The G.M.

Case
Class Notes
THE G.M. CASE
SYNOPSIS
SYNOPSIS OF THE CASE
1. HENRY FORD STRATEGY
A. LOW - COST
B. MASS PRODUCTION
C. DEVELOPED MASS MARKET - ONE MODEL 'T
D. LIMITED PRODUCT DIFFERENTATION
E. MFG. DISTINCTIVE COMPETENCE -
STANDARDIZATION OF QUALITY COMPONENT PARTS FOR EASY
AND CHEAP ASSEMBLY
W BROAD DIFFERENTIATION OF PRODUCT
W DECENTRALIZATION - PROFIT CENTERS
W FIVE DIVISIONS - FIVE MARKET SEGMENTS
W CUSTOMER COULD UPGRADE WITHIN G.M. CHEVROLET,
PONTIAC, OLDSMOBILE, BUICK, AND CADILLAC
W MASS PRODUCTION
THE G.M. CASE
SYNOPSIS
2. ALFRED P. SLOAN STRATEGY
THE G.M. CASE SYNOPSIS
W VERTICAL INTEGRATION CARRIED TOO FAR - 60
W TRANSFER PRICING PROBLEMS - CORPORATE CONTROL
W HIGH COST - POOR QUALITY
W PRODUCT DIFFERENTIATION BETWEEN DIVISIONS BECAME
EXCESSIVE - DISTRUCTIVE COMPETITION
W ROI DECLINED
W TOO MANY MODELS AND PLATFORMS
3. DEVELOPING PROBLEMS AT G.M.
THE G.M. CASE
SYNOPSIS
W SMALL CARS - G.M. LITTLE EXPERIENCE
W LEAN PRODUCTION - LOW COST
W HIGH QUALITY
W G.M. EUROPEAN DIVISION HAD THESE SKILLS BUT COULD NOT
TRANSFER THEM TO U.S.
4. OIL CRISIS AND JAPANESE COMPETITION
THE G.M. CASE
SYNOPSIS
W AN ATTEMPT TO REDUCE COST, INCREASE QUALITY, AND
IMPROVE CUSTOMER RESPONSIVENESS
W FUNCTIONAL - LEVEL STRATEGY
W 0 BILLION INVESTMENT
W AUTOMATION AND ROBOTICS - PEOPLE IGNORED
W TOYOTA NUMMI JOINT VENTURE - LEAN PRODUCTION
W SATURN PROJECT
. ROGER SMITH ERA - 1980`S
THE G.M. CASE
SYNOPSIS
W BUSINESS - LEVEL STRATEGY
W 80 MODELS AND 1 PLATFORMS
W REDUCTION OF MODELS AND PLATFORMS
W CONSOLIDATION OF FUNCTIONAL ACTIVITIES
W LOST ITS DIFFERENTIATION - DIVISION MODELS ALL
BEGAN TO LOOK ALIKE
W DIVISIONS LOST THEIR AUTONOMY
. ROGER SMITH ERA - 1980`S CONT.
THE G.M. CASE SYNOPSIS
W CORPORATE - LEVEL STRATEGY
W COSTS REDUCED BUT STILL TOO HIGH: 1,800 - 600
W REDUCED LEVEL OF VERTICAL INTEGRATION - MORE
OUTSOURCING.
W PURCHASED EDS AND HUGHES AIRCRAFT WITHOUT MUCH
SYNERGISTIC EFFECT.
. ROGER SMITH ERA - 1980`S CONT.
THE G.M. CASE SYNOPSIS
W CORPORATE - LEVEL STRATEGY
W CAR DIVISIONS DIVIDED AND COMBINED INTO TWO BUSINESS
GROUPS: CPC (SMALL CARS) - CHEV AND PONTIAC AND BOC
(LARGE CARS) - BUICK, OLDS, AND CADILLAC
W DID NOT WORK: COSTS STILL HIGH, LACK OF
DIFFERENTIATION AMONG MODELS, DIVISIONS LOST
AUTONOMY
. ROGER SMITH ERA - 1980`S CONT.
G.M. CASE ISSUES
W Leadership, Vision, And Mission: Focus
W Technology Vs. People
W ProIit Vs. Market Share
W Financial Considerations
W Competition: Quality, Cost, And Product DiIIerentiation
W Vertical Integration Vs. Outsourcing
W Strategy - Structure Link
W EDS And Hughes AircraIt
W The Oldsmobile division
THE G.M. VISION
GM`s vision is to be the world leader
in transportation products and
related services. We will earn our
customers` enthusiasm through
continuous improvement driven by
the integrity, teamwork, and innovation
oI GM people.
G.M. CASE
MISSION STATEMENT
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.
G.M. OBJECTIVES
W BECOME PROFITABLE
W SATISFY CUSTOMERS
WITH BETTER
PRODUCTS
W GROW THE BUSINESS IN
FUTURE YEARS
G. M. SWOT ANALYSIS
W STRENGTHS
SIZE AND MARKET SHARE
TECHNOLOGY POTENTIAL
NEW LEADERSHIP
QUALITY IMPROVEMENT AND PERCEPTION
THEREOF
MODEL ACCEPTANCE HAS IMPROVED
BENEFITS DERIVED FROM A NEW STRATEGY -
STRUCTURE APPORACH AND RELATIONSHIP.
G. M. SWOT ANALYSIS
W WEAKNESSES
Failure To Make Technology Work
Too Much Vertical Integration
Bureaucratic Culture
Relationship With UAW
Relationship OI Strategy To Structure
G. M. SWOT ANALYSIS
W WEAKNESSES cont.
Product Design Problems - Public Acceptance And
Reduction OI Cycle Time
Market Share And ProIitability
Negative EIIects OI Downsizing
Still Much To Learn About Lean Production - High Cost
Producer
Hughes AircraIt Situation
G. M. SWOT ANALYSIS
W OPPORTUNITIES
USE OF KNOWLEDGE GAINED FROM SATURN
EXPERINCE AND TOYOTA (NUMMI) JOINT
VENTURE.
EXPANSION OF THEIR GLOBAL PRESENCE - THEIR
OWN EUROPEAN MODEL OPERATON AS AN
EXAMPLE.
CONTINUE TO BUILD ON THE NEWFOUND
CUSTOMER CONFIDENCE.
CHANGING CONSUMER DEMAND FOR NEW MODEL
TYPES AND STYLES - EXPANSION AND
LEADERSHIP.
G. M. SWOT ANALYSIS
W THREATS
DOMESTIC AND FOREIGN COMPETITION
U.S. FEDERAL LEGISLATION AND REGULATION
CONSUMER LAWSUITS
FOREIGN LEGISLATION AND REGULATION
DECLINING QUALITY OF THE INFASTRUCTURE IN
THIS COUNTRY
DECLINING VALUE OF JAPANESE YEN
G. M. SWOT ANALYSIS
W INDUSTRY ANALYSIS
MATURE
PRODUCT SEGMENTATION BY PRICE AND FUNCTION
TECHNOLOGY CHANGING IN MFG. PROCESS AND
PRODUCT DESIGN
OVERCAPACITY WORLDWIDE
G. M. SWOT ANALYSIS
W INDUSTRY ANALYSIS
MEGADEALERS AND AUTO SUPERMARKETS
WORLDWIDE DEMAND - STAGNATION - DECLINE
MUST BE WORLD CLASS IN EVERY RESPECT - PRODUCT,
MFG. OPERATIONS, FINANCING, AND DISTRIBUTION
1992
RATIO ANALYSIS INDUSTRY G.M. COMMENTS
Current Ratio 1.4 1.1 Low
Quick Ratio 0.7 1.0 OK
Inventory Turnover 6. 11.2 Good
Debt Ratio 64. 96.7 Poor
ROA 4.6 0 Poor
ROE 6.6 0 Poor
COMPETITOR ANALYSIS
W Cost - G.M. too high
W Quality - G.M. marginal, competition continues to
improve
W Styling - G.M. must watch
W Product line and segmentation - price and Iunction -
G.M. OK
W Suppliers - G.M. too vertically integrated
W Buyers - sport utility and pick-ups
W New entrants - not likely a threat
STRATEGIC CHOICE
G.M. has been through some diIIicult times the
past 10 years or so and appears to have learned
some hard lessons. Based on these lessons G.M.
has begun to adopt a strategy oI restoring
proIitability to its North American operations, by
aggressive marketing, redesigned products,
decentralized MGT style, and a proIit rather than
a market share goal.
RECOMMENDATIONS
W Dropping UnsuccessIul Product Lines
W Trimming Its Product Line
W Reduce the Number oI Basic PlatIorms
W Standardizing Component Parts Across Models
W Reducing the Number oI Parts Needed to Produce a Car
CUT COSTS BY:
RECOMMENDATIONS
W Streamlining Operations by Consolidations Within the
Corporation
W Decentralizing Decision Making
W Integration oI It Design & MFG Activities
W Better Managing Its Supplier Relationships
CUT COSTS BY: con`t
RECOMMENDATIONS
W Focus resources on core products, cars, & trucks .
W Realignment oI organizational structure to support core products
and meet costs & quality goals.
Example: selI managed creative work teams to Iigure out how to
speed-up product development & improve product development.
W Implement common systems & processes where possible.
W Balance needs oI employees and unions with needs oI the
company.
GM UP-DATE
W MADE A PROFIT EVERY YEAR SINCE 1993
W OF THE MARKET APPROX. 30
W CONTINUE TO DOWNSIZE AND CUT COSTS
W STILL HAVE SOME UNION PROBLEMS
W HAVE REORGANIZED TOP MANAGEMENT
W OUT-SOURCING MORE-VERTICAL INTEGRATION
DECREASING
W INCREASING OVERSEAS OPERATIONS - EAST EUROPE,
RUSSIA, ASIA, AND SOUTH AMERICA
GM 1998 UP-DATE
W GENERAL STRIKE DURING SUMMER 1998
W ESTIMATED EARNINGS DOWN 20
W REORGANIZATION - MERGING ITS NORTH
AMERICAN AND EUROPEAN OPERATIONS UNDER
A SINGLE PRESIDENT WITH GLOBAL
RESPONSIBILITIES (RICHARD WAGONER, JR., 4)
COMBINED SALES OF 13 BILLION
GM 1998 UP-DATE con`t
W THERE ARE NOW FOUR REGIONAL DIVISIONS -
NORTH AMERICA, EUROPE, ASIA, AND LATIN
AMERICA
W CHAIRMAN AND CEO JOHN (JACK) F. SMITH, JR.
MAY NOT BE THE MAN TO FIX G.M.
W SPINNING OFF DELPHI AS AN INDEPENDENT
COMPANY
GM 1998 UP-DATE con`t
W COST CUTTING MEASURES--OPERATION
YELLOWSTONE--SMALL CARS--LOSING 1000 PER
CAR--SUPPLIERS WILL CODESIGN AND USE
MODULARITY
W NEW PLANTS WILL BE HALF THE SIZE OF THE OLD
PLANTS AND COST ABOUT 300 MILLION
W MORE ALUMINUM WILL BE USED TO KEEP THE
WEIGHT DOWN IN THE FUTURE
GM 1999 UP-DATE
W 1998 SALES 161.3 BILLION
W 1998 NET INCOME ALMOST 3.0 BILLION
W EST. 1999 SALES 176.6 BILLION
W EST. 1999 NET INCOME 6.0 BILLION
W OUTSIDE NORTH AMERICA
1) CADILLAC 2) CHEVROLET 3) GMC
4) HOLDEN ) ISUZU(49) 6) OPEL
7) SAAB (0 - 100) 8) VAUXHALL
9) NUMMI JOINT VENTURE WITH TOYOTA
GM 1999 UP-DATE con`t
W MARKET SHARE DOWN TO 30
W INVESTED IN OVERSEAS PLANTS IN BRAZIL,
CHINA, INDIA, POLAND, RUSSIA, THAILAND
W SEEKING A 10 MARKET SHARE IN ASIA
W SEEKING BROADER TIES WITH HONDA,
DAEWOO, AND SUBARU
GM 2000 UP-DATE
W RICK WAGONER NEW CEO
W JACK SMITH STILL CHAIRMAN OF THE
BOARD
W JOHN SMALE, FORMER CEO OF P&G,
RETIRED FROM GM BOARD AFTER 19
YEARS(1982)
GM 2000 UP-DATE con`t
W US MARKET SHARE DOWN TO 28
W PURCHASED A 20 SHARE IN FIAT AUTO
OF ITALY
W GM PUSHING SUVs AND TRUCKS
W OLDS-ALL RELATIVELY NEW MODELS-
STILL SUFFERING LOW SALES
2001 G.M. Update
W G.M. paid 600 million to double its stake in Suzuki to
20
W G.M. paid 340 million on a joint venture with Auto
VAZ (Russia`s biggest automaker) to build 7,000
SUVs a year
W G.M. made a 400 million deal to take over many
assets oI Daewoo Motors(Korean Automaker). This
gives G.M. a 67 stake in Daewoo.
2001 G.M. Update (Cont`d)
W G.M. is working on a deal to combine Hughes
Electronics (and Direct TV) with Rupert
Murdoch`s news corporation, Echostar (no. 2
U.S. satellite TV business).
W G.M. plans to discontinue the Iollowing
models:Camero and Firebird as well as the Olds
line.
2002 UP-DATE
W MARKET SHARE INCREASED FOR THE SECOND STRAIGHT YEAR.
FIRST TIME THIS HAS HAPPENED SINCE 1976.
2000 27.8
2001 28.1
2002 28.4
W LAST YEAR GM POSTED ITS FIRST MARKET-SHARE GAIN SINCE
1987.
W MUCH OF GM`S GAIN CAME AT THE EXPENSE OF FORD. FORD`S
TRADITIONAL BRANDS WERE DOWN NEARLY 9 PERCENT.
CHRYSLER GROUP SALES WERE DOWN ABOUT 3 PERCENT.
2002 UP-DATE (cont`d.)
W CADILLAC SALES INCREASED 16
W CHEVY BECAUSE OF THE SUBURBAN AND SOME OTHER
TRUCKS IS THE LARGEST SELLING BRAND OF VEHICLES THAT
COST 30,000 OR MORE
W OTHER BEST SELLERS
1. TRUCKS FORD F-10 SERIES (TOP SELLING VEHICLE IN US.)
2. SUV FORD EXPLORER
3. TOYOTA CAMERY NO. 1 & HONDA ACCORD NO. 2 CARS
4. TOYOTA 1.8 MILLION UNIT SALES, BEST
YEAR YET (4 YRS.). LEXUS WAS THE
MOST POPULAR LUXURY BRAND.