February 17, 2012
Unit 6 Assignment 2: Company Analysis
General Motors Company has played a pivotal role in the global auto industry for more than 100 years. However in 2008, it was almost brought to its knees by a major recession and global credit crisis that drove car sales to near depression levels and dried up private sources of capital. This paper attempts to review what happened to General Motors while analyzing the macroeconomics of its corporate operations.
General Motors Company (GM) is an American multinational automobile manufacturer founded on September 16, 1908 in Flint, Michigan by co-founders William C. Durant and Charles Stewart Mott. Later that year, they acquired Oldsmobile. Then in 1909, Cadillac, Elmore, Oakland, and several others were added as well as the Reliance Motor Truck Company and the Rapid Motor Vehicle Company. Eight years later, Durant reorganized General Motors Company into General Motors Corporation. Shortly thereafter, Alfred P. Sloan was selected to take charge of the corporation and led it to its post-war global dominance. This unprecedented growth of GM would last into the early 1980s. Headquartered in downtown Detroit, Michigan, the company once again in 2009 became General Motors Company, known as GM. As of 2011, GM employs 209,000 people in every major region of the world and does business in more than 120 countries (GM, 2011). GM produces cars and trucks in 31 countries, and sells and services these vehicles through the following brands: Buick, Cadillac, Chevrolet, GMC, Daewoo, Holden, Opel and Vauxhall (GM, 2011). GM’s OnStar subsidiary provides vehicle safety, security and information services. It has been the world’s largest carmaker and leader in global sales for 77 consecutive years from 1931 until 2008 when it was surpassed by Toyota in global sales.
The financial crisis has had a negative impact on the automobile industry, with GM experiencing a substantial decrease in its sales and revenue figures. After years of loses, GM along with Chrysler and Ford were forced to appeal to the federal government in 2008 for financial aid. As GM’s financial position remained very weak given the structural problems within the company and the negative impact of the so-called automotive crisis at that time, finally, on June 8, 2009, the company filed for bankruptcy protection under the provisions of Chapter 11 and as a direct result, all common stock shareholders loss their investments. GM was removed from the New York Stock Exchange (NYSE). Then just over one year later, on July 10, 2009, GM emerged from reorganization with financing partially provided by the government. They were relisted on the NYSE on November 18, 2010, setting the record for the largest IPO in US history with a value of $21.1 billion (Wikipedia, 2012). As a result of substantial company restructuring, which involved the discontinuation of some GM brands such as Hummer, Saturn and Pontiac and with Daniel Akerson as the new chairman and CEO, a new GM emerged. The new GM has one clear vision: to design, build and sell the world’s best vehicles including hybrids. The new business model revolves around this vision, focusing on compelling vehicle design, innovative technology, improved manufacturing productivity and streamlined, more efficient inventory processes. “Political changes in the 1990s meant that almost all trading nations function with market-based economies and their trade policies have tended to encourage free markets between nations” (Johnson, G. et al. 2008: p.70). This presented opportunities for business expansion for companies like GM. Since late 1990s, GM has been opening plants and forming joint ventures in countries such as India, China, South Korea, Japan, Russia...