Change Challenges of Downsizing5
Images of Change6
Pressures to Change6
Market Decline Pressure6
Result of Change7
This paper explores the change that General Motors faced after the economic recession and credit crisis that began in 2007. This pushed GM to request assistance from the U.S. Treasury which resulted in the restructuring of their US operations. The start of this restructuring change involved downsizing GM’s operations in the US. Along with the mandate imposed from the US government GM engaged in downsizing to reduce costs, and to cope with the external pressures. The pressures that propelled GM to change included market decline pressure, fashion pressures, and mandated pressures. In its restructuring, GM closed plants, cut its workforce, shed three brands, reduced debt, introduced popular new vehicles, and implemented changes to reduce retiree legacy costs, which had been a major financial drain (Canis & Webel, 2013). Although this downsize had a lot of negative results, including employee morale and retention, the overall effects of this change on GM’s operations were positive as their share price and finances grew since they filed for bankruptcy. Therefore, the change that GM executed was done effectively and helped the company keep their company standing.
Given the speed and depth of the economic crisis that began in 2007 many companies engaged in downsizing as a way to cut costs and adapt to changing market demands. Many automotive companies experienced significant declines in sales and revenue due to the precipitous drops in demand for automobiles and the growing switch to smaller, more fuel efficient, vehicles. The recession and global credit crisis not only affected smaller auto retailers but also the larger ‘big three’ auto manufacturers Ford, General Motors (GM) and Chrysler. As a result of this “GM, critically short of operating cash, received a bridge loan from the U.S. Treasury, under the conditions that the company further accelerate a tough restructuring of its US operations that had been underway for several years” (General Motors, n.d.). This report identifies the changes and the results that GM faced as a result of this restructuring and downsizing due to the economic crisis. Company Overview
As stated above, General Motors Corporation is one of the World's largest ‘big three’ automobile manufacturing companies. It was founded on September 16, 1908 by William Durant and has placed a critical role in the global auto industry for more than 100 years (General Motors, n.d). The design and quality of GM’s new cars improved significantly in these 100 years, but GM found it difficult to regain share from oversees manufacturers, and legacy cost from GM’s decades as a larger, less efficient company continued to weigh on financial results (General Motors, n.d.). This decline in financial results, combined with the global economic crisis, pushed GM to request assistance from the U.S. Treasury which resulted in the restructuring of their US operations. As a result of this restructuring, in 2009 General Motors changed their name to General Motors Company (General Motors, n.d.). Along with this name change, “old GM and its successor General Motors Company together received over $50 billion in federal assistance through the U.S. government’s Troubled Asset Relief Program (TARP)” (Canis & Webel, 2013). “As ranked by total assets, GM's bankruptcy marks one of the largest corporate Chapter 11 bankruptcies in U.S. history” (Canis & Webel, 2013). The start of this restructuring change involved downsizing GM’s operations in the US. Restructuring Change
Downsizing is “the intentional process of permanently reducing staff numbers in an organization” (Palmer, Dunford & Akin, 2009). GM engaged in...