General Motors by qingyunliuliu


									                  General Motors
Bryan Dickey
Jasmin Rush
Peter Crane
Robert Travieso
Richard Wagoner   GM Chairman and Chief
                    Executive Officer

John M. Devine    GM Vice Chairman and Chief
                        Financial Officer

Robert A. Lutz    GM Vice Chairman, Global
                    Product Development
• Under Billy Durant’s leadership, General Motors Company is
  organized on September 16, 1908

• Today, GM is recognized as the world’s largest automaker

• Global automotive sales leader since 1931

• Has manufacturing operations in 32 countries and its vehicles are
  sold in 200 countries

• Currently, GM Dealers in the United States have sold 257,623 new
  cars and trucks as of October and 445,555 of pre-owned cars
• Financial services: consumer vehicle financing, full service
  leasing, dealer financing, car and truck extended service
  contracts, residential and commercial mortgage services, and
  vehicle and homeowners insurance
• Developing a portfolio of future options to internal
  combustion engines

• Investing dedicated to improving cultural, economic,
  educational, environmental, and social aspects of our

• Supporting a strong and diverse base of K-12 education
  programs, especially in science, mathematics, and
• Protecting human health, natural resources, and global

• Improving vehicle safety for customers, passengers, and
  other motorists

• Creating environmental, health, and safety reports

• Improving health, safety, diversity, wages, and benefits
• “North/South America Plant Quality Award” – J.D.
  Power Quality Study– 2005

• “Supplier of the year” – Denso International America–

• OnStar by GM receives the “Grand Enterprise Value
  Award” – CIO Magazine
"The significant problems we face
  cannot be solved at the same
  level of thinking we were at when
  we created them."

--Albert Einstein
• Company Recognition
• The number of brands
  and brand recognition
• Committed workers
• Products like: OnStar and
  XM Satellite Radio
• Corporate Responsibility
• The time GM has been
• Globally known and
  located in 32 countries
• GM dealer locations
• The decline of market
• Health care costs
• Innovation of new
• Competition or lack there
  of with China
• Too much invested in
  SUV and Trucks
• Not enough Research
  and Development
• New innovation can
  compete with others
• Cut health-care costs
• Cut jobs and move
  production overseas
• Shrink brand line
• Recapture market share
  and be more competitive
  with more money
  concentrating on smaller
  more fuel efficient cars
• The United Auto Workers union can hurt General Motors
  if unhappy
• Cutting jobs or shutting down plants, and cutting health
  care cuts could instigate a strike
• Delphi being a supplier who is already bankrupt, GM is
  their former parent and could face up to $12 billion in
  liabilities for Delphi
                                       Threat of New Entrants:
                                       Car manufacturing takes
                                       extremely large amount of
                                       capital to enter. To compete at
                                       GMs level is next to impossible.

Bargaining Power of Suppliers:        Intensity of Rivalry:                Bargaining Power of
Moderate                              Very High
                                      GMs other divisions cannibalize
GM has the largest market share in
the US which could give it much       their own sales as well as all       Tens of Millions of car buyers per
power over suppliers but it has not   others. Each company will do         year and over twenty companies
used that and looks at suppliers      what it takes to real in customers   to choose from. Public is
                                                                           increasingly drawn in by costly
and their needs as equal.

                                      Threat of Substitutes:
                                      Very High
                                      GMs market share is continually
                                      dropping. Most other car makers
                                      offer higher quality and other
                                      benefits. Many substitutes
                                      available in the market
Porters Model illustrates the complexities of being
  in the automobile manufacturing business.
  Competition is fierce and substitutes abound.
  Quality and brand image have an important
  input into what consumers want to buy. With so
  many high threats in this market an auto
  manufacturer must be constantly be trying to be
  better than its competitors in responding to
  consumer demands. GM has failed in the last
  20 years and is in turn losing market share.

 • Cars     • SUVs
 • Trucks

Cash Cow
Financial Perspective
1. Daimler Chrysler

2. Ford Motor Company

3. Toyota Motor Company

4. Volkswagen
 Sales      $193 Billion   $16.2     $170.98    $175.48
Revenue                    Billion    Billion    Billion
 At 2004
 Year-end    324,000       37,000    384,723    324,864
• Development of passenger cars, light trucks, commercial

• Operates as Mercedes Car group, Chrysler Group,
  Commercial Vehicles, and Services

• Provides Financing to dealers for property, plant, and
  equipment purchases, and vehicle inventory

• Strategic Partnerships with Mitsubishi Motors
  Corporation, General Motors Corporation, BMW Group,
• Manufacture, distribute, finance, and rent vehicles and

•   Brands include Mazda, Volvo, Jaguar, Land Rover,
•   Operates as Automotive and Financial Services
•   Automotive: Ford, Lincoln, Mercury brand vehicles
•   Financial Services: Financing, leasing, and insurance

• Hertz Corporation: rents cars, light trucks, and
                     construction equipment
• Partners with Ups and New View
• Currently, operates 11 manufacturing plants in North

• Three additional facilities will open in Ontario,
  Tennessee, and Texas

• By 2008, Toyota will have annual capacity to build 1.81
  million cars and trucks

• Today, nearly two-thirds of all Toyota vehicles are built in
  North America and sourced with parts from over 400
  North American suppliers
• One of General Motors
  greatest problems is how
  good they are to not only
  hourly workers, but
  retired workers as well.
  They must strike a deal
  with the United Auto
  Workers which allows
  both parties to be happy
  with the cuts needed in
  health care costs to keep
  from filing for bankruptcy.
• G.M. pays about $1,500 per        • G.M. has lost nearly $4 billion
  car assembled in the United         so far this year due to health-
  States for health care              care costs
• G.M. spends more on health        • The largest private provider of
  care than it spends on steel        health care nationwide
• Provides health care to it’s      • In 2002 G. M. spent $1.4
  over 1 million employees,           billion, or 31% of its total
  retirees and their dependants       health care expenditures on
• Health care costs for 2005 will     prescription drugs
  increase to $5.6 billion from     • The UAW doesn’t like to make
  $5.2 billion in 2004 (estimate)     concessions on health care
                                      benefits and pension plans
•   Right now, retirees and active
    workers pay no monthly premiums
    and a small fraction of health care
•   General Motors and the United
    Auto Workers union need to strike
    a deal, 100% voter approved, that
    will take off some of the costs
    burden on GM and put a little
    more on the workers and retirees
    of GM by cutting long-term, and
    hourly liabilities, and reduce health
    care expenses by doing things like
    using generic prescription drugs
    when possible
Concessions must be made if UAW union workers
    want to keep plants open and jobs occupied
• Some of General Motors recent problems are
  uncontrollable. With prescription drugs increasing in
  cost 15 to 20% per year, expenditures only go up. Also
  the number of retirees due to the baby boomer
• Unions have power over companies they work for. Most
  of what’s happening in GM is due to lack of cooperation
  and understanding between the workers and General
• If the UAW does not make large concessions to things
  like wages and health care benefits, they won’t have jobs
  at all because costs must be cut one way or another to
  stay out of bankruptcy.
•   Long-term health care liability       • Hourly health care costs need
    needs to be cut and GM needs to         to be slashed by 30% to save
    save $20 billion just in the U.S.       money by: implementing
    Retirees need to be informed on         health programs for workers at
    how to stay healthy, and generic
    prescription drugs should be used       work, threaten jobs if smoking
    when possible. If not possible          or obesity are problematic to
    only 50% will be paid for instead       that worker, and creating a
    of the whole price. GM pensions         membership at a local gym for
    of less than $7000 annually will        workers paid by GM to cut
    get health care free of charge, and     down on trips to the doctor and
    they will have to pay up $800           to keep employees healthy.
    annually for families and $400 for      Also, forgo $1.50 an hour to
    individual health care. Some            help retirees who will have to
    monthly premiums not covered.
                                            pay more with the new plan.
1.) By December 1, 2005,
   begin meetings and talks
   between the UAW and
   General Motors. Make
   proposals that will need to
   be voted on by 100% of
   a.) Cut long-term health
   care liability by $20 billion
   b.) Cut its hourly health care
   liability by 30%
   c.) Save $5 billion annually
   on health care expenses
2.) By April 1, 2006, start implementing these plans in health care
   costs. Inform all employees and retirees of what HAS to happen to
   stay in business. Direct calling and mailing to retirees and
   employees must occur. Also, meetings at work for active employees
   to know exactly what is going on.
3.) May 1, 2006 start mailing out health tips to retirees in pamphlets to
   assist in healthier diets and exercise.
4.) May 1, 2006 have deal signed with Gold’s Gym, or Weight-
   Watchers of America for active employees to be able learn about
   dieting, eating, and a membership to workout when possible
5.) Provide a grace period or “trial run” to make sure all financial
   calculations are correct on savings and evaluate plan for January 1,
6.) By the end of 2007 health care costs will be cut in half overall for
   the year and only cost General Motors around $2.55 billion.
•     The costs will be nothing compared to the
      savings. With over 1 million employees and
      retirees, costs will be significant however.
1.)    $50,000 spent on food, space, and
      presentations during the months of meetings
      between UAW and GM in Detroit
2.)    $3 million deal made with Weight-Watchers
      and Gold’s Gym for employees health issues
3.)    $5 million spent on mailing and calling to
      inform workers and employees and
      pamphlets on health
4.)    A total of $10 million spent on research and
      development of the plan, the financial
      savings, the health ideas, and the pay for
      those responsible of implementation
5.)    The cost that some workers will quit because
      of new standards, however, that would save
      GM some money
• The UAW rejects new         • The plan will work and GM
  plan ideas                    will become more profitable
• GM must cut jobs or         • Less money lost will lead to
  close plants laying off       more money put into solving
  thousands because new         other company problems
  plan doesn’t work           • More money dedicated to
                                the more fuel efficient R & D
• If health care                to better compete with other
  expenditures are not cut,     auto makers
  GM could go bankrupt        • Share price will increase
• Workers could strike          drastically and GM will re-
• GM goes out of business       capture the market
                                percentage they once had
• GM will use their market share to bring suppliers in line
  with their needs. We are suggesting that GM force their
  suppliers to reduce prices and increase quality control.
  With this increased leverage at each supplier costs will
  come down and car sales will increase due to increased
  consumer confidence. The goal will be to reduce their
  manufacturing costs which will enable them to increase
  revenues and profits. This strategy also suggests
  greater transparency of suppliers financial situations to
  prevent similar problems like Delphi.
• GM will notify all suppliers of this plan
  on February 1, 2006.
• GM will evaluate each supplier
  according to their “Total Value Promise,”
  as well as the percentage reduction in
• If quality is lacking suppliers dropped at
  the end of each fiscal year.
• Suppliers evaluated on a quarterly
• Maintain “Total Value Promise” standard
  and reduce price 1%, by 2008
• Reduce prices 5% by 2012.
• GM will hold meetings with suppliers at
  the end of each fiscal year.
•   Increased Sales
•   Reduced costs
•   Greater ability to estimate financials
•   Increase Shareholder value
•   Increase sales = Increase demand for
• Substantial amount of time to meet with
  suppliers (>100k).
• Increased costs associated with Quality
  Control evaluations (approx. 2 mil./yr.)
• Possible loss of suppliers.
• Hold Board Members and Upper
  Management Responsible
• Turn GMs tech strategy from Follower to
  Leader and look to the future
• Remake the Brand Image by focusing on
  strengths and cutting weaknesses
• They must be held accountable for both
  successes and failures
• Bureaucratic structure must change to
  help decision making process
  (decentralize decision making process)
• Incentivise and challenge management
• Change board to people who had turned
  around failing companies
• No longer can GM survive being a tech
• Create a large centralized and well funded
  R&D program to catch up and surpass
  competitors immediately to have products
  coming out by 1st quarter 2008
• Rush hybrid technology into a vehicle by
  next model year
• Build back market share to over 30% by 2008
• Phase out sluggish brands by 2009
  – Pontiac, Oldsmobile, and Buick (Ex. 13.1 in Book)
• More focus on brand specific vehicles
  – No longer should every brand offer every type of
     • Destructive cannibalizing competition
     • Too many models and platforms
     • Vehicles all look the same to consumers
  – Bring back exciting vehicles with quality, character,
    and style
•   Regain lost market share
•   Better Corporate image
•   Build up consumer confidence
•   Fewer mistakes in the future
•   Increased shareholder value
•   Bottom line = More cars sold
• $2 Billion to R&D
  department to get things
  caught up quickly
• $200 million increase to
  design budget to bring in
  top designers for GMs
  next generation models

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