General Motors

Defense- Case
Analysis

Written by: Nicole King and Sarah James

BUAD 5412- Strategic Management

Wayland Baptist University
Spring Semester 2008
Case Analysis Report
Date Due: April 21, 2008

General Motors Defense

Abstract:
According to Chung and Beamish (2003), “In October 1999 the recently
appointed Chief of Staff of the United States Army, Eric Shinseki, held a meeting
with eight leading defense industry manufacturers.” The purpose of this meeting
was to address his vision for the type of equipment he felt the U.S. Army lacked,
in particular the need for a new medium-weight armored vehicle. “Shinseki
planned to award a multibillion-dollar contract within only 11 months. Any
manufacturers wishing to be considered were asked to have a prototype ready
by May 2000 for testing at Fort Knox.” Executive director of General Motors, Bill
Pettipas, was among the industry leaders present during the meeting. The
existing GM- developed platform was ideal for the Army’s needs. “At issue,
however, was how to pursue the contract. Should they go it alone, or form a joint
venture? A possible JV partner was General Dynamics. General Dynamics was
interested in exploring the possibility of a joint venture with GM for the contract,
but made it clear that the firm would also submit its own bid. For Pettipas, the
question was which arrangement would result in the greatest likelihood of
success.” (pg. C-125) It is important to note that this case is in accordance with
the year 1999.

The purpose of this report is to provide a case analysis in reference to Chung

and Beamish (2003)’s General Motors Defense. Furthermore, to implement an
arrangement that would result in the greatest likelihood of success for General
Motors Defense in relation to the Brigade Combat Team program requirements
include: quickly deployed and agile, standardized product line, shorter logistic
tails, high quality product, and cost.

General Motors Background:

Chung and Beamish (2003) states, “General Motors, the world’s largest vehicle
manufacturer, designed, built, and marketed cars and trucks worldwide. GM had
been the global automotive sales leader since 1931.” (C-125) GM has been the
annual global industry leader for 76 years. Founded in 1908, GM employed
approximately 355,000 people in 1999. GM’s global headquarters are in Detroit.
GM manufactures its cars and trucks in 33 countries. In 2006, 9.1 million GM
cars and trust were sold globally under its different brands. Today, GM’s
subsidiary OnStar is the industry leader in vehicle safely, security and information
services.

General Motors Defense’s Background:

In 1999, General Motors Defense was a division of General Motors, and
accounted for $167 billion which was less than 1% of GM’s total annual
revenues. According to Chung and Beamish (2003), “General Motors Defense
(GMD), London, Ontario; was a group of GM- owned business.” (pg.-C126)
General Motors Defense designs and manufactures light armored vehicles.
Chung and Beamish (2003) states, “In the 1980s, GM Diesel grew at a slow,
steady pace as small contracts gave way to larger ones. There were, however,
hard times in the late 1980s when GM attempted to sell its Diesel division, but it

General Motors Defense pg. 2

turned out that there were no takers that were acceptable to General Motors.
The division itself then made a bid for greater freedom and won and convinced
GM Corporation to allow the GM Locomotive Group, of which GM Defense was a
part, to have its own strategy board, giving it more autonomy to conduct its
business.” (pg-127)

The U.S. Army’s Background:

The military is separated in four different arm forces: Army, Navy, Air Force, and
Marines. According to Chung and Beamish (2003), in 1999 the amount of active
members was 480,000 in the Army, 375,000 in the Navy, 359,000 in the Air
Force and 175,000 in the Marines. Chung and Beamish (2003), states “The U.S.
Army was fragmented in terms of culture. Any plan to blend the light and heavy
elements of the Army would create a more common culture. They Army valued
its specialization. Each branch had a set of rituals and traditions. Thus only a
minority of those in the army saw transformation as something that they needed
to contemplate. In 1999, the United States Army comprised of ten active duty
divisions- six heavy divisions and four light divisions. “ (pg- C127)

The army’s brigades, battalions, and companies were arranged around the
conveyances tanks or Bradley fighting vehicles that take unit to the flight.
According to Chung and Beamish (2003), “The U.S. Army’s institutional identity
was reflected by its heavy pieces, especially the near invisible Abrams tanks.
None of these tanks was destroyed by the enemy in the 1991 Gulf War. The
Abram tanks first had been completed in 1980, and it had been a peerless war
machine. It could kill enemy tanks at standoff range, beyond the reach of enemy
fire. Because of its armor, the Abrams could survive almost any strike. It had a
layer of metal protection so thick that the tank weighed 70 tons.” (Pg- 127) The
problem the army had with the Abram tanks was that it was too big to be
transported efficiently to the battlefield by air, it guzzled a gallon of fuel per half
mile traveled, which created a division’s cumbersome logistic tail.

Bill Pettipas’ Background:

Before working at General Motors Defense, Bill Pettipas worked at Canadian
Forces head quarters in Ottawa. Bill Pettipas, during his 28 years with the
Canadian Forces served as commanding officer of the Royal Canadian Regiment
in London, Ontario. Mr. Pettipas was approached by General Motors executive,
in 1982 who offered him a sales position at GMD. At first Pettipas hesitated, but
changed his mind and retired from the Canadian Forces to join GMD. According
to Chung and Beamish (2003), “Pettipas struggles as he made the transition from
the armed forces to business. He did not initially know much about the business,
but soon determined that people did not buy a product as much as they did the
personality that sold it. He believed that sales success was based on building
relationships, even in an industry in which sales were about a $700,000 to $2
million armored vehicle. Not only did he focus on the final customer, the soldier,
he also really believed in his products.” Bill Kienapple, former executive director

General Motors Defense pg. 3

of GMD, in 1999 handpicked Pettipas as his successor. Kienapple recognized
that employees were loyal to Pettipas. Kienapple believed that he had a well-
rounded understanding of the business as well as the consumer. “Pettipas was
both visionary and possessed a keen ability to focus on the core of an issue.
With common sense, he could get an idea of how to achieve his goals, and do it
through the power of personality.” (Pgs. C126-127)

General Shinseki’s Background:

General Shinseki is the first Asian American in U.S. history to be a four-star
general, and the first to lead one of the four U.S. military services. Shinkseki has
initiated an innovative buy controversial plan to make the Army more strategically
deployable and mobile in urban terrain by creating Stryker Interim-Force Brigade
Combat Teams. ‘Objective Force’ was his long-term initiative and ‘Future
Combat Systems’ was the main long-term weapons program he pushed.
Shinkseki is known for his remarks to the U.S. Senate Armed Services
committee before the war in Iraq in which he stated, “something in the order of
several hundred thousand soldiers” would probably be required for post-war.”

According to Chung and Beamish (2003), “In the 1980s, as a colonel, Shinseki
commanded American forces in Germany. While in charge of the U.S. Army, he
witnessed the Soviet Union collapse. In the absence of a major confrontation
with the Soviet Union, he was later responsible for peacekeeping in Bosnia. In
1998, Shinseki became Chief of Staff serving under General Dennis Reimer. ”
(Pg. C-128) General Shinseki was appointed the U.S. Army’s 34 th Chief of Staff
in June 1999. Shinseki proposed to make the U.S. Army nimble as well as lethal.
“He wanted to create a U.S. Army that would be flexible enough to perform
peacekeeping missions or to fight an all-out war against Iraq and North Korea.
Moving away from traditional, ponderous tanks and armored vehicles, Shiseki
proposed to bring whole new advanced systems and technologies into the Army.
(pg. C128)

General Motors’ Product:

According to Chung and Beamish (2003), GM sells its products under the
following brands: Buick, Cadillac, Chevrolet, GMC, Pontiac, Saab, Saturn and
Oldsmobile. GM produces cars through Holden, Opel, and Vauxhall units.
Hughes Elections (DirecTV, Allison Transmission (heavy duty automatic
transmissions), GM Locomotive (locomotive, diesel engines, and GM Defense
(light armored vehicles). GM also has a 49% stake in Isuzu Motors and a 20%
stake in Fuji Heavy Industries (Subaru), Suzuki Motor, and Fiat Auto. “The
GMAC subsidiary provided financing.” (pg.-C125)

General Motors Defense’s Products, Clients, and Facilities:

General Motors Defense’s Products

General Motors Defense pg. 4

General Motors was engaged in light armored vehicles, their supporting turret
systems, and a wide range of commercially based military truck products.
Chung and Beamish (2003) notes, “Its two main platforms were light armored
vehicle (LAV) and Piranha. GMD supplied these platforms to numerous
military forces in over 15 countries, including Australia, Canada, Saudi Arabia,
Switzerland, and the United States. These vehicles had been in used in
operations in Bosnia, Somalia, Cyprus, Panama, Haiti, and as part of
Operation Desert Storm. GM was also well equipped to provide services in
project/ program management, subcontract management, and product
support.” (pg.-C126) GMD’s light armored vehicles included mortar, anti-
tank, ambulance, logistic, personnel carrier, recovery, arid defense, command
and control, electronic warfare, mobile repair, reconnaissance, and assault
guns with 90mm and 105mm main guns.

Products produced by GM Defense include:

1.) MILCOTS (Militarized Commercial Off-The-Shelf (Milverado) - based on

Chevrolet Silverado
2.) MLVW (medium logistic vehicle, wheeled)
3.) Cougar AVGP
4.) Grizzly AVGP
5.) Husky AVGP
6.) Coyote Reconnaissance Vehicle
7.) LAV III-
a. A four wheel drive armored vehicle weighting approx. 18 tons.
b. The LAV III travels on speeds of 62 mph on the highway and has a
maximum range of 312 miles.
8.) TRILS (Tactical Radar Identification and Location System)-
a. on a Bison platform
9.) Stryker Armored Vehicle
10.) ICV (Infantry carrier vehicle)-
a. Had armor that protected the two-man crew
b. Seven on-board soldiers from machine gun bullets, mortar, and
artillery fragments

11.) LAV II ICV-Mobile Gun System

a. included configuration such as the reconnaissance, anti-tank
guided missile, and medical evacuation vehicles

General Motors Defense pg. 5

 b. Also included carriers for mortars, engineer squads, command
groups, reconnaissance, and Fire support teams
c. “The Mobile Gun System variant comprised a General Dynamics
Land Systems 05mm cannon mounted in a low-profile turret
integrated on the General Motor LAV II chassis.” (Pg.-C126)
General Motors Defense Clients:
General Motors Defense’s Dominant Clients include:

1.) US Marine Corps

2.) US Army National Guard
3.) US Army
4.) Canadian Forces

GMD’s Facilities:
GMD’s research, design, and manufacturing facilities are located in London,
Ontario; Goleta, California; Troy, Michigan; Kreuzlingen, Switzerland; and
Adelaide, Australia. GM also has offices in Washingotn, D.C.; Ottawa, Canada;
and Canberra, Australia, for government regulation. (pg-C126)

U.S. Army’s Desired Equipment and Requirements

According to Chung and Beamish (2003, “The need for the transformation of
equipment became apparent during and after the 2992 Gulf War. The desert war
revealed the first problem was that armored units could not reach the battlefield
quickly. The second problem was that the U.S. Army’s quick response light
forces needed to have different equipment to stop Iraqi forces by themselves.”(C-
127)The main requirements for the Brigade Combat Team program prototype
include: quickly deployed and agile, standardized product line, shorter logistic
tails, high quality product, and cost.

General Motor’s Defense Main Issue:

The main issue is formulating and implementing an arrangement that would
result in the greatest likelihood of success to win the multibillion dollar contract
from the U.S. army.

Trivial Issues:
The trivial issues contributing to the main issue are: maintaining and developing
a competitive advantage over other competitors such as GD and UD, time
management to make sure the prototype is delivered on the deadline,
commitment of partners before forming a joint venture, lack of government

General Motors Defense pg. 6

relations with the United States Army, resistance within U.S. Army to change,
and the future success of GMD.

Functional Areas:
It is important to define the main issues pertaining to each individual department
related to, “How GMD was going to win the multibillion dollar bid.” The following
functional areas defined are the R&D, Sales, Marketing, Productions, Operations,
Distribution, Management, and Financial Departments.

R&D Department:
According to Chung and Beamish (2003), “The operational problems of the U.S.
Army in the Gulf, Haiti, Bosnia, and Kosovo made it clear that there was an
apparent gap between the U.S. Army’s light units, which were too vulnerable,
and its heavy units which were too slow. Politically, the Army was losing ground
to the more glamorous sister services operating from the sea and especially,
from the air and space.” In other words, the army needs its defense contractor,
for example GMD, to research and develop a vehicle that was more efficient,
lighter but protective, and faster in speed to cover more ground. Tim Deady
(1993) notes, “The List figures, based on research, development and testing
contracts from the U.S. Department of Defense, show that among the 25 largest
contractors, total local project grants have dropped from $3.2 billion in 1987 (the
last time the Business Journal compiled this List) to $1.87 billion in 1992. The
latest figures indicate the county has been hit hard not only by declines in
defense spending for weapons production, but also for research and
development.” (Time Deady, 1993) GMD conducts independent research and
development activities as a part of its normal business operations. In the 1990s,
the majority of GMD sponsored R&D expenditures was in the defense business.
In accordance with government regulations, the company recovers a significant
portion of these expenditures through overhead charges to U.S. government
contracts. GMD also conducted R&D activities under U.S. government contracts
to develop products for large development and technology programs. One
problem for the research and development department is finding the funds to
support the expensive research and development required to develop a
prototype. The main problem is continually researching and developing high
quality products under budget, which will enhance the Army’s operations abilities.

Sales Department:
GMD sales’ department depends significantly of the U.S. government for a large
portion of its sales. A problem with depending on the U.S. government for sales
is the U.S. government contracts generally are not fully funded at inception and
are subject to termination. Another problem for GMD is being subjected to U.S.
and foreign government regulations and procurement policies and practices.
GMD is also subject to regulations relating to import-export control, investments,
exchange controls and repatriation of earnings which affects its international and
domestic’s sales. Other factors can affect international sales, such as currency

General Motors Defense pg. 7

exchange fluctuations, and political and economic risks. The main problem in the
sales department is maintaining regulations and requirements of its contracts
with the U.S. government and its international sales so the indication of
termination is eliminated or decreased.

Marketing Department:
GMD’s main marketing campaign is building and maintaining relationships with
its clients, such as the United States Army.

Production/Operations/Distribution Departments:
In 1999, GMD had a strong production, operation, and distribution network. GMD
possessed advanced production techniques. Chung and Beamish (2003) states, “GMD’s
weapons and electronics operations had proven experience in designing, manufacturing,
and integrating turrets and fire control systems.” (pg-126) However, GMD’s production
department relies on subcontractors and other companies to provide raw materials, major
components and subsystems for it products or to perform a portion of the services that it
provides to its clients. GMD occasionally relies on only one or two sources of supply,
which, if disrupted, could have an adverse effect on the ability to meet its commitments
to its clients. GMD depends on its subcontractors and vendors to fulfill their contractual
obligations in a timely and satisfactory manner in full compliance with client’s
requirements. If one or more of the company’s subcontractors or suppliers is unable to
satisfactorily provide on a timely basis the agreed-upon supplies or perform the agreed-
upon services, the company’s ability to perform its obligations as a prime contractor may
be adversely affected. The central problem for the production, operations, and
distribution problem is relying of its subcontractors and vendors to fulfill their contractual
obligations in a timely and satisfactory manner in compliance with client’s requirements.
This problem causes a chain reaction affect because if the production department receives
resources late; it will delay the entire process for the operations and distribution
departments to meet its deadline.

Management Department:
GMD’s management is committed in creating shareholder value through disciplined
program management, business practices, and continuous operational improvements.
The company’s solid performance in its history is measured in its sustained revenue and
earnings growth and strong cash flow. According to Chung and Beamish (2003), “GM
has a rich history of military vehicle production. GM supplied its first vehicle for the
U.S. military During WWI and had continued to supply vehicles ever since.” (pg. 126)
GMD’s record as an industry leader in cash flow generation has enabled it to consistently
deploy resources to enhance shareholder returns through strategic and tactical strategies
set emplaced by its management team. In 1999, GMD’s appointed successor, Bill
Kienapple was recognized as a strong leader and manger. “Pettipas was both visionary
and possessed a keen ability to focus on the core of an issue, with common sense, he
could get an idea of how to achieve his goals, and do it through the power of
personality.” (C-127) The main problem observed in the management department is
reaching a strategic decision and implementation plan that will win GMD the multibillion
dollar contact.

General Motors Defense pg. 8

Financial Department:
In 1999, GMD total annual revenue was $167 billion dollars. GMD has proven
through its history to be a successful subsidiary for GM. However, GMD is tightly
tied to U.S. and global economic conditions, since a major portion of GMD’s
revenue is from the United States government. In 1999, the Department of
Defense funding grew rapidly over the past few years from 1992. However, there
is no assurance that this trend will continue due to rising budget deficits, the cost
of the Global War on Terrorism and increasing costs for domestic programs
continue to put pressure on all areas of discretionary spending, which could
ultimately impact the defense budget. A decrease in the United States
government defense spending or changes in spending allocation could result in
one or more of the company’s programs being reduced, delayed or terminated.
Reductions in the company’s existing programs, unless offset by other programs
and opportunities, could adversely affect its ability to sustain and grow its future
sales and earnings. The main problem for the financial department is its
reliance on the United States government in order to maintain its revenue and
profit.

General Motors’ Main Goal:

General Motors’ Website states, “G.M. is a multinational corporation engaged in
socially responsible operations, worldwide. It is dedicated 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.”(General
Motors’ Website)

United States Army’s Main Goal:

United States Army’s goal is “to provide protection for the United States and its
interest by securing its airspace, land, and sea interest and jurisdictions. To
provide support to civil authorities in order to provide the protection and support
needed to sustain the United State's national interest and stability. To provide
support during national emergencies by assisting civil authorities in maintaining
emergency preparedness throughout the nation. To work in concert with the
three other major branches of the US military—the Navy, the Marine Corps, and
the Air Force. Navy ships transport Army troops, equipment, and supplies to
bases overseas.” (Army, 2008)

General Motors Defense’s Main Goal:

General Motors Defense goal is to provide a full spectrum of subsystems,
combat systems, and components word-wide. Company strengths are world-
class design and systems integration, superior production and innovative life
cycle support. General Motor’s main goal is to deploy its strengths to meet its
client’s needs in a changing world.

Inconsistencies between General Motors Defense Goal and Performance:

General Motors Defense pg. 9

General External Environment:

Demographic:

1.) Geographic Distribution:

The United States Army is represented and protects the United States of
America.

2.) United States Army Population:

A.) In 2005, the total population in the Army was 1,010,761
B.) According to United States Army (2005), “the U.S. Army was over 1 million strong,
with more than half of its Soldiers serving in National Guard and Reserve.”(United States
Army, 2005)

3.) Total Army Strength

A.) Active-488,578- (48%)
B.) Guard-33,177 - (33%)
C.) Reserve-189,005- (19%)

4.) Total Active Duty:

A.) Race/Ethnicity/Gender
a.) Male- 85.7%
b.) Female- 14.3%
c.) White- 60.8%
d.) Black- 21.6%
e.) Hispanic- 10.5%
f.) Asian- 4.0 %
g.) Other- 3.1%

5.) Active Due by Grade:

A.) Commissioned Officers- 14.2%
B.) Warrant Officers- 2.5%
C.) Enlisted – 83.3%

1.) Enlisted:
A.) Race/Ethnicity/Gender
a.) Male- 85.9%
b.) Female- 14.1 %
c.) White- 58.2 %

General Motors Defense pg. 10

 d.) Black- 23.4 %
e.) Hispanic- 11.5%
f.) Asian- 3.9%
g.) Other-3.0%

B.) Education
a.) GED- 6.9%
b.) HSDG- 76%
c.) Some College- 7.2%
d.) BA/BS- 4.7%
e.) MA/PHD- .6%
f.) Other- 4.6%

C.) Age Structure

a.) 17-20-16%
b.) 21-24-30%
c.) 25-29-22%
d.) 30-39-25%
e.) 40 and over-7%

6.) Commissioned Officer

A.) Race/Ethnicity/Gender
a.) Male- 83.4%
b.) Female-16.6 %
c.) White- 74.7%
d.) Black- 12.3%
e.) Hispanic- 5.2%
f.) Asian- 4.7%
g.) Other- 3.1%

B.) Education
a.) GED- 0%
b.) HSDG- <.1%
c.) Some College- 1.3%
d.) BA/BS- 58.4%
e.) MA/PHD- 40.3%
f.) Other- < .1%

C.) Age Structure

a.) 17-20-<1%
b.) 21-24-11%
c.) 25-29-23%
d.) 30-39-39%
e.) 40 and over-27%

7.) Warrant Officer

General Motors Defense pg. 11

 A.) Race/Ethnicity
a.) Male- 92.2%
b.) Female-7.8 %
c.) White- 67.9%
d.) Black- 16.3%
e.) Hispanic- 6.2%
f.) Asian- 2.5%
h.) Other- 7.1%

B.) Education
a.) GED-< .1%
b.) HSDG- 8.4%
c.) Some College- 61.3%
d.) BA/BS- 24.9%
e.) MA/PHD- 5.2%
f.) Other- <.1%

C.) Age Structure

a.) 17-20-<.1%
b.) 21-24- 3%
c.) 25-29- 13%
d.) 30-39- 53%
e.) 40 and over- 13%

(Reference- (United States Army, 2005))

Army Budget/Income:
According to Chung and Beamish (2003), “The personnel budget allocated to the
active Army was 40% more than the Navy and the Air Force and more than three
times of that for the Marines.” (pg.-C127)

Economic:

Political/Legal:
It is important to note that the United States government contracts are subject to
procurement laws and regulations. The Federal Acquisition Regulation (FAR)
governs the majority of the GMD’s, or now GD/GMD’s, contracts. The FAR
mandates uniform policies and procedures for U.S. government acquisitions and
purchased services. There may also be agency-specific acquisition regulations
that provide implementing language for, or that supplement, the FAR. For
example, the Department of Defense implements the FAR through the Defense
Federal Acquisition Regulation supplement (DFARs). For all federal government
entities, the FAR regulates the phases of any products or services acquisition,
including: acquisition planning, competition requirements, contractor
qualifications, protection of source selection and vendor information. GMD’s
international sales are subject to U.S. and foreign government regulations and

General Motors Defense pg. 12

procurement policies and practices, including regulations relating to import-export
control, investments, exchange controls and repatriation of earnings.

Sociocultural:
Overall, the people of the United States, exhibit a strong patriotism towards its
soldiers and United States Military Regime and Service. The United States of
America strengths and protection is displayed through the United States Military.
Overall, there is admirable respect towards the soldiers, “Who risk their lives for
the United States people’s freedom.” The United States military is comprised of a
set of rituals and traditions. All of the military services including the Navy, Air
Force, Marines, and Army, have their own set of traditions and rituals. The
sociocultural towards these rituals and traditions revolves around a hierarchy of
duties including: order, pride, patriotism, and respect.

Technological:
“GMD’s advanced production technologies included computer-driven laser
cutters, rectilinear robotic welders, CAD-CAM systems, and flexible machining
centers.” (pg. C-126) GMD also had a information systems and technology group
which offered technology and service capabilities that support a wide range of
government and commercial needs, including systems integration expertise;
hardware and software products; engineering, management and support
services. GMD designs, builds and supports secure command, control,
communications and computing systems for defense clients worldwide. GMD
also specialized in the design, development and integration of wireline and
wireless voice, video and data networks, mission simulation and training
services, and secure identification and credentialing capabilities. GMD further
concretes specializes in providing the U.S. Government highly specialized
capabilities such as signals and information collection, processing and
distribution systems; special-purpose computing; multi-level security; data mining
and fusion; special-mission satellites and payloads; and information operations
services.

Global:
GMD is a global competitor, and was recognized globally as the leading
manufacturer in multipurpose lightweight turrets.

General’s SWOT Analysis:

Strengths-
– Superior product
– Credible history
– Excellent R&D facility
– Strong production, operation, and distribution departments
– Strong Management Team
– Technological and Innovated Advancements

General Motors Defense pg. 13

Weaknesses-
– Weak lobbying
– Reliance on client’s contracts for a large portion of revenues
– Inexperienced with U.S. Army
– Uncertainties with suppliers

Opportunities-
– Long-term U.S. Army contract
– Future contracts
– Strategic position
– Building an evolving relationship with the U.S. Army

Threats-
– “Kill the program”
– Being bought out
– Competitors catching up
– Unable to protect proprietary knowledge, techniques,& technology
– Lack of commitment from JV partner
– Declining U.S./Global Economic Conditions

General Motors’s- Porter’s Five Forces’ Model:

 Threat of New Entrants:

 Strengths
 .

 Weaknesses

 Rivalry among competing firms:

 Strengths

 Weaknesses

 Threat of substitute products:

 Strengths
 Weaknesses

 Bargaining power of buyers

 Strengths

Weakness

 Bargaining power of suppliers:

 Not Attractive
 Strength

General Motors Defense pg. 14

 Weaknesses

Industry Analysis:

GMD is classified in the defense/military contractor industry. A company within

the defense contractor industry is a business organization or individual that
provides products or services to a defense department of a government, such as
the U.S. army. The products in this industry typically include military ships,
aircraft, vehicles, weaponry, and electronic systems. Services can include
logistics, training, technical support, and communications support. Direct support
of military operations is usually not provided directly by defense contractors.
Under 1959 Geneva Conventions defense contractors engaged in direct support
of military operations may be legitimate targets of military attack.

General Motors Defense’s Competition:

The top competitors today in 2008 have changed from this case study. It is
important to remember that GMD is now part of the GD organization. Today the
top 10 World-Wide Defense contractors are Lockheed Martin, Boeing, BAE
Systems, Northrop Grumman, Raytheon, General Dynamics, EADS, L-
3Communications, Finmeccanica, and United Technologies. However,
pertaining to this case study GMD’s top competitors where General Dynamics
and its subsidiary General Dynamics Land System and United Defense. The
following paragraphs provide background information regarding GD, GDLS and
UD.

General Dynamics:
General Dynamics is a market leader with sales of $10 billion and 1999 and
revenues of 27.2 billion in 2007. Currently General Dynamics is a leader in
business aviation; land and expeditionary combat vehicles and systems;
armaments; and munitions; shipbuilding and marine systems; and mission-critical
information systems and technologies. In 1999, GD employed 43,000 people
worldwide, but today GD employs approximately 83,500 people worldwide.

General Dynamics is comprised of four business segments: 

1.) Aerospace- designs, develops, manufacturers and services a comprehensive
offering of advanced business-jet aircraft. 
2.) Combat Systems- is a global leader in producing, supporting and sustaining
land and expeditionary combat systems for the U.S. military and its allies. 

General Motors Defense pg. 15

3.) Marine Systems- designs, builds and supports submarines and a variety of
surface ships for the U.S. Navy and commercial customers. 
4.) Information Systems and Technology- which offers a variety of technology
and services capabilities

General Dynamics Land System:

“General Dynamics Land System was a wholly owned subsidiary of General
Dynamics based in Sterling Heights, Michigan. GDLS manufactured tracked and
wheeled armored vehicles, as well as amphibious combat vehicles, for the U.S.
Army, the U.S. Marine Corps, and international allies.” (pg. C129)

United Defense:
United Defense (UD) is an international leading company engaged in the design,
development and support of advanced defense and aerospace systems on land,
at sea, and in the air and space. United Defense designs, manufactures, and
supports combat vehicles, military aircraft, surface ships, submarines, radar,
avionics, communications, electronics, and guided weapon systems. It is a
pioneer in technology with a history stretching back hundreds of years and is at
the forefront of innovation. United Defense is always working to develop the next
generation of intelligent defense systems. United Defense has major operations
across five continents and customers in over 130 countries. UD today has a total
of nearly 100,000 employees and generates annual sales of approximately 25
billion through its wholly owned venture operations.

Constraints:
The main constraints involved in this case study are:
1.) Not being able to win the Bid- this condition could occur through Pettipas and
the management team decision. This also could occur through not eliminating
the “Risk to Kill”, the potential lack of commitment of the JV Partner, and if GMD
is unable to meet the U.S. Army’s requirements and deadline.
2.) Eliminating the “Risk to Kill”-
3.) Protecting Proprietary Information, Techniques, Technology, and Knowledge-
4.) The Potential Lack of Commitment of the JV Partner-
5.) Meeting the Requirements and Deadline-

Critical Success Factors:

General Motors Defense’s success factors are targeted in conquering General
Motors Defense’s constraints. General Motors Defense’s critical success factors
related to General Motors Defense case; is foremost to implement a strategy to
win the multibillion dollar contract through the United States Army. The second
critical success factor is if GMD forms a joint venture it must first attain the
commitment of its partner. It is important that the other company in the JV is
focused on the joint venture with GMD, and not competing with a solo bid. If

General Motors Defense pg. 16

GMD was going to win the bid it needed to make sure that it eliminated the risk of
“Kill the Program” as the best alternative. The fourth critical success factor is to
protect GMD’s propriety information. According to Chung and Beamish (2003), “If
GMD made a sole bid for the BCT program; it would not have to worry about
coordination problems with partners.” If GMD formed a joint venture it would
enhance the learning process and capabilities of its competitors in relation to its
techniques and technologies. The fifth critical success factor is that GMD meet its
deadline, and have a prototype developed and ready by May 2000 for testing in
Fort Knox.

Relevant Alternatives:
General Motors Defense’s Solo Bid:
General Motors Defense has a strong history of winning bids on its own, such as
the winning solo bid for the vehicle program for the U.S. Maries in 1982. The
reason GMD won this program was because it was technically capable of
designing and manufacturing advanced 8 by 8 prototypes. This victory led to
other winning programs as well as through the U.S. Department of Defense.
“With superior design and manufacturing capabilities, GMD focused on
commonality across its product lines of light armored vehicles. GMD also
emphasized its commonality with the U.S. Army support units.” Pettipas also
believed that GMD’s 8 by 8 light armored vehicles were technically competitive
and would provide significant benefits to the U.S. army. If GMD decided to go
solo there would not be any threats of having to protect proprietary information,
technologies, and techniques and it would eliminate the lack of the JV partner’s
commitment.

“Kill the Program”:

According to Chung and Beamish, “It was a common practice in the U.S. defense
industry for firms to try to kill any program they could not compete in, or any
program they did compete in but had lost. The logic was that by seeing to the
cancellation of programs, the funds from the canceled programs would be
available for new programs in which they would have opportunities. Numerous
existing programs could be canceled to fund a major new program.” If the top
three major U.S. competitors could not negotiate on a joint venture or forming its
solo bid it could lobby heavily for the program cancellation.

If the program was cancel no one would win the multibillion dollar contract and
the Army would still be in need of newly innovative equipment. Even though
another contract could evolve in the future for the companies, Shinseki’s offer
was very appealing and unusual.

Joint Venture with General Dynamics (GD)/GDLS:

According to Chung and Beamish (2003), “GD seemed a possible joint venture
partner for the new U.S. Army contract.” However, GD was also going to submit
a bid of its own. “Pettipas had been informed that GDLS was also interested in
exploring the possibility of a joint venture with GM for the contract.” (pg. C-129)

General Motors Defense pg. 17

GDLS and GMD had a joint venture in the past towards the ACV program bid by
the Canadian Department of National Defense. Due to this past joint venture,
GMD and GDLS had created a close bond. However, Pettipas still wondered
GDLS’s real or hidden intentions.

Chung and Beamish (2003) states, “If GMD and GD formed a JV, GD might add
value by contributing its Mobile Gun Systems (MGS) that would be installed on
turrets of light armored vehicles. Recently, GED had acquired CDC and
enhanced its technologies on MGS. To save in-house development costs, the
MGS and GMD’ light armored vehicles was being outsourced from GD Canada.
Pettipas felt that GD was a better fit than UD, in every aspect. GMD focused on
commonality across its product lines. He thus believed that GD would be a
better candidate for a JV because GMD not only shared the manufacturing
process of Canadian combat vehicles with GD in 1997 but also it outsourced
MGS from GD Canada. Pettipas would not hesitate in choosing GD as a partner,
if he decided to form a JV for the BCT program.

Joint Venture with United Defense (UD):

“UD is a leader in designing, developing and producing combat vehicles, fire
support equipment, combat support vehicles, weapon delivery systems and
amphibious assault vehicles.” UD also has a political power regarding
negotiations with U.S. Army programs. “For several defense programs
comparing critical elements of the U.S. military forces, UD had been a sole-
source prime contractor. The board of United Defense included former secretary
of Defense Frank Carlucci and former Chairman of the Joint Chiefs of Staff John
Shalikashvili. For the past 60 years, United Defense had produced more than
100,000 combat vehicles and 100,000 weapon systems that the U.S. Department
of Defense and its international allies were using. ” (C-129). If GMD formed a JV
with UD it would strengthen its ability to win the contract and its relationship with
UD.

Joint Venture with General Dynamics/GDLS (if GD drops solo bid), United
Defense, and GMD
If GD/GDLS, UD, and GMD could negotiate and form a Joint Venture it would
eliminate the possibility of “Killing the Program.” The reason it would eliminate
the “kill of the program” risk is because if all three U.S. competitors are working
together there will not be any lobbying to cancel the program. UD and GMD
could convince GD of the benefits to only submit a bid with the joint venture to
eliminate the risk of GD submitting a bid of its own. Pettipas considered all the
merits of partnering with UD and GD/GDLS. Even though Pettipas felt that GD
could offer more to the JV than UD, UD still had strengths which could benefit
both of the other companies.

If Pettipas was able to form a JV with UD and GD and eliminated GD’s solo bid, it
would be able to combine all three companies’ strengths. This JV would give
GMD the ability to win the contract, eliminate the risk of kill, provide commitment

General Motors Defense pg. 18

of the JV partners, and meet the deadline. The only downfall for GMD is UD and
GD’s access to its proprietary technologies and techniques. However, GMD
would also be exposed to GD and UD’s proprietary technologies and techniques.
This JV would create a powerful pool of resources, research, development
techniques, innovation, technology, focus, and knowledge. GD, GMD, and UD
could focus on developing one superior prototype which would surpass the
Army’s requirements.

Comparison of Alternatives:

Ability Eliminate Protect Commitment Meet

Constraints to Win Risk of Proprietary of the JV Deadline
Kill Tech Partner
1.) GMD
Solo Positive Negative Positive Positive Positive

2.) Kill the

program Negative Negative Positive Positive Negative

3.) JV with
GD/GDLS Positive Negative Negative Negative Positive

4.) JV with
GD/GDLS(if
Positive Negative Negative Positive Positive
GD drops
solo bid)
4.) JV with
UD Positive Negative Negative Positive Positive

5.) JV with
UD and
GD/GDLS
(if GD Positive Positive Negative Positive Positive
drops solo
bid)

6.) JV and
Positive Negative Negative Negative Negative
going solo

Best Alternative
The best alternative is to first negotiate to persuade GD to drop its solo bid then
negotiate with GD/GDLS and UD to form a joint venture. If the negotiation fails,
negotiate with GD/GDLS privately to remove its solo bid and form a JV between
GMD/GD/GDLS. If that negotiation fails the best alternative would be for General
Motors Defense to submit a solo bid.

General Motors Defense pg. 19

Implementation Plan:
Immediately:
GMD should immediately get exact specifications and requirements of Bridge
Combat Team program requirements and deadline, and start persuading
GD/GDLS to remove its solo bid and negotiate with GD/GDLS and UD for a joint
venture. It should establish a bid team office in Washington, D.C. GMD should
start headhunting for U.S. Army/Government lobbyists quickly, so it is prepared if
it needs to “Kill the Program.”

Short Term (1-2 months)

In the short term, GMD must begin intense lobbying efforts; mobilize, the bid
team, including the project managers and American plant(s) staff; ensure GMD
and if applicable GD and UD can meet the design specification needs; review
MO Way integration with GMD technology; if in a JV GMD should meet as soon
as possible to incorporate the other companies technology and strengths; assign
duties and responsibilities of each individual company; and form strategies to
reach goals, duties, and objectives.

Medium Term (3-4 months)

In 3 to 4 months, GMD should continue lobbying; begin preparing its bid out of
the United States office; get production, operation, distribution plants ready to
manufacture the prototype; and if applicable meet with the other JV companies to
see their progress.

Long Term (up to 7 months)

GMD and JV companies should test, build, and improve prototype; deliver
prototype and bid to the Chief of Staff General Shinkseki; and continue lobbying
with the U.S. Army/Government.

General Motors Defense’s today:

In December 2002, General Motors Corporation sold General Motors Defense.
General Motors Defense was acquired by General dynamics in 2002, and
operates as a subsidiary of General Dynamics. Today, General Motors Defense
designs and manufactures light armored vehicles and supporting weapons
systems. The division’s products include armored fighting vehicles, military
vehicles and trucks, military tactical vehicles, turrets, and security tactical
vehicles. Today, General Motors is based in London, Canada.

Conclusion/Synthesis:

In May of 2000, the competitors for the Brigade Combat Team multibillion dollar
contract submitted the following prototypes:

1.) General Dynamics (GD) teamed with General Motors Defense- 8x8 wheeled
LAV III family, made by General Motors Dynamics of Canada.
2.) United Defense, L.P – tracked M8 Armored Gun System and M113 variants.
General Motors Defense pg. 20
3.) Textron- 6x6 wheeled LAV-200 Mk II and 4x4 XM117 Armored Security
Vehicle, AM General- 4x4 XM114 up-armored HUMVEE and 4x4 Cobra (with
Turkey’s Otokar)
4.) Steyr-Daimler-Puch (Austria)- 6x6 Pandur (in cooperation with GD)
5.) GIAT Industries (France)- 6x6 VAB
6.) Henschell (Germany)- 6x6 TPz-1 Fuchs
7.) FMC- Nurol (Turkey)- M113 variants.

In 2000, a winning bid for the BCT contact was awarded to General Motors
Defense and General Dynamics/General Dynamics Land System Defense. The
BCT contract included a six-year contract approximately worth $4 billion to
produce 2,131 of its new “interim armored vehicles.” The unveiling of the
versatile wheeled weapons platform is the Army’s first new armored combat
vehicle since the Bradley came on line in 1980, and is the most visible symbol to
date of the service’s commitment to reinventing itself into a leaner, more
deployable force for the 21st century. (CNN News)

Paul Hoeper, the service’s assistant secretary for acquisitions, logistics and
technology stated, “In seeking its new infantry combat vehicle, which strongly
resembles the vehicles used for years by the Marine Corps, the Army wanted a
weapons platform that would move fast, be light enough to fit on the smallest
combat transport planes but still pack a powerful combat punch, and fulfill a
variety of roles and missions. The new vehicle design fits the requirement to “get
to the fight quickly and come alive in every respect.” – (Paul Hoeper, 2000)

The new vehicle will have a top speed of 60 mile per hour, a range of more than
400 miles, wrap-around 14.5. Mm armor plating that will withstand .50 caliber
machine-gun fire, and a weight of less than 19 tons. This is a drastic change
from the armored 70-ton tracked M1A2 tank. (CNN News, 2000) In the end,
General Motors Defense won the bid through its joint venture with General
Dynamics/GDML and accomplished its goal through strategic methods!

References:

CNN News. (2000). Army announces $4 billion contract for new combat vehicles.
The Associated Press. Retrieved April 17, 2008 from:
http://archives.cnn.com/2000/US/11/17/army.vehicles.ap/index.html

Deady,Tim (1993). Defense contractors ranking echoes declining business; TRW

unit leads List as it actually increases contracts - TRW Space & Electronics
Group - The List. Retrieved April 16th, 2008 from:
http://findarticles.com/p/articles/mi_m5072/is_/ai_14571122

General Motors. (2008). General Motors Goal and Mission. Retrieved April 15th,
2008 from:
www.gm.com

General Motors Defense pg. 21

Hitt, M., Ireland, D., and Hoskisson, R. (2007). Strategic Management. Thomson
South-Western. Chung, Changwha & Beamish, Paul. (2003). General Motors
Defense. ( C-13)

Matthews, Lloyd & Pavri, Tinaz. (1999). Population Diversity in the U.S. Army.
Retrieved April 15th, 2008 from:
http://www.strategicstudiesinstitute.army.mil/pdffiles/pub283.pdf

Military Analysis Network. (2000). Medium Armored Vehicle (MAV) Interim

Armored Vehicle (IAV). Retrieved April 17, 2008 from:
http://fas.org/man/dod-101/sys/land/mav.htm

United States Army. (2005). Army Profile, FY5. Retrieved April 16th, 2008 from:
http://www.armyg1.army.mil/hr/demographics/FY05%20Army%20Profile.pdf

General Motors Defense pg. 22