The Collapse of General Motors

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MGX 9660 - International Business Theory and Practice
Case n°10: The Collapse of General Motors

PHAM Trang
(23283300)

REBOURG Malcolm
(23625678)

YAO Aileen
(20460996)

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Table of Contents
I - Introduction………..………...………………………………………….….….p 3 II - What are the internal and external factors that contributed to GM’s decline and eventual bankruptcy protection application?……………….....….p 4  Internal Factors...………….……..…………………………...……….……….…p 4  Extenal Factors……….…..…………………………..……….………………….p 5

III - Discuss the latest stage of the new (smaller) GM……………….………...p 6  What are the characterisics of the new GM?..………………………………...…p 6  Some encouraging signs of recovery………………………………………....….p 9  Threats regarding GM’s trials to regain its golden past………………………….p 11  Summary and Observations……………………………………………………...p 13

IV - With a majority government ownership, what operational and management challenges might GM’s management confront when trying to regain its golden past?…….………………………………….………..p 14  Operational Challenges..………………………………………………………….p 14  Management Challenges………………………………………………………….p 15  Summary and Observations………………………………………………………p 16

V - Critically Analyse Whether it was GM’s Failure or its Competitors’ enormous success in cost savings and innovation that brought about GM’s demise…………………………..…...….……………………..…….….….p 17  Cost Savings - a poorly designed cost structure……...………………………….p 17  Innovation Processes…………….…………..…………………………………..p 18  Summary and observations……………………………………………………...p 21

VI - Conclusion……………….……………………………………………….….p 22 VII - References……………………………………………………….……….....p 23 2

I - Introduction
General Motors (GM) is an American multinational which was founded by William Durant in 1908. It is known as one of the world’s largest auto manufacturers. GM employs 209,000 people around the world and produces vehicles such as cars and trucks in 31 countries. It services and sells its vehicles through various brands, such as Buick, GMC, and Holden. The largest markets of GM are China, the United States, Brazil, the United Kingdom, Germany, Canada and Russia. In June 2009, after years of loss and market share decline, GM filed for bankruptcy protection. In July, the U.S. government spent billions of dollars to fund GM during its recognition (Isidore 2009). After emerging out of bankruptcy, the debt for the “new GM” was reduced from $54.4 billion to $17 billion. In addition, only four brands have been kept in the U.S. market: Chevrolet, Cadillac, GMC and Buick. In November 2010, GM realized the biggest IPO in the U.S. history and was relisted with 27% ownership of the U.S. government and 12% ownership of the Canadian government. There are many reasons for GM’s decline, both internal and external. After recovering from bankruptcy, the “new GM” has made some changes to its strategies and management to regain its golden past. This report will be mainly focus on analyzing firstly, the factors that contributed to GM’s decline; secondly, the latest state of the new GM; thirdly, the challenges and obstacles GM had to confront and overcome when it partnered with governments; and lastly, whether it is GM’s failure or its competitor’s success that caused its demise. GM’s collapse can be concluded by two main factors, that are, the internal weaknesses such as high costs and wrong focus on customer needs, as well as external disadvantages such as powerful competitors, tight government regulations and global financial crisis.

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II - What were the internal and external factors that contributed to GM’s decline and eventual bankruptcy protection application? Internal Factors
Heavy burden of wages, benefits and pensions During GM’s high profitability period, it has signed a contract with the United Auto Worker (UAW) union to pay high wages, generous pensions and healthcare benefits (Alam 2011). However, the high costs of GM have created a significant competitive disadvantage against its...
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