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Marketing Strategies for the Motor Vehicle Industry

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Marketing Strategies for the Motor Vehicle Industry Powered By Docstoc
					Marketing Case Project: General Motors




            Zach Bauer
           Matt Biersdorf
             Matt Flinn
            Amy Oliver
          Danielle Provance
         Marketing Strategies
           Professor Paul
             11/08/2006
                                   Executive Summary

       General Motors is one of the largest motor vehicle manufacturers in the world and

has been a market leader for over 75 years. The company itself has been going through

changes especially in the way that they are creating products and on an internal basis,

however, there are some changes that the company still needs to overcome.

       One of the changes that General Motors has promoted is its‟ Flexible Fuel

Vehicles which do not run on solely petroleum, rather Ethanol 85. These vehicles cost

only $150 more than a normal vehicle, however, the lacking of E-85 fueling stations

throughout the nation are making it harder for consumers to take advantage of this

“greener” technology while also saving money.

       The company has also decided to implement a widespread corporate restructuring

initiative to help alleviate company debt as a result of rising costs of employee

healthcare, benefits, and pensions. Such a plan includes the closure of over a dozen

North American plants and manufacturing lines, as well as making substantial job cuts.

This three-year endeavor is necessary in keeping General Motors in line with

competitors.

       General Motors is struggling to keep up with its competition in hybrid

technology. In order to become a major competitor in the automotive market GM needs

to penetrate the hybrid market. In the past few years this market has more than doubled

and GM has done nothing to obtain market share. The suggestion is that General Motors

needs to implement a strategy to produce hybrid automobiles and take market share away

from its Asian competitors.
                                                    Table of Contents
Introduction ....................................................................................................................... 4
Company Background ...................................................................................................... 4
Situational Analysis .......................................................................................................... 6
  Industry Analysis .......................................................................................................... 6
  Competitive Analysis .................................................................................................... 7
  Economic Analysis ........................................................................................................ 7
  Social Analysis ............................................................................................................... 8
Problem, Opportunities, and Decision ............................................................................ 9
  Problem .......................................................................................................................... 9
  Opportunity ................................................................................................................... 9
  Decision .......................................................................................................................... 9
Alternative One (Company Provided): Ethanol 85-Flexible Fuel Vehicles ................. 9
  Marketing Mix Strategy ............................................................................................... 9
  Financial Analysis ....................................................................................................... 11
  Pros ............................................................................................................................... 12
  Cons .............................................................................................................................. 12
Alternative Two (Company Provided): Corporate Restructuring ............................. 13
  Marketing Mix Strategy: ............................................................................................ 13
  Financial Analysis: ...................................................................................................... 14
  Pros ............................................................................................................................... 15
  Cons .............................................................................................................................. 15
Alternative Three (Company Provided): Hybrid Initiative ........................................ 16
  Marketing Mix ............................................................................................................ 16
  Financial Analysis ....................................................................................................... 18
  Pros ............................................................................................................................... 19
  Cons .............................................................................................................................. 19
Conclusion and Recommendation ................................................................................. 19
  Conclusion ................................................................................................................... 19
  Recommendation......................................................................................................... 20
Implementation and Control Issues .............................................................................. 20
  Implementation ........................................................................................................... 20
  Control Issues .............................................................................................................. 21
References ........................................................................................................................ 22
Appendix .......................................................................................................................... 24
                                        Introduction

       Christopher James is from Seattle, Washington and currently owns a GMC Denali

and has owned GM vehicles throughout his entire lifetime. His son Pallab recently turned

16 years old and Christopher wanted to buy him a new car while also teaching him to be

environmentally and economically considerate. Christopher has had a brand loyalty to

GM vehicles but is having trouble with GM because the only vehicles that they offer that

are environmentally friendly are flexible fuel vehicles.

       The problem that he came to with these types of vehicles is that out of 170,000

total fueling stations there are only 50 fueling stations that support flexible fuel vehicles

and most of which are in the Midwest. Ideally Christopher would like to purchase his son

Pallab a hybrid vehicle but GM currently does not offer any type of hybrid and he is

having problems switching to another brand of car.

Company Background

       The General Motors Corporation was founded in 1908 and is currently the

world‟s largest producer of automobiles. Currently, the United States holds the “largest

national market” for General Motors. China, Canada, the UK, and Germany follow the

United States for GM‟s largest markets. General Motors, also known as GM, currently

employs people from all parts of the world with an employee population of 326,999

(General Motors).

       The current headquarters of the company resides in Detroit, Michigan. Some of

the brands that GM encompasses consist of: Buick, Cadillac, Chevrolet, GMC, GM

Daewoo, Holden, Hummer, Oldsmobile, Opel, Pontiac, Saab, Saturn, and Vauxhall

(General Motors). Within all of these companies, GM produces vehicles in 33 countries
and in 2005 9.17 million GM cars and trucks were sold globally (General Motors).

Along within the vehicle aspect of GM, the company also owns a financial company

known as GMAC Financial Services. This sector of GM offers residential and

commercial financing and insurance (General Motors). Another sector within General

Motors is a subsidiary company known as OnStar, which provides vehicle safety,

security, and information services (General Motors).

       General Motors has “purchasing collaborations” with such companies as Suzuki

Motor Corporation, Isuzu Motors Ltd of Japan, Toyota Motor Corporation of Japan,

DaimlerChrysler AG, and BMW AG of Germany (General Motors). The company as a

whole also has manufacturing ventures with several automakers around the world,

including Toyota, Suzuki, Shanghai Automotive Industry Corporation of China,

AutoVAZ of Russia, and Renault SA of France (General Motors).

       General Motors also offers vehicle accessories and parts through GM owned

brands such as GM Goodwrench and ACDelco. GM brand engines and transmissions are

marketed through the GM Powertrain line.

       On June 30, 2006, Kirk Kerkorian, whose Tracinda Corporation is the third-

largest shareholder of General Motors, proposed a global alliance between GM and the

Renault-Nissan group (General Motors). Since GM has recently had financial issues,

Carlos Ghosn, the CEO of both Renault and Nissan, expressed interest in possibly

acquiring a stake in GM (General Motors). After months of negotiating between both

parties, the end decision could not agree on the perceived benefits of acquiring a massive

shareholders position within GM and an announcement was made to end the discussions

about an alliance (General Motors).
Situational Analysis

Industry Analysis

       Threat of new entrants: The threat of new entrants is low in the automobile

industry since the industry is very mature and has reached great economies of scale.

Some common entry barriers new automobile manufacturer‟s face include insufficient

start-up capital, difficulty accessing distribution channels, lack of dealership availability,

and extensive research and development costs necessary for product innovation.

       Power of suppliers: The bargaining power of suppliers is very low in the

automobile industry as they saturate the automotive market. There are many more

automotive part suppliers in relation to automobile manufacturers; thus, giving

manufacturers the power to switch suppliers if necessary.

       Power of Buyers: The bargaining power of buyers is relatively high in the

automobile industry because individual consumers purchase the majority of the industry‟s

output, which constitutes the largest source of revenue. Therefore, manufacturers must

recognize consumer needs and wants, and conform to changing consumer trends in order

to boost sales volume.

       Availability of substitutes: The availability of substitutes in the automotive

industry is moderately low. Possible alternatives to automotive transportation include

walking, riding a bike, or access to public transportation such as a bus, subway or train.

The availability of such alternatives depends heavily upon the geographic location of the

consumer. In cities such as Chicago or New York City, a car is not necessary due to easy

subway access; however, a non-urban dweller may seek automobile access as a more

viable means of transportation.
       Competitive Rivalry: Competition within the automotive industry is very strong

due to a lack of product differentiation and opportunities. All manufacturers produce

similar products, cars, trucks, or SUV‟s; thus, making price, quality and durability, the

primary and weak basis for differentiation. In attempts to increase sales and gain more

market share, automobile companies often use comparative advertising to emphasize

areas where it outperforms its competitors.

Competitive Analysis

   The automobile industry is highly competitive. The North American automobile

industry is dominated by what‟s known as the „Big Three‟: General Motors,

DaimlerChrysler, and Ford Motor Company (General Motors, 2006). The two largest

foreign competitors include both Toyota and Honda. General Motors, once the leading

car manufacturer in the industry, is now struggling to keep up with competition. Since

Toyota‟s introduction of the Prius, an innovative gas electric hybrid car, many other

manufacturers followed suit changing the direction of the automobile industry (Toyota

Hybrid Synergy Drive, 2006). Ford has also introduced a line of new environmentally

friendly cars in Europe boosting company sales. However, GM‟s failure to keep up with

changing market trends has left the company behind its competitors; thus, losing a great

deal of market share (See Appendix A for list of competitors and market share).

Economic Analysis

   Since the attacks of September 11, 2001, the nation‟s economy suffered from a

drastic decline in consumer spending. However, the overall economy is now on the rise

and continues to remain strong. The real after-tax income per person has risen by 9.8%

since President Bush took office, the U.S. economy has grown a solid 2.9% over the past
four quarters, productivity has grown at an annual rate of 3% since the first quarter of

2001, and the employment rate continues to increase (Jobs and Economic Growth, 2006).

In addition to the other economic improvements, gas prices have fallen almost 82 cents a

gallon since early August (Jobs and Economic Growth, 2006). Since the boom in the

economy, GM has gradually started making more profit. GM‟s worldwide vehicle sales

for 2005 were 9.2 million units compared to 9.0 units in 2004 (General Motors

Corporation, 2005). And over the past five years, the global automotive industry has

continually risen year-to-year growing approximately 13% from 2001-2005 (General

Motors Corporation, 2005).

Social Analysis

         For many years, the baby boomer generation has been the primary target market

for automobile manufacturers. However, as this generation nears retirement, and is

spending less money, automakers are shifting their focus to younger generations;

generation Y in particular. This generation is reaching a point of greater financial

stability; thus, contributing greatly to the amount of consumer spending on luxury

products such as automobiles (Baki, 2004). According to analysts, it is projected by 2011

generation X and generation Y combined will account for roughly 40% of total vehicle

sales (Baki, 2004). Consumer trends are also shifting from oversized passenger vehicles,

such as trucks and SUV‟s, to smaller more economic, fuel efficient automobiles (Baki,

2004). Therefore, marketing efforts must shift to meet changing consumer demands.

Such marketing efforts, however, depend heavily on geographic location of the

consumer. For example, marketing a convertible in a cold climate is not as economical
as marketing it in a warmer climate; therefore, the company‟s marketing mix must be

adjusted accordingly to geographic conditions.

Problem, Opportunities, and Decision
Problem

       General Motors‟ dramatic decline in sales and stock market activity is largely due

to a variety of both internal and external factors. Such factors include rising energy

prices and consumer resistance. As a result of changing fuel prices, many consumers are

purchasing smaller, more fuel efficient automobiles consistent with current market trends.

Another factor causing the decline of General Motors is related to a deteriorating internal

structure on both the management and supply chain levels.

Opportunity

       General Motors‟ has several options for alleviating an overall decline in sales.

Such alternatives include offering consumers the choice of new product lines which

consist of smaller and more fuel efficient hybrid vehicles. Secondly, the company has the

option of restructuring management strategies by focusing on their marketing, social,

situational, and psychological influences.

Decision

       After analyzing the various alternatives, the most appropriate action for General

Motors is to offer consumers a new line of innovative energy efficient vehicles, while

also restructuring General Motors‟ internal management method.

Alternative I (Company Provided): Ethanol 85-Flexible Fuel Vehicles

Marketing Mix Strategy

       According to the US Department of energy, E-85 is an alternative fuel source that

has superior performance characteristics (http://www.eere.energy.gov/afdc/e85toolkit/).
The composition of ethanol 85 is basically 85% ethanol and 15% petroleum based. One

of the perks to the use of E85 and ethanol as a whole is that it is a “domestic,

environmentally friendly fuel that enhances the nation's economy and energy

independence” (http://www.eere.energy.gov/). It is also completely renewable. Also

governmental tests have proven that not only is it renewable but in terms of the

environment it results in the reduction of harmful benzene and hydrocarbon emissions.

This fact is solely based on comparisons with that of gasoline. E85 can also reduce

carbon dioxide, and in-turn reduces the greenhouse effect. Ethanol also degrades quickly

in water and, therefore, poses much less risk to the environment than an oil or gasoline

spill. (See Appendix B for E-85 Alternative Fuel Diagram).

       General Motors has seen the benefits to this alternative energy source as many

consumers are switching to this method of fueling. According to its website, as of right

now some of the car lines that General Motors has implemented this to include: 2007

3.5L Chevrolet Impala and Monte Carlo Sedans, 2005-2007 5.3L Chevrolet Avalanche

SUV‟s, 2002-2007 5.3L Suburban, Tahoe, Yukon, and Yukon XL‟s, 2002-2007 Sierra

and Silverado Trucks, All 2000-2002 Chevy S-10 Trucks (after 12/99), All 200-2002

Sonoma Trucks (after 12/99). Many of these models however, also come with standard

petroleum fueling options.

       In terms of General Motors and its method for promoting greater usage of E-85,

"GM will work with VeraSun to add E85 at 20 gas city locations in the Chicago area, and

a pilot program by GM and shell oil products U.S. will test consumer interest in E85 at

six Shell Chicago locations" ("Growing Together to Fuel" 1). The main issue dealing

with E-85 and General Motors promotion of this alternative is "The limited availability of
E85 means that most consumers don't use the alternative fuel even though the [General

Motors] said they have a combined 3 million vehicles on the road capable of using E85."

("Growing Together to Fuel" 1). The General Motors North American Vice President for

Marketing and Advertising reportedly said that they would start to place yellow caps on

their Flexible Fuel Vehicles so that consumers can start to associate their vehicle with this

alternative fuel. He also reported "the company's in-vehicle On-Star help system "will

help people find E85 fueling."" ("Growing Together to Fuel" 1). The main reasoning

behind this is because "many consumers may not know whether or not their vehicles can

run on E85” ("Growing Together to Fuel" 1).

Financial Analysis

               Financially it is not a huge cost to convert vehicles to have E-85

capabilities. In terms of consumers, "These vehicles, [cost] about $150 more than

standard models, [but] have not been advertised in the past, probably due to the shortage

of stations handling E85" ("Fence Post" 16). For General Motors the shortage of Flexible

Fuel Vehicles that have been purchased is a direct correlation with the shortage of fueling

stations, which financially probably has not been good for the revenue of the company if

one were to look specifically at sales of these types of vehicles.

       General Motors may want to market these vehicles from a standpoint of the prices

of E-85 versus gasoline. This is because the price comparison for consumers is dramatic.

As of Sunday, May 21st, 2006 in Greeley, Colorado E85 was priced at $1.99/gallon

whereas regular unleaded fuel was priced at $2.80/gallon. Although $1.99/gallon is still

somewhat pricy when looking at what prices for gasoline used to be it is also almost a
dollar cheaper than that of conventional gasoline. This price difference is quite significant

(http://afdcmap2.nrel.gov/Website/Stations/viewer.htm).

Pros

        There are many pros for the company with this alternative. Some of these include

creating an image to the public that General Motors is trying to promote a movement to a

“greener” method of transportation. One of the perks to the use of E85 and ethanol as a

whole is that it is a “domestic, environmentally friendly fuel that enhances the nation's

economy and energy independence” (http://www.eere.energy.gov/). It is also completely

renewable. Also governmental tests have proven that not only is it renewable but in terms

of the environment it results in the reduction of harmful benzene and hydrocarbon

emissions. This fact is solely based on comparisons with that of gasoline. E85 can also

reduce carbon dioxide, and in-turn reduces the greenhouse effect. Ethanol also degrades

quickly in water and, therefore, poses much less risk to the environment than an oil or

gasoline spill. These facts may seem attractive to consumers and may also draw a new

customer base. Also, by offering these types of vehicles General Motors will be able to

break into a different market because they aren‟t solely going to be using petroleum for

its vehicles.

Cons

        Some of the cons to this alternative include the fact that many consumers who do

have a General Motors Flexible Fuel Vehicle do not actually know that they have this

type of vehicle. Also many of the fueling stations are based mainly in the Midwest and

"there are more than 170,000 gas stations nationwide, only 500 offer E85. About 100 are

in Illinois." ("Growing Together to Fuel" 1).
       Another potential con is that this new alternative is really only a temporary

alternative. There is a worldwide rush and initiative to find an alternative source of

energy. E-85 still is partially based off the production of petroleum and these vehicles as

are the current petroleum based vehicles will only be around for so long and consumers

know that.

Alternative Two (Company Provided): Corporate Restructuring

       General Motors, along with many other American-based companies, suffered a

decline in stock market activity and overall company finances following the attacks of

September 11, 2001. The company‟s rising costs of retiree health care, pensions and

benefits have exceeded expected rates of return, impelling GM to develop a corporate

restructuring initiative (General Motors, 2006). Following a $10.6 Billion loss in 2005,

General Motors decided to carry out its three year restructuring strategy, which includes

the closure of nearly a dozen manufacturing plants, making substantial job cuts,

introducing new automobile lines, and redeveloping General Motor‟s overall marketing

strategy (General Motors, 2006). Most recently, General Motors announced it would

consider a joint enterprise with competitors Renault and Nissan; however, efforts to form

the alliance failed. Overall, the company still trusts it is on track with the new plan and

CEO Rick Wagoner believes that both job cuts and plant closures are “necessary for GM

to get its costs in line with other major global competitors” (Maynard, 2005).

Marketing Mix Strategy:

   Product: General Motors has established a reputable name in the automotive industry,

which is widely recognized for both reliability and affordability. If GM restructures,

consumers may start to view the company as undependable and lose trust if they see GM
as a declining company. On the other hand, corporate restructuring could result in a new

brand image that increases sales because consumers are more drawn to General Motors

knowing new and more qualified employees have been hired.

    Price: Price is an important component in consumers‟ assessment of value.

Consumers often seek reasonable cost in relation to quality; GM offers fair prices and

maximum quality. Price will not likely be affected by corporate restructuring. If

corporate restructuring costs the company substantial capital then car prices may rise;

however, if General Motors can maintain the brand image it has established for itself,

then consumers will continue to believe that the product is worth the financial sacrifice.

    Place: Place is important in business because the product must to be easily accessible

to consumers. Corporate restructuring would not affect where GM dealerships are

located, just the distribution of manufacturing lines; therefore, it would not significantly

affect profit loss or gain.

    Promotion: A company cannot sell a product if they do not competitively advertise

in magazines, television commercials, billboards, or other forms of media. The

advertisements must cater to an appeal and convince the consumer they need to product

being advertised. If General Motors advertises its automobiles as coming from a newly

restructured corporation, GM can convince customers the product is improving along

with internal company motives.

Financial Analysis:

        Through the implementation of long-term corporate restructuring, General Motors

plans on developing promising new product lines; thus, increasing market share,

improving product quality, and strengthening company finances. During the first quarter
of 2006, GM earned nearly $400 million in sales revenue indicating the potential long-

term benefits of such a plan (General Motors, 2006). General Motors was also able to

slash its annual dividend from $2 per share to $1 per share, saving the company nearly

$565 million a year (General Motors, 2006). With recent company cutbacks as well as

health care benefit reductions taking effect, General Motors could potentially reduce

company costs of up to $7 billion by the end of 2006, $1 billion more in savings than

previously projected, which constitutes nearly one-sixth of GM‟s annual spending of $42

billion (Maynard, 2005).

Pros

       There are many long-term financial advantages associated with corporate

restructuring. GM earned $400 million in the first quarter of 2006 alone providing

promising evidence about the future financial success of the restructuring program

(General Motors, 2006). In 2006, many GM workers agreed to company buyouts well

over the company goal, greatly reducing GM‟s operating costs and future liability

(General Motors, 2006). GM was able to slash the annual dividend from $2 per share to

$1 per share, saving the company nearly $565 million a year (General Motors, 2006).

Shutting down plants, assembly lines, and reducing employee numbers will greatly

reduce additional company costs, allowing the money to benefit greater product

development. With improving sales, GM can open new plants and modify existing plants

to maximize the quality and efficiency of output.

Cons

       The Primary disadvantages of GM‟s corporate restructuring relate to both internal

and external factors. GM runs the risk of losing consumer loyalty because consumers
may begin to question the strength, reliability, and dependability of the company during

its time of corporate crisis. Corporate restructuring is very expensive; therefore, such an

initiative is a huge risk for a company already suffering the consequences of financial

debt. Job cuts will have a negative effect on unemployment rates, especially Michigan

which currently has the highest rate of unemployment of 6.4 Percent in contrast to the

national average of 5.1 percent. (Maynard, 2005). Many standout plants and assembly

lines, ranked among the company‟s best in quality surveys, are scheduled to shut down

(See Appendix C for a complete list of plant closures). Such plants include the Saturn

plant in Tennessee, which is known for superior labor-management, as well as plants in

Oklahoma City and Oshawa, Ontaio (Cervone, 2006). This plan allows for major foreign

rivals, such as Toyota, to expand and build more manufacturing plants in North America;

thus, increasing Toyota‟s market share and further decreasing GM‟s (Maynard, 2005).

Alternative Three (Company Provided): Hybrid Initiative
Marketing Mix

        General Motors needs to modify its business strategy and focus on producing

hybrid automobiles. There are many reasons for General Motors to shift towards hybrid

vehicles but the principal justifications involve the statistics of the fuel costs, fuel

efficiency, and money. General Motors should also consider the global and national

factors that have less impact.

        Hybrid sales have risen consistently in the U.S., from 9,350 cars in 2000 to

20,287 in 2001, 35,000 in 2002 and 47,525 in 2003 (Getting There: a Guide to Planet-

Friendly Cars, 2004). Automotive analyst J.D. Power and Associates foresees annual

sales totaling 350,000 by 2008, accounting for two percent of all car sales (Getting There,

2004). This estimate indicates that demand for hybrid technology is increasing
substantially and General Motors has to start manufacturing hybrid vehicles in order to

regain the market share it has lost in the United States.

       Today, having a fuel-efficient vehicle is important because of the benefits it has

for the environment as well as lower cost for gas. As fuel prices increase and with the

sales of sport utility vehicles declining, General Motors needs to penetrate the market and

compete head on with its competitors. Hybrid cars dominate the list of the most fuel-

efficient vehicles for 2007 (Fuel Economy Guide, 2006). Toyota leads in sales for

automobiles in America while Ford remains on top for SUVs. A generation ago, General

Motors produced half of the vehicles sold in America, but today it‟s just over one quarter.

General Motors can‟t keep up with the automobile market and it lost over one billion

dollars last year (Industry Giant Falling Behind, 2005). This trend will continue if they

don‟t start producing what consumer‟s want.

       Hybrid vehicles provide drivers with an innovative, efficient, and affordable

option. After years of 'on the road' development, the new hybrids have become a practical

choice for consumers. Hybrid technology, compared to alternative fuel technologies, is

gaining a considerable amount of interest from consumers and other manufacturers. The

difference between hybrid and standard fuel vehicles is that hybrid vehicles use two or

more power sources, namely an electric motor and an internal combustion engine.

       The electric motor kicks in during slow speeds, such as with city traffic driving,

saving on gasoline and reducing emissions. Consumers around the world are concerned

with saving their money as well as the environment and the hybrid vehicles are the

logical decision to accomplish those goals. As consumer demand for hybrid vehicles
continues to rise, prices are expected to stabilize and become more affordable for average

consumers.

       General Motors will boost its image by supporting the environment through

manufacturing hybrids and will lower the United States dependence on foreign oil. The

reasonable use of hybrid vehicles will conversely decrease the dependence on foreign oil.

This is an especially important point in today‟s political climate. General Motor‟s

production of hybrid cars will help strengthen the hybrid revolution and eventually help

America become independent from foreign oil sources. For consumers, buying a hybrid

sends a message that says, 'I am willing to fund fuel efficient technology.' This message

is especially aimed at automakers that have contributed to America's yearly increase in

foreign oil consumption.

Financial Analysis

       The revenues in United States market totaled $373.2 million in 2005 and expect to

reach $851.9 million in 2012 (Growing Demand for Hybrid Vehicles, 2006). As gas

prices rise consumers are more meticulous about which type of vehicle they will

purchase.

       Hybrids are cost companies roughly $2,000 dollars to produce in factories while

they sell for around $25,000 (Slim Fast). By the end of the decade the cost of purchasing

one of these vehicles will decrease dramatically. The consumers will save $200-$1500 on

fuel costs each year if they purchase a hybrid (Fuel Economy Guide, 2006).

       General Motors can establish a platform to build a wide variety of fuel-efficient

vehicles. The cost of producing a hybrid vehicle is much lower than the selling price of

the automobile that the company grosses a substantial profit.
Pros

       General Motors will increase its revenue, over a period of time, by producing

hybrid automobiles because of the increasing demand from high oil prices. The public

will look favorably upon the company because it demonstrates GM‟s compassion

towards the people and the environment. GM‟s product mix will increase allowing

consumers to choose from a wide variety of products.

Cons

       The negative aspects of creating a hybrid line will be cutting costs from other

automotive lines. Some product lines, that aren‟t as successful, will need to be cut in

order to make way for the new hybrid line. Jobs and other automobiles will have to be cut

in order to have the financial security to produce the hybrid vehicles. GM will have to

take a financial hit for a few years until they start to break even. The process of creating

the hybrid automobiles will take time to make money.

Conclusion and Recommendation

Conclusion

       To conclude, it is quite apparent that General Motors has been consistently trying

to develop new operations by which they can better the company as a whole. With

problems of a potential merger it has become more and more prevalent that General

Motors must start acting versus waiting to act. The company has been promoting Flexible

Fuel Vehicles, which has been somewhat beneficial to its sales but also to its public

image. Consumers are purchasing “green” products and General Motors has been trying

to follow this trend.
       In conjunction with the development of “green” products, General Motors is also

currently undergoing corporate restructuring. In efforts to remove company debt, GM

has implemented a three-year restructuring strategy. The strategy includes: the closure of

nearly a dozen manufacturing plants, making substantial job cuts, introducing new

automobile lines, and redeveloping General Motor‟s overall marketing strategy. In order

for GM to remain competitive in the automobile industry, such a strategy is necessary.

Recommendation

       The recommended strategy that General Motors needs to implement in order

increase its market share is to produce hybrid vehicles. The hybrid industry is increasing

in sales by each year and General Motor‟s competitors are capitalizing on it. If GM can

switch its strategy to implement fuel-efficient vehicles into its product line then

consumers will realize GM‟s social responsibility towards the environment. This strategy

will help GM effectively compete with competitors in the future.

Implementation and Control Issues

Implementation

       To implement this recommendation the strategy that seems most appropriate

would be to focus on creating a hybrid vehicle product line. The means by which General

Motors should go about this strategy/alternative would be to research its competition to

see what is working and what is not working and also how they could possible make an

even better hybrid than that of its competition. General Motors may also need to cut

existing non-profitable product lines to further the development of hybrid vehicle

production.
Control Issues

       One of General Motors control issues deals specifically with its‟ competition.

This is because its‟ competition is already in the market place for hybrid vehicles. Such

companies known as Toyota, Lexus, and Honda already have these vehicles and already

know how to market them as well as focus on existing vehicle malfunctions and general

vehicle problems. General Motors may initial problems with a new hybrid vehicle line

just as any new product line may have initial malfunctions. Another factor that may be a

control issue is the fact of its‟ recent plant shutdowns. This is because this leaves less

room for General Motors to produce vehicles, which also may play a part in the

discontinuation of other non-profitable vehicle lines.
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                                                Appendix

Appendix A: Light Vehicle Sales by Company

               WARD'S U.S. Light Vehicle Sales by Company
                                           Month                                Calendar Year-to-Date
                        October                 % Share           DSR.        January - October       Vol.
                                                                                                       %
                 2006         2005         Current   Year-Ago     % Chg.      2006         2005       Chg.

Chrysler
Group           159,586       164,814         13.2         14.4       0.7    1,787,534    1,955,486      -8.6
Ford            210,249       194,773         17.3         17.0      12.3    2,446,359    2,649,009      -7.7
GM              297,555       253,727         24.5         22.2      22.0    3,438,995    3,794,815      -9.4
Big 3 Total     667,390       613,314         55.0         53.7      13.2    7,672,888    8,399,310      -8.6
Honda           110,624       110,895          9.1          9.7       3.7    1,271,134    1,223,812      3.9
Hyundai          30,479           29,413       2.5          2.6       7.8     389,738      378,608       2.9
Isuzu               855            1,177       0.1          0.1     -24.5      11,191       14,490      -22.8
Kia              20,097           20,631       1.7          1.8       1.3     242,094      236,993       2.2
Mazda            18,843           19,504       1.6          1.7       0.5     228,082      221,366       3.0
Mitsubishi        9,288            9,292       0.8          0.8       4.0      99,392      105,420       -5.7
Nissan           75,115           72,294       6.2          6.3       8.1     851,644      908,439       -6.3
Subaru           15,404           16,774       1.3          1.5      -4.5     164,286      161,562       1.7
Suzuki            5,950            6,246       0.5          0.5      -0.9      87,278       69,732      25.2
Toyota          189,011       173,086         15.6         15.1      13.6    2,117,507    1,887,352     12.2
Asia Total      475,666       459,312         39.2         40.2       7.7    5,462,346    5,207,774      4.9
BMW              24,464           25,635       2.0          2.2      -0.8     254,297      251,276       1.2
Mercedes         20,601           18,390       1.7          1.6      16.5     197,689      175,221      12.8
Porsche           2,355            2,588       0.2          0.2      -5.4      28,766       26,397       9.0
Volkswagen       22,373           23,866       1.8          2.1      -2.5     267,126      246,508       8.4
Europe Total     69,793           70,479       5.8          6.2       3.0     747,878      699,402       6.9
Total Light
Vehicles       1,212,849     1,143,105       100.0        100.0      10.3   13,883,112   14,306,486      -3.0
Appendix B: Flexible Fuel Vehicles
Appendix C: List of Plant Closures


Plants                             Location    Closing   Role                               #Em
                                                                                            ploye
                                                                                            es
Scarborough Assembly van plant     Ontario     1993      Van assembly                       2,700


Moraine Assembly (3rd shift)       Ohio        2006      Mid-size SUV assembly              4,165


Oklahoma City Assembly             Oklahoma    Early     Mid-size trucks and SUV assembly   2,734
                                               2006


Lansing Craft Centre               Michigan    Mid-2006 Chevrolet SSR roadster assembly     398


Oshawa Car Assembly No. 1 (3rd     Ontario     Mid-2006 Mid-size sedan assembly             3,600
shift)


Spring Hill Manufacturing Line 1   Tennessee   March     Saturn Ion sedan and coupe         5,776
                                               2007      assembly


Doraville Assembly                 Georgia     2008      Minivan assembly                   3,076


Lansing Metal Center               Michigan    2006      Metal fabricating                  1,398


Portland Distribution Center       Oregon      2006      Parts distribution                 95


Saint Louis Distribution Center    Missouri    2006      Parts distribution                 182


Pittsburgh Metal                   Pennsylvania 2007     Metal fabricating                  613


Ypsilanti Processing Center        Michigan    2007      Parts processing                   278


St. Catharines Engine              Ontario     2008      Engine/Transmission parts          1,699


Flint North 3800                   Michigan    2008      Engines                            2,677

				
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