General Motors Europe as of Essay
- Length: 10 pages
- Sources: 10
- Subject: Transportation
- Type: Essay
- Paper: #33584954
Excerpt from Essay :
The second decision was implemented and the same treatment would be applied to both Opel and Vauxhall. The first alternative would not have been extremely viable for the simple reason that both German and British manufacturers are subjected to the same environmental features and this means that there is no logic reason as to why they should be treated separately; they both fall under regulations of the European Community, they both pose risks of financial losses and they both could revive and support the company's overcoming of the crisis.
Having made the decision of how to treat the two companies in relationship to each other, a question is now being posed relative to what the Detroit headquarters should decide in terms of the future of Opel and Vauxhall as integrant parties of General Motors. On the one hand, the parent organization considered selling the two subsidiaries and as such renouncing most of its operations within the European arena; on the other hand, they considered not selling the subsidiaries, but continuing to invest in them and maintaining them as integrant parties of GM. The following lines detail the two alternatives.
4.1. Selling Opel and Vauxhall
The alternative of selling Opel and Vauxhall was made in early 2009, as the financial crisis was beginning to take a toll on General Motors. Internal analyses pointed out to the fact that Opel was a far too large organization, employing over 55,000, and expanding over too much factory space. Despite these features, it contributed only limitedly to the Group's annual revenues.
After months of discussions, the board at GM decided to sell the British and German subsidiaries to Magna, a Canadian manufacturer of car parts. The loan would be offered by a Russian bank, Sberbank, making as such the Canadian-Russian consortium the majority owner of Opel and Vauxhall. They would possess 55% of the interest; 35% would remain with General Motors and 10% would go to the staff members. The proposition to sell the two subsidiaries to Magna was well received by German chancellor Angela Merkel, who praised the initiative for its ability to save jobs; Magna promised that it would not close any Opel organization on German territory (Wilx, 2009).
4.2. Keeping Opel and Vauxhall
It took half of a year for General Motors to make the decision to sell Opel and Vauxhall; yet, before a materialization of this decision could be observable, the board focused more intensely on their second alternative -- that of keeping the German and British subsidiaries. Such a course of action would undoubtedly increase the pressure for the American owner, which would not manage to reduce the threat of the crisis. Additionally, they would be forced to invest their own resources to revive the company and it would as such be uncertain if the company would be profitable by 2010, as estimated by Magna's takeover (Stoll, Fuhrmas and Walker, 2009). It would also have a negative impact onto Germany, as the measure would require Opel to reduce 30% of its costs, meaning that it would have to let go an estimated 10,000 employees (Yahoo News, 2009).
Despite these threats and limitations, the company would be able to retain its strong reputation, and even enhance it by proving its abilities in times of financial hardship. It could also strive and convince the German and British governments to offer it subsidies and bridge loans in order to move passed the crisis. And when Opel and Vauxhall regain their pre-crisis strength, GM will be the sole beneficiary and the sole controller. Given this situation, it is most advisable for General Motors to not take the easy way out through selling the two subsidiaries, but to keep them and strive to revive them.
On the 4th of November 2009, less than two months after the deal with Magna had been declared, the General Motors officials announced that the agreement was off and that they would not sell the two German and British subsidiaries. This recent decision was based on improving business conditions for the organization, but also the hope that the German and British governments and communities would support the company (Wards Auto, 2009).
5. Stakeholder Strategies
Due to the difficulty in making the final decision, as well as the large number and complexity of the parameters involved, it is possible for the board at General Motors to once again change their ruling. This possibility arises as the organizational leader focus on ultimate goals and benefits, as promoted by the principles of strategic management. Whichever the ultimate course of action however, fact remains that various categories of stakeholders would be impacted by the future endeavors, and that the organization would have to implement various strategies.
Considering that General Motors sticks to the decision of not selling Opel and Vauxhall, they would have to implement several strategies in order to deal with the issues of the stakeholders, such as some of the following:
Downsizing strategies will have to be developed and implemented in order to reduce operational costs; the strategy will significantly reduce the on the job satisfaction of the remaining staff members, and will also reduce the reputation of the organization within the German community
For the same purpose of cost reduction, the managerial team at General Motors would also have to renegotiate its contracts with the purveyors in order to convince them to offer the necessary commodities at lower retail prices
The governmental institutions will also be approached with requests for financial support; GM will try to convince the British and German authorities to implement plans similar to the American TARP and support the automobile manufacturer through these times of financial difficulties
Considering however that it would be possible for the General Motors Company to change its mind and sell Opel and Vauxhall after all, they would have to implement the following strategies relative to their stakeholders:
Concerning the business partners, they would hand all control to the Canadian-Russian consortium, meaning that GM's 35% interest would no longer be able to massively influence the decision making process
In terms of the shareowners, these could be satisfied on the one hand as the company does not have to invest additional financial resources in reviving the German and British subsidiaries (most sources will be ensured by Magna) and that it can distribute the revenues in the form of dividends, but they could on the other hand be dissatisfied as the company does not register any income from the sales transaction
Massive financial resources would have to be invested in marketing endeavors in order to attract the customers and link the new ownership to the solid reputation of Opel and Vauxhall
In terms of the staff members, General Motors would present them with the opportunity to buy shares; a total of 10% of the company's total interest would be transferred to the employees.
The General Motors Company is a leading presence within the international automobile industry. In its century long existence, the American automaker has been faced with countless challenges, but has always managed to pull trough; the most recent example in this sense is given by its ability to emerge from a bankruptcy file. Yet, in order to overcome the modern day difficulties raised by the internationalized economic crisis, tough decisions had to be made. One such decision referred to the most adequate course of action to be implemented relative to company's subsidiaries in Europe -- German Opel and British Vauxhall. The initial discussions pointed out towards a strategy to sell the two subsidiaries; yet, after further consultations, and based on beliefs of improved economic conditions and political support, General Motors decided to keep the two subsidiaries.
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