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					      General Motors:
The Fall of an American Giant

    Stephen Edmondson
        Cortni Jones
    Michelle Middleton

 Global Business Strategies
    DIS summer 2006
  Instructor Peter Haisler
                                                  Edmondson, Jones, Middleton


Table of Contents:

Introduction………………………………………………………………………………………..2

General Motors‟ Business Strategy Problems and Solutions……………………………………..3

General Motors Labour Problem Analysis………………………………………………………..7

General Motors Labour Solution Proposal………………………………………………………..9

GM‟s Image Problems…………………………………………………………………………...11

             Rising Gas Prices………………………………………………………………….12

             Quality……………………………………………………………………………..13

             Delphi and Downsizing……………………………………………………………14

             Solutions…………………………………………………………………………...14

Conclusion……………………………………………………………………………………….16

Works Cited ……………………………………………………………………………………..17




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                                                                   Edmondson, Jones, Middleton


Introduction:

General Motor‟s downturn in the US market has brought great attention to the companies‟

strategies and business practices. The global auto market has seen significant change since the

mid 1970s. Why has GM faced a period of stagnation in their strategy, problematic labour issues,

and a poor public image and how can these barriers be overcome? First, a SWOT analysis of

GM will determine their current position in the market. Next, the business strategy will be

analyzed and solutions will be proposed on how to restore a profitable product line. Thirdly, the

continued troubles with the labour cost structure will be prioritized and systematically attacked.

Lastly, current image problems must be rectified through growth in customer relations.

Strengths:            GM currently holds one fourth of the US market of automobiles. GM has a

                      long history, giving it a well known brand and valuable knowledge of the

                      automobile market. GM also has a large pool of skilled workers, that if

                      properly managed can aid with innovation. Its wide variety of models and

                      brands allow GM to capture various market segments through

                      differentiation.

Weaknesses:           Poor business strategies have lead to a lack of innovation, too many

                      brands, a continued loss of core customers, and declining global alliances.

                      The focus on the SUV market has left GM vulnerable to petroleum market

                      forces.

Opportunities:        A growing desire for advanced hybrid vehicles has created a large market

                      without a clear leader. Strength of global brands and emerging markets

                      such as China provide new areas for expansion. New innovations in design

                      and craftsmanship allow for GM to increase its competitiveness.




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                                                                  Edmondson, Jones, Middleton


Threats:               Increasing overseas competition from Chinese companies and established

                       Japanese firms. Lawsuits from customers and employees hurt the GM

                       image.



General Motors‟ Business Strategy Problems and Solutions:

       General Motors‟ current business strategy has not been able to turn the company around

so that it is profitable.   Its lack of focus with too many brands and divisions along with

insufficient focus on technological innovation plays a huge role in the loss of profit and

customers.   With the global market recently developing, GM is not keeping up with the

competition and has consistently lost customers not only to American rivals, but also to Japanese

or German competitors. It has recently sold stakes in foreign companies that had formed useful

alliances to exchange technology and share costs. Brand loyalty has fallen because of confusion

between brands and the unreliability of GM vehicles as opposed to its competitors. After years

of being unsuccessful, GM is trying incentive programs with employee discounts and large

rebates to dealers. GM has been ineffective in keeping up with the competition, so GM needs to

revise its business strategy. GM vehicles are looked at as unreliable and not of high quality,

however through technology and innovation the firm can change the vehicles produced to fit

consumer demand.

       The discontinuation of brands, revision of incentives, increase in technology and

innovation, and continued global alliances are the proposed ways to fix the problems within

General Motors. After downsizing brands, GM can focus on the core brands and improve them.

This may lead to producing fewer vehicles, but will generate more revenue with each brand.

Another alternative would be to keep all brands and try to improve them all, but this would have




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                                                                             Edmondson, Jones, Middleton


high costs and is the strategy that GM has been using while the company has been losing money.

In 2005 the total loss was $10.6 billion.1 The recent incentives of discounts and rebates started

off with an increase of sales, but after competitors followed with similar discounts, it was no

longer an advantage.2 This strategy is a long term strategy of GM that should become short term

or seasonal because of its ineffectiveness after competitors follow suit. If the value pricing

continues, GM will only be losing more money per car and if sales don‟t increase it could face

bankruptcy.3 Cost reduction and rebates can be avoided if the brand becomes strong again, and

that can‟t happen only through design and good marketing, but also through better technology

and more innovation. GM has a large budget for technology development, but not a sufficient

amount and it has not learned to effectively use its technology to target customers. Joint

ventures in the past have helped GM gain knowledge from competitors as well, but being able to

use this knowledge to produce more appealing vehicles has not yet been integrated into its

models.

        The current problems within GM of too many brands, unsuccessful incentives, and not

enough innovation can be solved from careful planning with a revised strategy. In the past GM

had a strong brand with a lot of loyalty, but over the years the brands started to overlap and

become uniform without the previous differentiation.4 GM should downsize the number of

brands to focus on its core competencies. Oldsmobile is already being cut from the company.

Fewer brands with more differentiation in style and pricing will help customers see clearly




1
  General Motors Corporation Annual Report 2005.
www.gm.com/company/investor_information/docs/fin_data/gm05ar/download/gm05ar.pdf. pp. 5
2
  Greenberg, Karl. 'Value' Pricing to Replace Cash Deals. Brandweek, 8/22/2005, Vol. 46 Issue 30, p4-4, 1p, 1c.
3
  Carteau, Richard. Cracks begin to show at General Motors. MarketWatch: Automotive, Mar2006, Vol. 5 Issue 3,
p9-9, 1p.
4
  Freeman, Sholnn. Brand Breakdown; Too Many Models, Too Little Innovation Destroyed Detroit's Customer
Loyalty, The Washington Post, March 26, 2006 Sunday, Final Edition, Financial; F01, 1586 words.


                                                                                                                  4
                                                                          Edmondson, Jones, Middleton


defined brands and hopefully rediscover the appeal that these vehicles once held. 5 The pricing

of these vehicles shouldn‟t be standardized. Each brand should have a somewhat separate price

range to help with differentiation. The current incentives of “total value pricing,” employee

discounts, and enormous dealer rebates should slowly be abandoned as the brand and profit of

the company increases.6 Technological innovation for each brand needs to increase to keep up

with competitors and also attract customers.

        Under the leadership of Alfred P. Sloan, GM had five strong brands, catered to different

customer segments. The price range between these vehicles was clear and defined to consumers,

but over time the cars became more uniform with the same parts and look. The brands were

interchangeable and lost their individuality, which confused customers who had previously been

loyal.7 Competitors such as Toyota oversee three brands, while GM manages eight brands. Kirk

Kerkorian, the largest individual shareholder, would like to see the Hummer and Saab brands

ceased.8 That should be a point of departure, along with the discontinuation of the Oldsmobile

brand. The brands that are kept need to start off with a high profile rollout, which GM is capable

of achieving. After this, GM needs to continue upgrading and innovating or else the competition

will easily surpass them; a problem which has occurred multiple times. The Toyota Camry is the

top selling car in America because it has been through five redesigns since 1982, and each time

has produced a better vehicle in design and technology. This success contrasts with GM, whose

Uplander, Terraza, Relay, and Montana models were rated least reliable of all U.S. vehicles in




5
  Trout, Jack. Schizophrenia at GM. Harvard Business Review, Sep2005, Vol. 83 Issue 9, p22-22, 1p, 2c.
6
  General Motors Corporation Annual Report 2005.
www.gm.com/company/investor_information/docs/fin_data/gm05ar/download/gm05ar.pdf. pp. 5
7
  Trout, Jack. Schizophrenia at GM. Harvard Business Review, Sep2005, Vol. 83 Issue 9, p22-22, 1p, 2c.
8
  Freeman, Sholnn. Brand Breakdown; Too Many Models, Too Little Innovation Destroyed Detroit's Customer
Loyalty, The Washington Post, March 26, 2006 Sunday, Final Edition, Financial; F01, 1586 words.


                                                                                                          5
                                                                             Edmondson, Jones, Middleton


Consumer Reports.9 GM is closing the plants producing the unsuccessful Uplander and Terraza,

in a cost reduction effort.

        By focusing only on reducing costs, GM will mostly be cutting workers and closing

plants, which won‟t attract customers or shareholders. In addition to these reductions, GM needs

to focus on its competitive design to increase profits. The cash loss from reducing the size of the

company is unsustainable in the long run and GM needs to find ways to gain revenues against

the strong competition.10 With the rising gas prices, GM needs better technology so the large

trucks are more fuel efficient. Competing with the small foreign cars that are less costly is hard,

and GM needs to gain an advantage to keep from losing more of the market. GM has previously

made some very good technological advances such as four wheel steering and night vision. 11 It

just didn‟t market these very well so consumers weren‟t interested. The supplier Delphi, which

was recently owned by GM and has the technology, is now looking to sell the four wheel

steering equipment to other companies that will promote it more, therefore GM has lost that

competitive advantage.         Night vision was a failure as well, since it was expensive and

inconvenient for the driver. GM placed the screen in the windshield of the Cadillac De Ville,

where it showed ghostly images when the driver was going at a high speed and only made it

difficult to concentrate. If GM had placed the device in a larger vehicle, hunters or consumers

who like to off-road would find it much more convenient.12 Small glitches like these need to be

avoided at all costs in the future if GM wants to stay competitive in the global market.

        Although GM hasn‟t been doing very well in North America, globally its performance

has been more successful. However, the recent sale of its stake in Isuzu marked the downfall of

9
  Freeman, Sholnn. Brand Breakdown; Too Many Models, Too Little Innovation Destroyed Detroit's Customer
Loyalty, The Washington Post, March 26, 2006 Sunday, Final Edition, Financial; F01, 1586 words.
10
   ICFAI, Center for Management Research. ``GM‟s Pension Fund Problems.´´ 2006. Pp. 5
11
   Truett, Richard, 3 technologies worth watching, Automotive News, 00051551, 4/3/2006, Vol. 80, Issue 6196.
12
   Truett, Richard, 3 technologies worth watching, Automotive News, 00051551, 4/3/2006, Vol. 80, Issue 6196.


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                                                                              Edmondson, Jones, Middleton


GM‟s major global strategy for world domination, where it was working for years to control

limited stake in European and Asian companies. Along with the sale of Isuzu stake; GM also

sold Fiat Auto, Fuji Heavy Industries, as well as reducing its stake of Suzuki. To stay globally

competitive, GM should keep forming and maintaining alliances with global partners. The

vision of controlling 35% of the market worldwide is not entirely realistic at the moment, but the

global alliance strategy has saved GM billions from joint power train and purchasing ventures,

especially with Fiat Auto. From Isuzu, GM received greatly needed diesel engines for pick up

trucks.13 Sharing information and technology with other competitors is sometimes hurtful and

gives away a firm‟s competitive advantage, but in the long run it has been beneficial to all

parties.

           All of these factors of too many weak brands with confusing pricing, declining global

alliances, and lack of technological innovation have led to GM‟s loss of money for many years

and they need to be changed before balance sheets climb out of the red.



General Motors Labour Problem Analysis:

           General Motors (GM) has faced a number of labour related problems in recent years.

GM is the largest healthcare provider in the US, $5.2 billion in 2004, and they also have the

largest under funded pension plan in the US.14, 15 These costs are caused by three established

internal flaws: GM workers‟ strong unionization, recent developments in their pension fund, and

rising healthcare costs.

           For GM, United Auto Workers (UAW) employees were given a no deductible health

insurance policy, whereas the average non-unionized worker pays $280/individual or

13
   Guilford, Dave. GM's global strategy was a costly flop, Automotive News Europe, 5/15/2006, Vol. 11, Issue 10
14
   ICFAI, Center for Management Research. ``GM‟s Pension Fund Problems.´´ 2006. Pp. 10
15
   Ibid. pp. 6


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                                                                             Edmondson, Jones, Middleton


$861/family for similar plans.16 In this practice GM has paid the difference. This deductible

difference is only compounded by the low co-pay costs that GM workers (represented by UAW)

receive.17 The strong union pull and historically generous benefits, creates lowered negotiating

power on behalf of GM. According to Michael Porter‟s 5 Forces, this environment creates

strong supplier power that will be a hindrance for GM as it tries to add flexibility into its cost

structure. “„It is a well-known fact that the U.S. automobile industry spends more per car on

health care than on steel,‟ says Lee Iacocca, the retired chairman of Chrysler.”18 There is,

however, leverage for GM as you compare the unionized hourly-wage worker‟s healthcare

benefits to those of salaried employees.

        GM‟s unionized employees receive far greater benefits than even GM salaried

employees. In 2004, GM‟s salaried workers pay 27% of their health care costs, while the hourly

workers paid only 7% of their costs.19 This difference does not seem significant, but when these

figures are weighed against the salaried to hourly worker ratio of 31% the number have clout.20

In other words, GM‟s healthcare cost distribution is expensive for 69% of their employees and

cheap for only 31% of their employees. The UAW healthcare costs are troubling enough, but

they are not the only labour related problem facing GM.

        In the late 1990s GM invested its pension funds into stocks as a great percentage of the

investment portfolio, as GM looked for higher returns to solve their pension cost woes.21 After

the dotcom bubble burst in 2001 the total value of the GM pension fund decreased



16
   Appleby, Julie & Carty, Sharon. ``Ailing GM Looks to Scale Back Generous Health Benefits,´´
www.usatoday.com, June 23, 2005
17
   Ibid.
18
   Ibid.
19
   Clanton, Brett and Terlep, Sharon. The Detroit News. ``Automaker: UAW benefits are too rich: GM pitches health
care cuts.´´ Thursday, March 24, 2005
20
   Ibid. Note- These figures are for GM‟s US employees in the 2004 fiscal year.
21
   ICFAI, Center for Management Research. ``GM‟s Pension Fund Problems.´´ 2006. pp. 9


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                                                                       Edmondson, Jones, Middleton


substantially.22 Since current pensions needed to be paid with some of those lost funds, GM was

forced to contribute more of their net equity to keep the pension fund at a sustained level. By

using current net equity, a cyclical problem developed and GM has not been able to fully

recover. There is a rapidly decreasing worker to retiree ratio, so there are fewer workers to pay

money towards the compensation for those no longer employed by GM.23 Fewer workers per

retirees means that there is fewer worker dollars to pay for retiree costs.

        Current GM labour cost reduction policy is admirable, but does not go far enough and is

also too divisive for UAW. General Motors will need to implement a labour cost reduction plan

to a greater extent than their current policy for cost reduction in order to reach the critical level

for their products to return to competitive levels.



General Motors Labour Solution Proposal:

        For General Motors, the solution for labour cost reduction must be targeted for both the

short run and long run. A short-term solution must be developed to cut costs immediately so that

further financial crises can be avoided and so that the UAW becomes fully aware of the gravity

of the future labour related decisions that GM will face. The long-term component of the

solution will focus on less painful but potentially more advantageous healthcare cost reduction.

Short Run Solution:

        Healthcare for retirees and unionized employees is the single largest burden and point of

inflexibility for GM. It would be most effective for GM to change both forms of healthcare, but

GM must focus on current employees as to mitigate bad press by reneging on retiree

commitments. The proposed method for cost reduction- which is at the same time politically

22
 Ibid. pp. 9
23
 General Motors Corporation Annual Report 2005.
www.gm.com/company/investor_information/docs/fin_data/gm05ar/download/gm05ar.pdf. pp. 5


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                                                                              Edmondson, Jones, Middleton


feasible for the UAW- is to keep the health insurance co-pay constant and revise the deductible

policy. GM will only need to equalize the UAW employees‟ annual payment with the salaried

with the salaried employees for this policy to have tremendous fiscal impacts.

        In 2005, GM reviewed their pension structure and decided to, “further reduce GM‟s

financial risk and cost.”24 Indeed, GM needs to look at how to best reduce their pension fund risk

to avoid the sort of losses they sustained in 2001. GM should, in conjunction with this plan, also

look at how to best diversify their pension portfolio to have safe, low yield investments, but also

more high return investments such as capital venture investments.                    Through an aggressive

investment strategy GM will be able to use the returns to cover all current pension liabilities, and

also hedge future costs.

Long Run Cost Reduction:

        GM‟s long run labour strategy is tangled with the complex UAW relations and continued

liabilities to retirees. Because of this situation, an alternative must be found that will not disturb

the union structure at the company in a significant way.

        US based companies with similarly large labour costs have, “aimed at injecting more

`consumerism' into the health-care system.”25 Companies like Boeing have developed a fixed

sum healthcare coverage so their employees look for the most efficient healthcare. 26 This may

be too drastic of a move for GM in the immediate future, so an intermediary step could be model

after Oshkosh, a US based trucking company. This plan entails:

             ``…annual physicals and other preventive tests such as mammograms

             and prostate cancer screenings are fully covered. After that, workers


24
   Ibid. pp. 5
25
   Business Week, ``Health Costs: good News at Last; Slower price hikes and higher copays have helped companies.
Now they're testing new ways to find more savings.´´ May 30, 2005
26
   Ibid.


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                                                                      Edmondson, Jones, Middleton


               and their families receive a $1,000 annual health-care account. Any

              unspent portion can be rolled into the following year. But once that

              account is tapped out, workers are responsible for the next $1,500 of

              medical expenses. If expenses go beyond that, the company steps back

              in and will pick up 90% of expenses. Oshkosh is betting that the gap

              will discourage wasteful spending while still ensuring workers are

              covered for serious illness.´´27

According to Oshkosh‟s Vice-President for Human the program showed costs going up in the

high single digits -- a big improvement over the double-digit increases the company saw with its

HMO plan.28

           For long run cost reduction current employee health should be focused so that retiree

healthcare costs can be minimized. For example, PepsiCo employees fill out a health appraisal

that can help pinpoint genetic predisposition to certain healthcare concerns and also current

lifestyles factors. Some 16% of the company's 50,000 employees now work with fitness and

dietary coaches on a regular basis.29 Programs like these are new to the corporate climate, so the

payoffs are quantitatively unknown, but logically this current investment in the employees would

mean that fewer total healthcare concerns will exist.



GM‟s Image Problems

           For years General Motors (GM) enjoyed the image as the best automobile on the market.

Built of the highest quality, GM shared the iconic image of the American dream. Today that

image is tarnished by failure after failure of its products as well as the impact of several

27
   Ibid.
28
   Ibid.
29
   Ibid.


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                                                                             Edmondson, Jones, Middleton


economic crises. In April, 2006 Businessweek said, “The company relies too much on gas hogs.

It can‟t support its bloated family of brands. And the imports still have more to offer when it

comes to cars and crossover SUVs. Until GM licks those issues, its recovery will be a long

slog.”30 Today GM is synonymous with very damaging keywords: discounting, low quality, high

mileage, old. This negative perception at one time had merit, now it is only continued because of

GM‟s lack of action. If they continue to fail in improving their image GM will lose more of its

already shrinking market share and along with its financial woes, ergo inevitably going bankrupt.

Rising Gas Prices

        The average price of gasoline in the US recently reached $3 per gallon causing a surge in

movement away from the once popular SUV‟s to small high mileage and hybrid vehicles. 31 Year

after year GM has fallen behind competitors in providing either. This has only emphasized the

perception that GM‟s vehicles consume more gas than their Japanese counterparts even though

GM has comparably efficient vehicles. For far to long GM has concentrated on larger vehicles

which consume more gas than their smaller counterparts; an area dominated by small fuel

efficient automobiles produced by Japanese competitors. This is because, “…cars tend to be less

profitable than trucks, making their sales less important to the bottom line.”32 Not only does this

lower the resale value of GM‟s vehicles, it also causes the perception of their vehicles as gas-

guzzlers to hit even fuel-efficient cars. It can produce models in the SUV sector faster than

competition, but because of rising gas prices the company remains exposed to the shrinking

market. Lack of action to correct this issue and develop vehicles to meet customer needs is the



30
   Welch, David. “Fixing GM is an Escalade-sized job.” April 21, 2006
http://www.businessweek.com/autos/autobeat/archives/2006/04/fixing_gm_is_an.html
31
   Energy Information Administration, US retail gas prices
http://www.eia.doe.gov/oil_gas/petroleum/data_publications/wrgp/mogas_home_page.html
32
   Carty, Sharon. “GM's generous incentives fail to rev sales in the USA” USA Today. March 16,2005
http://www.usatoday.com/money/autos/2005-03-16-gm-cover-usat_x.htm


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                                                                         Edmondson, Jones, Middleton


primary reason why the company‟s vehicles are falsely perceived as being low-mileage. Today

GM has several fuel-efficient models that are on par with Japanese vehicles, but they do not

receive the same financial backing from GM as its SUVs. Without informing the customers of

the abilities of these models GM has failed to give its gas guzzling image a facelift.

Quality

        Starting in the 1970‟s the perception of GM‟s quality has remained lower than

competitors such as Toyota and Honda. Cutting costs on production and materials caused so

much damage that the effects are still felt today even though these issues have been corrected.

"The image of GM's vehicles is far worse than the reality," he said. "GM has changed. Some of

the best-made vehicles in the world today are being produced by GM. It's paying for the sins of

its past.”33 Even though they have corrected these problems GM still has troubles moving away

from this image. A reason for this is the large range of products under the GM umbrella. The

company lacks the financial assets to properly back marketing for all 8 of its brands. With so

many different vehicles GM not only creates cannibalization because of cross-market offerings

but it also must pick and choose which brands and models to advertise. “If the GM brands were

distinctive, both in styling and pricing as Alfred Sloan intended, it wouldn't matter if they were

advertised on the same TV shows.”34 Skin deep upgrades of various models sharing a similar

framework across brands gives the perception that all GM vehicles are essentially the same.

Incentives are also a source of marketing problems for the company because they draw few new

customers and gives the perception that GM is a discount item. People avoid making purchases

because they want to wait for the best incentive. Why buy now if next month more could be


33
   Phelan, Mark. “On quality, GM haunted by its past,” Detroit Free Press April 11, 2006
http://www.indystar.com/apps/pbcs.dll/article?AID=/20060411/BUSINESS/604110366/1003/BUSINESS
34
   Crain, Rance. “Automaker Considers Ad Campaign to Address Bankruptcy Rumors.” AdvertisingAge January 23,
2006 http://www.adage.com/columns/article?article_id=48177


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                                                                              Edmondson, Jones, Middleton


saved. “The problem is that GM has conditioned car buyers to expect fatter and fatter incentives,

and so they know there's no hurry to rush in and buy.”35

Delphi and Downsizing

        After spinning off the company from GM, Delphi has caused a severe decline to GM‟s

image. Negative connotation because of bankruptcy and poor union relationships of Delphi

transfers over to the parent company and tarnishes its image. “Delphi’s filing for bankruptcy

protection compounds a series of setbacks that have left GM with a battered balance sheet,

declining market share and bruised image.”36 The situation with Delphi has all but ruined GM‟s

ability to claim a policy of Corporate Social Responsibility (CSR). The company is also

currently seeking to void Union contracts in an effort to cut costs. This strikes a hard blow to the

primary market that still buys GM vehicles, the average blue-collar American. Voided contracts

will increase the bad press and force people to further avoid GM products. Along with nearly

30,000 employees to be downsized in 2006 the GM image as a company that stands for the

American people is only further damaged. The only saving grace is the offer to pay employees

up to $140,000 for leaving the company, but this too adds to the overall financial costs the

company currently faces.

Solutions

        Perceived as old, low quality, bad at business, low mileage, and a waste of money, GM‟s

image must be transformed to innovative design. They must compete with Japanese automakers

(which are considered to be more innovative with their sleeker designs and performance) with

better gas mileage, higher quality, and consistently updated features. Innovative direct marketing

and customer feedback such as the use of Blogging is very important and has shown its value in

35
  Ibid.
36
  Eisenstein, Paul. “The fallout for GM” Bury St. Edmunds: Oct 19, 2005.Vol.18, Iss. 19; pg. 33, 1 pgs
http://web.lexis-nexis.com.ezproxy.rit.edu/universe


                                                                                                         14
                                                                            Edmondson, Jones, Middleton


recent years; “…the blog was equally open to both praise and criticism -- in other words, it was

an authentic exchange between the company and its customers.”37 GM must continue to focus

on the needs of its current customers and properly market to new customers. The incentives

offered to employees leaving the company was a good first step in reacquiring CSR, but with

little capital GM must focus on its image primarily through restructuring and innovation. CSR

must also be focused internally on employees, where it is most needed. Consolidation on a minor

level has cut some costs, but consolidation of entire brands must occur in order to allow GM

enough capital to focus its marketing efforts. Peter DeLorenzo, the founder of

Autoextremist.com who previously worked as an automotive advertising executive said GM

spends “…the most on advertising of any car company. Can you imagine if they spent the same

amount with a third fewer models? They could actually promote those models properly. Right

now, they are spread too thin."38 The association with its „best in class‟ models and harnessing

strengths in new model releases must be marketed to the consumers. Many of GM‟s products are

comparable and even superior to its competitors; it must simply prove this through focused

marketing campaigns that use the knowledge found from customer feedback to send the right

message. Today GM‟s automobiles are of the same quality as Japanese competition. “At one time

it was thought that U.S. workers couldn’t build the same quality as [their] Japanese

counterparts. That myth has proven wrong.”39




37
   Kline, David. “Blogrevolt.com. January 5th, 2006
http://www.blogrevolt.com/archives/2005/12/gms_blogging_ex.htm
38
   DeLorenzo, Peter. “GM's generous incentives fail to rev sales in the USA” USA Today. March 16,2005
http://www.usatoday.com/money/autos/2005-03-16-gm-cover-usat_x.htm
39
   Welch, David. “Fixing GM is an Escalade-sized job.” April 21, 2006
http://www.businessweek.com/autos/autobeat/archives/2006/04/fixing_gm_is_an.html


                                                                                                        15
                                                                   Edmondson, Jones, Middleton


Conclusion:

              GM sees itself as a company who has a long history, but recently has seen troubled

times. Although these problems seem insurmountable, the company does have possible solutions

to rectify the situation. GM‟s brands and public image have faced scrutiny in recent years due to

its inability to adapt to consumer needs. Even though GM does not have the financial backing to

delve fully into a complete brand turn around, they have the opportunity to capitalize on the

growing hybrid market. Its poor past pension investment and increasing union healthcare costs

prevents GM‟s production from reaching optimal flexibility to adjust to market demands. The

UAW has traditionally been a significant barrier for GM as it tries to modernize its production

process, but with creative solutions to reduce short-run and long-run costs, GM can avoid any

significant conflicts.

              GM is currently dropping the Oldsmobile line, and should continue to reduce the

total number of brand they offer. This will allow them to focus on innovation within the

remaining brands, reduce costs, and build the image of their residual brands. Through their

alliances they should look for low-risk situation that will enable them to develop better

technologies and share the costs of innovation. GM has tried to reduce costs through worker

layoffs, but this strategy has had painful consequences in the public eye. GM offered generous

compensation to the fired workers, which is a good first step towards development of their

internal CSR.     But they should further focus their resources on GM employees for both

productivity reasons and public image reasons. The labour costs for GM are a large part of the

total production cost for GM. Through prioritizing these costs and focusing on the largest

contributor- union healthcare- GM can develop a strategy to reduce these costs. The labour cost

solution, long with all of GM‟s solutions, should have both short and long run foci.




                                                                                              16
                                                                 Edmondson, Jones, Middleton


Works Cited:

Appleby, Julie & Carty, Sharon. ``Ailing GM Looks to Scale Back Generous Health Benefits,´´

       www.usatoday.com, June 23, 2005

Business Week, ``Health Costs: good News at Last; Slower price hikes and higher copays have

       helped companies. Now they're testing new ways to find more savings.´´ May 30, 2005

Carteau, Richard. Cracks begin to show at General Motors.          MarketWatch: Automotive,

       Mar2006, Vol. 5 Issue 3

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Figure 1:




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