Generala Motors Final

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identify what are their key threat and key opportunities. These are the other two vital parts of the

business where one can be blessing and other can be curse. So these should be analyzed well by

each and every company for their strategic development as well as their business.

INTRODUCTION:

General motor, before many years it can be mentioned as the supreme power in the automobile

industry. At that time the competition in the automobile industry was not that much strong. But

the conditions have been changed in later periods. The company had tried to acquire as well as to

merge with other companies so as to show their global presence. The strategic decision made by

the GM was good in one sense and bad in another sense. Many strategic alliances have helped

them to gain competitive advantages in many markets around the world. Joint ventures also had

helped in order to reduce the cost of operation of the company and to increase the revenue as

well but at the same time these all agreement at the time of termination has caused huge loss in

revenue and greatly affected their good will in different parts of the world.

MISSION STATEMENT

"G.M. is a multinational corporation engaged in socially responsible operations, worldwide. It isdedicated to provide products and services of such quality that our customers will receive

superior value while our employees and business partners will share in our success and our

stock-holders will receive a sustained superior return on their investment."(GM,2009)



MAIN BRANDS UNDER GENERAL MOTORS

STRATEGIC ALLIANCES AND MEREGER AND AQUSITIONS IN

GENERAL MOTORS

MERGERS AND AQUISITION:

Every market in the world is under tough competition. This competition is playing a vital role in

every aspects of the business. In order to gain the competitive advantage from the market many



companies are adopting different strategies in the market. The main among them is the mergers

and acquisition process in the market. Many companies are trying their level best to expand their

business in other parts of the world with only one intention so as to gain the competitive

advantage. By the process of the mergers and acquisition companies are trying their level best to

come out of their weakness and threats. Each and every companies are doing their mergers and

acquisition according to their economy of scale and status in the market in the field of the

business. From the business we can say that the merging and acquisition are meant for the not

only to increase the share market but also to make their global presence stronger. A successful

alliance and merging are in the hands of the top level management. It depends upon how they

pre-evaluate all the strategic levels in it. (Weston,F,2004.p.45). The top level management in

every organization is the responsible head for the making critical decisions in the field of the

strategic development of the company. The decisions made by the management should be

flexible with the changing environment of the business. Else after making the strategic alliances

and mergers and it is not suited for the future business then the decision made by the company

was false and it will critically affects the company to a greater extent. Especially this automobile

is very dynamic industry and every aspects of it changes with time and customer change in

demands globally.

In the recent period many companies are focusing towards the developing countries for the future

growth. The countries in the Asian continents are showing dominant growth in the automobile

industry. India, China and South East Asian countries are showing above 25% in the financial

period 2004 and 2005. The enormous growth in these countries has attracted many companies.

Many global companies have started to make alliances as well as merging with many companies

in these regions. General Motors are making their position stronger in the Chinese region by

doing acquisition or investing in equity stakes. (GM, 2009).

Let us discuss about the different strategic alliances which was made by GM motors with

different other automobile industries in the world. In the year 2000 GM motors and FIAT motors

were signed with for strategic alliances. The alliances was about mutual consent signed between

two companies in the all the fields of strategic business. In this mutual consent GM take over

20% of the stake from the FIAT motors and Fiat has took over 5.1% stakes from the GM motors.



In this strategic alliance they had signed for the setting up of the purchasing and power train joint

venture.

In the year 2002 Gm motors has announced to set up some strategic plans with the fiat motors. In

which they started to research and develop different components and systems for the small cars

in the European market as the demand for the small cars in the European region has increased in

the mean time. GM and Fiat motors have maintained this alliance in order not to affect the

branding of the vehicle but at the same time in order to ensure greater efficiency for the output.

Another major important alliance made by GM motors was with the Daewoo motors. In this GM

motors need Daewoo to take over 3% of the European market in three years and this will come

around 450,000 units of sale per year. In the year the share of the Daewoo had gone down to the

0.81% in the financial year 2001 and 2002. So in the year 2002 Gm and Daewoo had started a

new venture of business named as GM Daewoo Auto & Technology Europe. The company head

was Erhard Spranger. He was the CEO and head of the operation of Opel motors in Italy. The

newly setup company will look after the Daewoo sales subsidiaries in the European region and

planned to supply the small kalos model from September to the European countries. (GM, 2009).

Alliance with Honda motors: Honda and Gm were alliance together for vehicle recycling in

European region in the year 2002. Here Honda will use the GM team to collect the scrapped

vehicles across the Europe. The main intention of the strategic alliances was to share information

on technology between the two companies to share the ideas to disassemble vehicles and so as to

produce recycle as well eco friendly automotive spare parts. This strategic alliance has helped in

order to reduce cost because in the year before European government had notified that all the car

manufactures should collect scrapped vehicles from the consumers at free of cost and this is

alliance is expected to make high savings on the future years. (GM, 2009).

Alliance with MMC Norilsk Nickel: GM and MMC Norilsk Nickel had signed up for a strategic

alliance in October 2002. As per the alliance they had signed for long term supply of palladium,

platinum and rhodium supply contract. It was a supply contract made by GM with MMC Norilsk

Nickel. It was the beneficial from the side of MMC Norilsk Nickel because they were in a

strategy in order to increase the number of strategic deals so as to ensure the stability in their

operations.



Strategic alliance with AutoVAZ: In the year 2001 Gm signed joint venture agreement with the

AutoVAZ motors. Autovaz is a Russian automobile industry. Under this new joint venture they

both own 41.5% of the share and the rest of the share were owned by EBRD. This joint venture

project is about 332$ million worth. They developed new cars based on the Russian platforms

and they sold the cars in Russia under the new name Chevy Niva. The targeted production of this

joint venture was about 75000 units an annual basis. The plant was set up in the region called

Togliatti about 1000 kilometers south east of Moscow and started production in the year 2002.

The company has reached it full production at the year 2004 which helped them to export 40000

vehicles annually to western and central Europe parts and to the Mexico as well. The control of

operation management of this joint venture was under general motors. The boards of directors

were selected from GM, AutoVAZ as well as one from EBRD. (GM, 2009).

Joint venture with Toyota motors: Toyota motors one of the top listcar manufacture in the world.

The company is based from Japan. In the year 1984 a manufacturing unit named NUMMI was

started in the north america as a part of the joint venture between the general motors and toyota

motors. The expansion of NUMMI is New United Motor manufacturing Unit Inc. Basically

NUMMI was setup by the GM motors in the year 1960 but in the later part of 1982 due to the

labour and other legal issues the plant was closed down. In the year 1984 it has been restarted as

a joint venture between toyota and general motors. The plant had a capacity of 6000 units of

vehicles per week having nearly 5000 employees. The main startegic intentions behind this

strategic alliance was different from each companies. From the view of GM there main intention

was to study the manufacturing and production techniques from a Japan company but from the

view of toyota motors is entirely different. Toyouta was finding hard to setup a plant in north

america and to enter into the american market but with thelp of this joint venture they find an

easy pathway to enter into the american market. But by the end of the year 2009 the they planned

to close down this joint venture as it becomes difficult for both companies to continue with the

agreement. The main reasons behind closing down of the NUMMI car plant was: Both thecompanies find difficluty to produce siutable products in this plant. Both the companies were

find its difficult to sort a plan for production which suits for both companies. (BBC, 2010).

Joint venture with Isuzu motors: General motors and the famous automobile company of Japan

named Isuzu motors have signed for joint venture. In many field of the automobile business they



had very good relation. The joint venture agreement was signed in the year 1971 but this venture

has come at its full flow only on later part of the 21st century. In the later part of 2002 Gm

brought 50% of the share from Isuzu motors and in the year 1998 they had setup a company

named DMAX ltd and production plant in the USA. The main intention of forming DMAX

Company was produce 100,000 units of 6500cc CRDI- common rail direct injection diesel

engines. Even though the deal to setup DMAX was signed on the year 1998 the company came

into fully functional only on the later periods of 2004. Under this joint venture agreement GM

had given full control of research and development of the diesel for the commercial vehicle is

given to Isuzu motors. (Isuzu, 2004).

Acquisition of SAAB motors: In the year 1989 general motor had bought some of the shares

from SAAB motors. In that period fiat owned the major shares of the SAAB motors. In the year

2000 the general motor has acquired the full ownership of SAAB motors by making a large bid

on SAAB. At the same time GM has been looking to acquire Volvo Company but it has been

taken over by ford and they diversified their focus towards SAAB motors. (SAAB,2010)

BUSINESS ETHICS AND SUSTAINABILITY

BUSINESS ETHICS AND GM

The business ethics can be judge by considering the fact around four major ethical perspectives

which ultimately determines the mortality of the business. Out of this four, the first and main

perspective is the natural right or rights perspective, which deals with weather the business,

violates or follows the rights. The next one is the consistency perspective, normally deals with

the equality and the question “what would happen if it were done or practiced with by every

one?” The third one is the virtue perspective deals with the impact of a practice and action on

the character of the people. Final consideration is the utilitarian perceptive, this includes the

consequences of the action or practice over a long term on the society.(American thinker,2009)

As we all know due to the rapid market penetration of the Japanese car manufacturing companies

and the capturing of the cost leadership from the American car manufacturing companies, the

companies like Ford, GM had came to bankruptcy. In the case of GM the Obama administration



had spent a lot of money in saving the company rather than letting the company to handle its

condition and reorganizing in the free market. He spent billions of taxpayer dollars to reorganize

the company and to obtain the output the US people wanted from the company. The contribution

from the united auto workers union (UAW) is millions made the company owned by the federal

Government and UAW. (GM, 2009).

The above situation can be considered as ethical repugnant when viewing from the right

perspective. To be more clear the right of the stake holders or the creditors about the settlement

has been completely violated. According to the consistency perspective the nationalization

strategies of Obama using his political power was against all the longstanding principles that

could secure the priority of the creditors to get their asset. The forced nationalization of the

company is unethical if we see the situation in the Utilitarian perceptive.(American

thinker,2009). Likewise cut in the pension and other benefits of the employees made a lot of

criticism against the company. in 2006 the chief executives of the company agreed to reduce

their pay to 50 % to save the company from the bankruptcy. So the different strategies GM

implemented like job cut, work load on employees can also be considered as the unethical

polices of the company to maintain the sustainability. Let see the strategy evaluation of the

company.

SUSTAINABILITY POLICIES - METRICS

GM has implemented a sustainability strategy called Metrics of sustainable manufacturing. The main

objective of this strategy is to maintain green and sustainable operation and manufacturing .The strategy

is implemented by the effectiveness and effort of each one in the company. The employees are divided

into sub groups on the metrics strategy they are

• GM -Global Environment Matrices Team

• GM -Energy Cost Council

• GM -Energy and Utility Services Groups

• GM -Global Environment Issue Team

• GM Worldwide facility group



• The Energy and Environment strategy board

• Gm Global Energy Team

The whole system will come under this strategy. The R and D departments will analyze and selects the

most suitable manufacturing process with respect to the green approach. The procedure is largely

recommended to the whole Global GM group to get global sustainable production method.

THE DRIVERS FOR SUSTAINABILITY METRICS INCLUDE

• The energy conception and environment, is becoming more important for every organization

because of the global acceptance of the phenomena like climate change and global warming.

• Energy security : This is important for all large scale business due to the factor like energy price

fluctuations and energy conservation issues, which may directly impact the profitability and

capital planning of the company.

• Public Awareness and Branding: Now a days the sustainability of the business has become a

more relevant factor in the purchasing decisions of the customers. So the customer preferences

have changed to sustainability related issues.

• Improved technology and manufacturing methods : The development of more effective

technology which have a positive impact on the environment in very critical in the sustainability

of the company. This can be achieved through advanced technologies with a lower cost.

SUSTAINABLE MANUFACTURING METRICS



Even though the key of the sustainable metrics is for the manufacturing, it is applied indirectly to all

metrics in the industry. The characteristics of the metric includes

• Can effectively address the need and demand of all stakeholders (Government , customer ,

business)

• It enables growth and facilitate innovation

• It coordinates and harmonies the international level operations with the national, state, and local

level operations.

• It is a measuring system for the right things.

Out of developed criteria the best criteria is selected and implemented definite inside and outside analysis

of the industry. The environment and social impact will hold the prime importance.” The effort is to

accurately collect data and effectiveness to measure theta data”.

So a literature review is performed to know the better suit manufacturing strategy. The manufacturing is

maintained in the sustainability level by 6 R innovation elements .GM believes that “ it is obvious from

review research that if a company wants sustainability manufacturing it has to take holistic approach.”

Business Ethics and Scandals about GM



The business ethics can be judge by considering the fact around four major ethical perspectives which

ultimately determines the mortality of the business. Out of this four, the first and main perspective is the

natural right or rights perspective, which deals with weather the business, violates or follows the rights.

The next one is the consistency perspective, normally deals with the equality and the question “what

would happen if it were done or practiced with by every one?” The third one is the virtue perspective

deals with the impact of a practice and action on the character of the people. Final consideration is the

utilitarian perceptive, this includes the consequences of the action or practice over a long term on the

society.(American thinker,2009)

As we all know due to the rapid market penetration of the Japanese car manufacturing companies and the

capturing of the cost leadership from the American car manufacturing companies, the companies like

Ford, GM had came to bankruptcy. In the case of GM the Obama administration had spent a lot of money

in saving the company rather than letting the company to handle its condition and reorganizing in the free

market. He spent billions of taxpayer dollars to reorganize the company and to obtain the output the US

people wanted from the company. The contribution from the united auto workers union (UAW) is

millions made the company owned by the federal Government and UAW.

The above situation can be considered as ethical repugnant when viewing from the right perspective. To

be more clear the right of the stake holders or the creditors about the settlement has been completely

violated. According to the consistency perspective the nationalization strategies of Obama using his

political power was against all the longstanding principles that could secure the priority of the creditors to

get their asset. The forced nationalization of the company is unethical if we see the situation in the

Utilitarian perceptive.(American thinker,2009). Likewise cut in the pension and other benefits of the

employees made a lot of criticism against the company. in 2006 the chief executives of the company

agreed to reduce their pay to 50 % to save the company from the bankruptcy. So the different strategies

GM implemented like job cut, work load on employees can also be considered as the unethical polices of

the company to maintain the sustainability. Let see the strategy evaluation of the company.

GM - analyzing the Problems

The central principle of any organization is creating value to the customers by giving products and

services according to their needs. So if a company fails to keep in touch with the needs and want of the

customer they may be in danger because the gain is all for the competitors. This was happened in the

cause of GM because of the uncompetitive vehicles and lack of innovations. The GM recognizes the

competition because of the high market share and stability in the performance of the last recent years.

When company realized the competition it was too late. The main reason behind this is that the company



was never ready to change their culture rapidly to adopt the changes due to competition. Since Toyota had

expanded their capability and capacity rapidly with respect to the market demand to capture the market

share it become really hard to GM to maintain the market share. Some of the reasons of the company are

follows

• Bad financial policies: Company made some wrong financial decision by loaning the money

through the financial arm of the company. This restricts the company to invest the money in R&D

and manufacturing. Due to this the liquidity problem raised in the company.

• Uncompetitive Vehicles: Even though the sale of some vehicles diminished company continue to

produce the same model without knowing the demand in the market. Poor design and old model

vehicles forced the market share reduction of company.

•

Ignoring the competition: This was the greatest mistake GM made. Ignoring the competition for almost fifty year. Toyota utilizes time to build market. While Toyota capturing market GM was

losing market.

• Future Innovations: since the company was more focused to the financing the R & D department

was really passive. No investment in R & D resulted in ignorance of designing and building better

cars.

• Managing the employees: the job appraisal of the company was based on inward focus. So the

customer attention and satisfaction was not a factor under consideration. Poor performances of the employees are unnoticed in the company.(Valuechain group,n.d.)

OPPORTUNITY IN GREEN TECHNOLOGY

When considering the present consumer trend , we can see that more than 60 percent of the customers are

giving more importance to the reduced environment impact of the vehicles ultimately indicates the use of

green technology in the manufacturing, and the rest of the customer gave importance to the safety.

Almost all the auto makers are more concentrated to the green technology by placing, of hybrid cars and

less carbon emission vehicles.(greentechnology,n.d.)

Even though General Motors have to travel along way before they can pay a $ 50 million to the

government, the company also shows a good initiative green technology to utilize the advantage.

Chevrolet, one of the main brands of GM has announced an investment of about $ 40 million in clean

energy project and fro the development of the environment friendly cars. The aim objective of this is to



reduce the about 8 million metric ton carbon dioxide. The car named Chevrolet Volt electric car is win the

green car in US. This achievement is due to the extended capability of the car. The car can run on pure

electricity up to 25 to 50miles with a single battery charging. (Media.GM,n.d.)

The environmental honor received to the Volt of GM can be considered as good mark for the right way to

exploiting the market demand. In addition to that GM shares are started trading as the biggest US IPO

ever on the same day which is also a good sign for the company opportunity in that sector. This award

had made a new good start for the 102 year old automotive giant of the globe. The investment of the

company is now more focused on the public relation and demand in order to avoid the great mistake

again. As per the information GM had reduced the carbon emission of the vehicles 60 percent since 1990,

but company could not effectively market it. Understanding the fact that what ultimately matters is the

kind of the care the company makes.GM expect a near bright future with the great market influence and

share as before without missing any opportunity for development.(ecoelectricblog ,2010)

GM THREAT 2010 : LIQUIDITY PROBLEM.

In the beginning of the 2010 Gm announce d that they will be closing their rand SAAB brand because o

the brand is running in the money loss. General motors have made an attempt to sell the Swedish car to

the Spyker cars. But this has made a negative impact on the customer of SAAB. So they had protested

against the decision of General motors. The main reason of this entire problem when we look from the

side of GM is the insufficient liquidity of the company. the company have to pay an $ 50 billion to the

government is one among the major threat of liquidity. For example during the psat few years thecompany had planned number of restructuring plans to improve the competitive position, profitability

working capital etc. but due to the insufficient liquidity problem the company could not establishment the

plan and fall in the bankruptcy. So the liquidity is one of the major threats of general motors. .(GM

corporation,2008). Lets see some of the main reason behind this threat.

The company had struggled a lot to overcome from the bankruptcy and the involvement of the Federal

government enabled the company to be sustaining the position in he market. So the dept of the company

is more than $ 50 billion, which is the tax payers money to which the company is responsible for. So the

investment of the company will be restricted to an extent and in effect will reduce the liquidity. The tight

competition in the automobile industry will increase the intensity of this threat because, in order to

maintain the market the company need to be implement new strategies which requires the investment.

General motors are facing tight competition in the foreign as well as the domestic market. The rate of the

row materials in the international industry and transportation cost is also increasing which can make a



challenge for the company to manufacture cost effective cars. Considering all this factors of liquidity

threat GM has to develop an effective strategy to overcome the liquidity threat.

Recommendations

• The increasing negative publication of the press about the company can affect the good will of the

company. The low response of the company to this type of publication is one of the weaknesses

of the company. Since this create a negative impression on the customers and the shareholders it

should be avoid through good customer centric programs and advertisements.

• Increase the good will of the company by maintaining good relation with the customers,

government and the public.

• Enhance the research and development department for the effective utilization of the advanced

technological advantages. Since competition is tight company have to be equipped to face any

market challenge.

• Regulate the number of dealership and control and coordinate their activities to reduce the

operational cost of the company.

Conclusion

General motor was founded in 1908 and from then the company had come through a lot of challenges and

achievements. They were the global leader of the car manufacturing for more than 50 years with the

largest global market. The operation of the company is available in more than 140 countries all over the

world. Even though the company was giant strong, some of the wrong policies and ignorance affected the

growth and stability to a great extend and GM had played a lot for the same. In spite of this different

business environment company came across the made great come back by abstracting the bitter lessons

from the experiences. Unlike other auto manufactures General motor have a different culture and have a

public to which they are responsible for. This is in such a way that” the every car they put in the road

should respect the environment and ensure the safety of the customer”.



REFERENCE AND BIBLIOGRAPHY:

• Hitt, M.,Ireland, D& Hoskisson, R.2009,Strategic management: competitiveness and

globalization: concept &cases, south western part of Cengage learning

• Allison,M.,Kaye,J.2005,Strategic planning for organizations: a practical guide and work book ,

Compass point nonprofit services.

• Griffin ,R .2008 , Fundamentals of Management ,Houghton Mifflin company, USA.

• Lamb,R., Boyden.1984,Competitive strategic management , Prentice-Hall.

• Hill, C. Jones G.2008 Strategic Management Theory: An Integrated Approach, Cengage learning

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http://www.gm.com/corporate/about/ (retrieved on 6/11/10).

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us/en/2010/Nov/1118_volt_award (Retrieved on 06/11/2010).

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http://www.gm.com/corporate/about/

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http://news.bbc.co.uk/1/hi/business/4263125.stm


http://www.greentechnolog.com/2008/04/automotive_industry_environmental_impact_is_top_of.html





http://www.gm.com/corporate/about/



http://news.bbc.co.uk/1/hi/business/4263125.stm






• Ecocentric Blogs ,2010,iTransportation GM[online] Available from URL:

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on 15/11/10).

http://ecocentric.blogs.time.com/2010/11/18/transportation-gm-goes-green-gets-green/

http://ecocentric.blogs.time.com/2010/11/18/transportation-gm-goes-green-gets-green/

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Generala Motors Final

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