General Motors' Decision to Withdraw Thesis

  • Length: 10 pages
  • Sources: 20
  • Subject: Business
  • Type: Thesis
  • Paper: #11000050

Excerpt from Thesis :

Three of the most important ones are succinctly revealed below:

(a) The declining demand for the company's vehicles -- this issue led to the necessity for more financial resources, which eventually materialized in the acceptance of aid under TARP

(b) The growing competition placed by international manufacturers -- this situation raised an impending necessity to reorganize the company in a means that it better addresses the needs and wants of customers

(c) The fact that the consumers were turning to foreign cars translated in the inability of GM to understand and serve the needs of its customer base

5. Strategic Options

As the gravity of the situation was intensifying, the managerial team at General Motors found itself in a position in which they had to identify several strategic courses of action, and select the most adequate one. Some of their alternatives would have included slashing down the car prices, implementing a process of cultural change or restructuring the entity.

Reducing prices would have had the benefit of attracting more customers, but it is unlikely that the sales generated would have been able to make a positive difference. The strategy would have been integrated in the Ansoff matrix under the entries of existing products, sold onto existing markets (Tutor2u). It would have been a penetration strategy, but its prospects could not have been positive. It would have however been advisable to offer promotional sales to the vehicles in stock in order to reduce inventories. This means that while the feasibility of this option would have been increased, its long-term sustainability and acceptability were low.

Reshaping the organizational culture at General Motors would have been a positive solution, a necessary solution even, as it would have created a new mentality, focused better on innovation, on customer satisfaction and on attention to the changes impacting the micro and macro environments. The downside would be however that this strategic option would only be able to generate positive outcomes in the long-term. It is of course advisable for any entity to think on the long-term and consolidate itself, but when presented with a crisis situation, like 2009 was, they should focus on immediate solutions. This means that the solution was feasible and sustainable, but not acceptable in the given conditions.

In this light of events then, the strategy selected was that of restructuring the organization. This was the best solution given the respective circumstances and it scored the highest levels of sustainability, feasibility and acceptability. It virtually saw the sale of some of the General Motors brands. Hummer was for instance sold to Sichuan Tengzhong Heavy Industrial Machinery for $250 million and 3,000 jobs were saved in the process (Times Online, 2009). Three brads were eliminated altogether -- Saab, Saturn and Pontiac (Krebs, 2009). Discussions were also commenced for the sale of European subsidiaries Opel (Germany) and Vauxhall (United Kingdom). After months of negotiations, the General Motors executives decided to keep the two European subsidiaries. This final decision was also supported by the fact that the German government offered the company a state loan to restructure the GM subsidiary (Opel Facts and Fiction).

6. Implementation Issues

The final decision to "kill the sale agreement with Magna" (Ward's Auto, 2009), the prospective buyer for Opel and Vauxhall, has given birth to several issues. On the one hand, there was the necessity to deal with Magna, in the meaning that the two organizations -- GM and magna, had been doing this negotiation "dance" for months, and the American automobile retailer had been looking to get the most out of the sale. The flexibility of Magna was however been insufficient, and now GM risked losing a strong prospective business partner.

Another issue refers to the fact that, despite improving economic conditions, the main argument in keeping the European subsidiaries, the crisis has not yet passed, meaning that its danger must still be overcome. In order to still implement the restructuring strategy, the GM executives have decided to run Opel and Vauxhall no longer as two separate entities, but as a single organization (Opel Facts and Fiction).

Relative to the human resource, the staff members would generically be expected to forward a high degree of resistance to change. This is given by several reasons, such as a fear of the unknown or a lack of desire to learn new things. Whichever the case however, the actual resistance on the part of the Opel and Vauxhall employees was in this case limited. The explanation would be best given by the less fortunate alternative of selling the subsidiaries to Canadian ownership, which would have implied even more changes.

Another issue belongs to a more political field and sees that, since the German government offered Opel financial subsidies in order to continue operating, the company will have to present its plans to the federal authority. This virtually means that the executives lose part of their control in the company, control which is transferred to the German government.

All in all, the decision to keep Opel and Vauxhall has managed to maintain the sense of a strong and powerful General Motors, but it has not helped solve the problem. The final results prove that just like the entire parent company and its other subsidiaries, Opel and Vauxhall would continue to be met with challenging situations. They will as such be forced to develop new strategic sets of action through which to introduce innovation and better serve the needs of the consumer base.

References:

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Haglund, R., 2009, Analyst Says TARP Funding Hurting General Motors, MLiv e, http://blog.mlive.com/autoblog/2009/03/analyst_says_tarp_funding_hurt.html last accessed on January 11, 2010

Krebs, M., 2009, Good-Bye Pontiac, Saturn, Saab, Hummer, Auto Observer, http://www.autoobserver.com/2009/04/good-bye-pontiac-saturn-saab-hummer.html last accessed on January 11, 2010

Schafer, D., Reed, J., 2009, GM Still Confident of Opel-Magna Deal, FT, http://www.ft.com/cms/s/0/f2a69666-bcd1-11de-a7ec-00144feab49a.html last accessed on January 11, 2010

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January 11, 2010, U.S. Grants $187M for Fuel Efficiency Research, Chicago Tribune, http://www.chicagotribune.com/news/chi-ap-us-fuelefficiency,0,6446827.story last accessed on January 11, 2010

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