right direction to improve our environment. Having to use electricity as well will help alleviate the political burden General Motors has to face fro