General Motor’s Struggles in India: Understanding the Problems and Solutions for Growth

Rajveer Singh
University Canada West
MRKT 201
Ghoncheh Moshiri
Introduction:

The automotive industry witnessed giants, such as General Motors GM, entering new markets

to take advantage of the unexploited opportunities in a competitive environment and an ever-

changing landscape. India has been one of a desirable destination for GM, due to its huge

population and flourishing economy, where it will be able to show off its capabilities and

expand its horizons. However, GM's journey to a has been far from easy, marked by hurdles

and obstacles that have tested the company's resilience and adaptability. Despite GM's global

reputation and solid past, its performance has been weak because of which it is faced with the

problem of being able to penetrate this dynamic and high competition environment. GM has

experienced financial issues over the years, especially during the worldwide economic

downturn of 2008–2009, which had a substantial effect on its operations and investments.

The company's operational and production cost inefficiencies have also been a recurrent

source of worry, restricting its capacity to successfully compete with more nimble

competitors.

Additionally, GM struggled with the deterioration in product quality and occasionally came

under fire for falling short of customer expectations. Another significant difficulty for the

industry has been how to adjust to shifting consumer tastes, especially the move towards

more fuel-efficient and environmentally sensitive vehicles.

In this report, General Motors' difficulties in the market are examined by looking at a

complex range of issues that hampered its growth and hindered its ability to become

dominant. We have tried to identify the main factors which are behind its poor performance

and propose new strategies for possible revival of GM's business prospects in this rapidly

growing market, based on our careful analysis of the challenges that it faces in India.
Through a comprehensive examination of GM's experience, the aspects and issues would be

lightened which were responsible for the failure of this American giant.

Reasons for the failure of General Motor

 Profitless Sales: The issue with GM is obvious to us. GM no longer makes a profit.

The purpose of every business is to generate a profit. Companies fail when they cease

producing a profit. The income statement is used to calculate profit. The income

statement basically takes what you sold in a certain period and subtracts the costs of

doing company in that same time. Profit exists when sales outnumber expenditures or

expenses. If sales are less than expenditures, a loss occurs. In 2005, GM stopped

turning a profit. Since then, GM has lost over $90 billion through the first quarter of

2009. "In finance, we learn that losing money is bad," Joe explains in his seminars.

The issue for GM was that as sales dropped, they had difficulty lowering expenditures

because the majority of their costs were set. In other words, when their revenues

decreased, many of their expenditures did not decrease. When sales fall in most

manufacturing organisations, some of the larger costs fall as well (if you're not selling

as much of your product, you cut down on manufacturing through layoffs, reduced

material purchases, and so on). GM has significant fixed costs as a result of their

union deal. Closing a facility, for example, did not inevitably result in employment

losses. Pensions and legacy health care expenditures were also fixed. As a result, even

when revenues fell, many expenditures remained relatively steady. As a result, there

were losses. As the losses increased and the economy faltered, GM's losses were so

enormous that the company could no longer be considered sustainable. Despite

bankruptcy and try to reduce those fixed costs through a judicial procedure.

 Technology: GM vehicles had outdated chassis and engines. Almost no automobile in

their lineup has contemporary technology. There were even some autos that managed

to pass emission tests. Their component quality only deteriorated, and the long-term

durability of their vehicles was a major problem. Concurrently, competitors were

providing new platforms, better engines, and spectacular automobiles. It was

heartbreaking to watch a global carmaker depart the Indian market. The Indian car

market is the world's second biggest, and the potential is enormous. It is difficult but

not impossible to maintain ground since other international firms are performing well.

In the past, GM's older vehicles may have lacked improved safety features that are

now standard in many newer vehicles. As safety rules and customer expectations

matured, GM's vehicles were chastised for lacking critical safety technology,

lowering their safety ratings and commercial appeal. While vintage GM cars may

have been dependable in their day, ageing technology can result in higher

maintenance and repair expenses. Customers may have grown cautious to invest in

older GM models as a consequence of worries about dependability and lifespan.

 Customer Service: At various times in its history General Motors had been

confronted with customer service problems and failures. While the company has

undertaken efforts in improving customer service, there have been very few instances

where it did not deliver and resulted in adverse feedback and an impact on satisfaction

with customers. General Motors has suffered from a number of key customer service

failures. GM has been engaged in numerous large recalls owing to car safety

problems. Millions of consumers have been affected by these recalls, producing

the safety and quality of its products. Some consumers have reported obtaining

assistance or replies from GM's customer care employees being delayed. Slow

response times can aggravate customer issues and cause unpleasant customer

experiences. Customer service is important in brand differentiation in the automobile

business since it is extremely competitive. Because of GM's poor customer service,

some consumers may have switched to competitors that provide better service.

 Lack of innovation: General Motors, a major producer of both trucks and SUVs, has

seen its sales plummet due to a lack of fuel economy. Fuel price increases had a

crucial impact in enabling the development of hybrid and more fuel-efficient

automobiles. General Motors' fundamental competency was innovation. Since 1908,

General Motors has used service and technical innovation to build a leading position

in the vehicle industry.7 In the case of hybrid automobiles, however, General Motors

was unable to keep up with market demand. GM is falling behind in the alternative

energy revolution.8 This is GM's most serious flaw. Since the beginning of the

alternative energy movement in the automobile industry, GM has lagged behind the

competition in terms of hybrid vehicle and alternative energy research and

development. This resulted in a slew of issues, including a loss of market share and a

drop in business profitability.

 Mishandling Fiat: It seemed genius to buy 20% of the Italian car manufacturer Fiat

for 2.4 billion dollars in GM shares. With Opel/Vauxhall, it would've given GM

dominance in the European market and made GM an even stronger global player.

Then, after the death of Fiat's CEO, Gianni Agnelli, the problems with the company

grew. Fiat was given the right to demand that General Motors purchase remaining

shares and take ownership of them in exchange for GM's stake. Instead, GM decided
 to pay Fiat $2 billion to walk away from the deal in 2005. Fiat used that money to turn

itself around, and it will be Chrysler's newest owner.

Potential solutions for business growth:

 Make customers happy: The importance of listening to the customers' feedback and

meeting their needs is emphasised in this solution. GM can strengthen relations with

its customers through knowing what they want out of their cars as well as addressing

their concerns. It is more likely that satisfied customers will be loyal to the brand and

recommend it to others.

 Safety enhancement: Safety and comfort can be improved through the use of

autonomous driving technologies. The solution suggests that General Motors should

be investing in the development of vehicles capable of driving themselves at a certain

degree, with enhanced driver assistance features. General Motors can appeal to

consumers who are more safety conscious and maintain its position as a leader of

automobile technology by prioritising security while offering innovative driving

experiences.

 Develop alternative solutions: You'll be able to focus more if you create a heatmap

above. Resources to be dealt with can be allocated according to priorities. So you're

well aware of the issues that need to be specially addressed. As an example, given that

their impact on your business is large and they are probable to take place, you should

be able to respond promptly to the risks in the yellow heatmap above. You will also

indicate possible alternate solutions on your list, in an ideal way. You'll be able to

take your experience from the past. Or you'll find out about how to get the key to

success of your business in dealing with these problems from other people. It's going
to help you open your eyes, helping you figure out ways of coping with the risk that

you have.
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