General Motors

Bryan Dickey Jasmin Rush Peter Crane Robert Travieso

Richard Wagoner

GM Chairman and Chief Executive Officer GM Vice Chairman and Chief Financial Officer GM Vice Chairman, Global Product Development

John M. Devine

Robert A. Lutz

 Under Billy Durants leadership, General Motors Company is organized on September 16, 1908 Today, GM is recognized as the worlds largest automaker Global automotive sales leader since 1931 Has manufacturing operations in 32 countries and its vehicles are sold in 200 countries Currently, GM Dealers in the United States have sold 257,623 new cars and trucks as of October and 445,555 of pre-owned cars

 Financial services: consumer vehicle financing, full service leasing, dealer financing, car and truck extended service contracts, residential and commercial mortgage services, and vehicle and homeowners insurance

 Developing a portfolio of future options to internal combustion engines Investing dedicated to improving cultural, economic, educational, environmental, and social aspects of our communities Supporting a strong and diverse base of K-12 education programs, especially in science, mathematics, and business

 Protecting human health, natural resources, and global environment Improving vehicle safety for customers, passengers, and other motorists Creating environmental, health, and safety reports Improving health, safety, diversity, wages, and benefits

 North/South America Plant Quality Award J.D. Power Quality Study 2005 Supplier of the year Denso International America 2004 OnStar by GM receives the Grand Enterprise Value Award CIO Magazine

"The significant problems we face cannot be solved at the same level of thinking we were at when we created them." --Albert Einstein

 Company Recognition The number of brands and brand recognition Committed workers Products like: OnStar and XM Satellite Radio Corporate Responsibility The time GM has been around Globally known and located in 32 countries GM dealer locations

 The decline of market share Health care costs Innovation of new products Competition or lack there of with China Too much invested in SUV and Trucks Not enough Research and Development

 New innovation can compete with others Cut health-care costs Cut jobs and move production overseas Shrink brand line Recapture market share and be more competitive with more money concentrating on smaller more fuel efficient cars

 The United Auto Workers union can hurt General Motors if unhappy Cutting jobs or shutting down plants, and cutting health care cuts could instigate a strike Delphi being a supplier who is already bankrupt, GM is their former parent and could face up to $12 billion in liabilities for Delphi

Threat of New Entrants: Low Car manufacturing takes extremely large amount of capital to enter. To compete at GMs level is next to impossible.

Bargaining Power of Suppliers: Moderate GM has the largest market share in the US which could give it much power over suppliers but it has not used that and looks at suppliers and their needs as equal.

Intensity of Rivalry: Very High GMs other divisions cannibalize their own sales as well as all others. Each company will do what it takes to real in customers

Bargaining Power of Customers: High Tens of Millions of car buyers per year and over twenty companies to choose from. Public is increasingly drawn in by costly incentives.

Threat of Substitutes: Very High GMs market share is continually dropping. Most other car makers offer higher quality and other benefits. Many substitutes available in the market

Porters Model illustrates the complexities of being in the automobile manufacturing business. Competition is fierce and substitutes abound. Quality and brand image have an important input into what consumers want to buy. With so many high threats in this market an auto manufacturer must be constantly be trying to be better than its competitors in responding to consumer demands. GM has failed in the last 20 years and is in turn losing market share.

Star Question Mark

Cars Trucks

SUVs

Cash Cow

Dog

GM Operating Income
60,000

50,000

40,000

Dollars (mil.)

30,000

20,000

Revenue Expenses Income

10,000

-10,000

Sep-04 Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05

Date

60,000

50,000

40,000

Dollars (mil.)

30,000

Revenue Expenses Income Reduced Health Care

20,000

Income after savings

10,000

0 Sep-04 Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05

-10,000 Date

Financial Perspective
Profit
0.02

argi s

0.02

0.01

0.01
GM

Perce t

FO 1

CH Y L

(0.01)

(0.01)

(0.02)

(0.02)

(0.03)

0.00

1. Daimler Chrysler 2. Ford Motor Company 3. Toyota Motor Company 4. Volkswagen

2004 Sales Revenue Employees At 2004 Year-end

$193 Billion

$16.2 Billion 37,000

$170.98 Billion 384,723

$175.48 Billion 324,864

324,000

 Development of passenger cars, light trucks, commercial vehicles Operates as Mercedes Car group, Chrysler Group, Commercial Vehicles, and Services Provides Financing to dealers for property, plant, and equipment purchases, and vehicle inventory Strategic Partnerships with Mitsubishi Motors Corporation, General Motors Corporation, BMW Group,

 Manufacture, distribute, finance, and rent vehicles and equipment Brands include Mazda, Volvo, Jaguar, Land Rover, Operates as Automotive and Financial Services Automotive: Ford, Lincoln, Mercury brand vehicles Financial Services: Financing, leasing, and insurance

Hertz Corporation: rents cars, light trucks, and construction equipment Partners with Ups and New View

 Currently, operates 11 manufacturing plants in North America Three additional facilities will open in Ontario, Tennessee, and Texas By 2008, Toyota will have annual capacity to build 1.81 million cars and trucks Today, nearly two-thirds of all Toyota vehicles are built in North America and sourced with parts from over 400 North American suppliers

 One of General Motors greatest problems is how good they are to not only hourly workers, but retired workers as well. They must strike a deal with the United Auto Workers which allows both parties to be happy with the cuts needed in health care costs to keep from filing for bankruptcy.

 G.M. pays about $1,500 per car assembled in the United States for health care G.M. spends more on health care than it spends on steel Provides health care to its over 1 million employees, retirees and their dependants Health care costs for 2005 will increase to $5.6 billion from $5.2 billion in 2004 estimate)

G.M. has lost nearly $4 billion so far this year due to healthcare costs The largest private provider of health care nationwide In 2002 G. M. spent $1.4 billion, or 31% of its total health care expenditures on prescription drugs The UAW doesnt like to make concessions on health care benefits and pension plans

Right now, retirees and active workers pay no monthly premiums and a small fraction of health care costs General Motors and the United Auto Workers union need to strike a deal, 100% voter approved, that will take off some of the costs burden on GM and put a little more on the workers and retirees of GM by cutting long-term, and hourly liabilities, and reduce health care expenses by doing things like using generic prescription drugs when possible

Concessions must be made if UAW union workers want to keep plants open and jobs occupied
Some of General Motors recent problems are uncontrollable. With prescription drugs increasing in cost 15 to 20% per year, expenditures only go up. Also the number of retirees due to the baby boomer generation. Unions have power over companies they work for. Most of whats happening in GM is due to lack of cooperation and understanding between the workers and General Motors. If the UAW does not make large concessions to things like wages and health care benefits, they wont have jobs at all because costs must be cut one way or another to stay out of bankruptcy.

Long-term health care liability needs to be cut and GM needs to save $20 billion just in the U.S. Retirees need to be informed on how to stay healthy, and generic prescription drugs should be used when possible. If not possible only 50% will be paid for instead of the whole price. GM pensions of less than $7000 annually will get health care free of charge, and they will have to pay up $800 annually for families and $400 for individual health care. Some monthly premiums not covered.

Hourly health care costs need to be slashed by 30% to save money by: implementing health programs for workers at work, threaten jobs if smoking or obesity are problematic to that worker, and creating a membership at a local gym for workers paid by GM to cut down on trips to the doctor and to keep employees healthy. Also, forgo $1.50 an hour to help retirees who will have to pay more with the new plan.

1.) By December 1, 2005, begin meetings and talks between the UAW and General Motors. Make proposals that will need to be voted on by 100% of voters. a.) Cut long-term health care liability by $20 billion b.) Cut its hourly health care liability by 30% c.) Save $5 billion annually on health care expenses

2.) By April 1, 2006, start implementing these plans in health care costs. Inform all employees and retirees of what HAS to happen to stay in business. Direct calling and mailing to retirees and employees must occur. Also, meetings at work for active employees to know exactly what is going on. 3.) May 1, 2006 start mailing out health tips to retirees in pamphlets to assist in healthier diets and exercise. 4.) May 1, 2006 have deal signed with Golds Gym, or WeightWatchers of America for active employees to be able learn about dieting, eating, and a membership to workout when possible 5.) Provide a grace period or trial run to make sure all financial calculations are correct on savings and evaluate plan for January 1, 2007. 6.) By the end of 2007 health care costs will be cut in half overall for the year and only cost General Motors around $2.55 billion.

1.) 2.) 3.) 4.)

5.)

The costs will be nothing compared to the savings. With over 1 million employees and retirees, costs will be significant however. $50,000 spent on food, space, and presentations during the months of meetings between UAW and GM in Detroit $3 million deal made with Weight-Watchers and Golds Gym for employees health issues $5 million spent on mailing and calling to inform workers and employees and pamphlets on health A total of $10 million spent on research and development of the plan, the financial savings, the health ideas, and the pay for those responsible of implementation The cost that some workers will quit because of new standards, however, that would save GM some money

 The UAW rejects new plan ideas GM must cut jobs or close plants laying off thousands because new plan doesnt work If health care expenditures are not cut, GM could go bankrupt Workers could strike GM goes out of business

The plan will work and GM will become more profitable Less money lost will lead to more money put into solving other company problems More money dedicated to the more fuel efficient R & D to better compete with other auto makers Share price will increase drastically and GM will recapture the market percentage they once had

 GM will use their market share to bring suppliers in line with their needs. We are suggesting that GM force their suppliers to reduce prices and increase quality control. With this increased leverage at each supplier costs will come down and car sales will increase due to increased consumer confidence. The goal will be to reduce their manufacturing costs which will enable them to increase revenues and profits. This strategy also suggests greater transparency of suppliers financial situations to prevent similar problems like Delphi.

 GM will notify all suppliers of this plan on February 1, 2006. GM will evaluate each supplier according to their Total Value Promise, as well as the percentage reduction in price. If quality is lacking suppliers dropped at the end of each fiscal year.

 Suppliers evaluated on a quarterly basis. Maintain Total Value Promise standard and reduce price 1%, by 2008 Reduce prices 5% by 2012. GM will hold meetings with suppliers at the end of each fiscal year.

Increased Sales Reduced costs Greater ability to estimate financials Increase Shareholder value Increase sales = Increase demand for suppliers.

 Substantial amount of time to meet with suppliers >100k). Increased costs associated with Quality Control evaluations approx. 2 mil./yr.) Possible loss of suppliers.

 Hold Board Members and Upper Management Responsible Turn GMs tech strategy from Follower to Leader and look to the future Remake the Brand Image by focusing on strengths and cutting weaknesses

 They must be held accountable for both successes and failures Bureaucratic structure must change to help decision making process decentralize decision making process) Incentivise and challenge management Change board to people who had turned around failing companies

 No longer can GM survive being a tech dinosaur Create a large centralized and well funded R&D program to catch up and surpass competitors immediately to have products coming out by 1st quarter 2008 Rush hybrid technology into a vehicle by next model year

 Build back market share to over 30% by 2008 Phase out sluggish brands by 2009
Pontiac, Oldsmobile, and Buick Ex. 13.1 in Book)

More focus on brand specific vehicles

No longer should every brand offer every type of vehicle
Destructive cannibalizing competition Too many models and platforms Vehicles all look the same to consumers

Bring back exciting vehicles with quality, character, and style

Regain lost market share Better Corporate image Build up consumer confidence Fewer mistakes in the future Increased shareholder value Bottom line = More cars sold

 $2 Billion to R&D department to get things caught up quickly $200 million increase to design budget to bring in top designers for GMs next generation models

http://www.gm.com/ http://www.cnn.com/2005/AUTOS/11/02/incentives.reut/index.html http://money.cnn.com/quote/quote.html?shownav=true&symb=GM http://www.msnbc.msn.com/id/8129876/ http://www.msnbc.msn.com/id/7469954/ http://online.wsj.com/article/SB113140909884990600.html?mod=us_bus iness_whats_news http://online.wsj.com/article/SB113138258559290156.html?mod=us_bus iness_whats_news

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