Catastrophe of Near Bankruptcy, GM

¶ … catastrophe of near bankruptcy, GM has serious moves to make in order to keep the former power house afloat. Unfortunately, this means the company will be big on cutting down production costs. GM is said "to tighten their belts, slash production costs, and make the most of their $15.4 borrowed billion by outsourcing to China," (Leech 2009:1). This is done in hopes of downsizing to keep production and overhead costs as low as possible while still producing enough to fit demand. Another major aspect in GM's plan to cut costs -- outsourcing; the company has made a major push to begin importing most of its units from China. In this, it will cut its North American models, "GM will cut it's North American nameplate lineup from 48 down to 36 by 2012," (Lassa 2009:1). The chuck list includes Hummer models, and Saturn's Astra, Aura, Vue, Outook, and Sky. These will slowly be replaced with lighter and more economic Chinese models. Finally, GM plans to bulk up its stock worth by seeking "to convert bondholder debt and funding to autoworker's retirement health care fund into GM stock," (Lassa 2009:1). With this and projected sales revenues, the company is expected to pay pack Federal loan guarantees from 2012 to 2017 (Lassa 2009:1). These elements are aimed at keeping GM from going under by cutting as much production costs as necessary and re-establishing the company as a powerhouse.

Yet, there are some serious risks involved with such strategies. With the amount it plans to outsource, "by 2011, GM intends to sell over 17,000 exported vehicles from China to the U.S., doubling that to over 50,000 by 2014," GM is slashing large numbers of American jobs (Leech 2009:1). This risks a bad consumer image, especially with the idea that it was tax payer's money that kept the company out of bankruptcy in the first place. Along with that, GM has forecasted very ambitious unit sales, which may prove a future downfall for the company. GM has lowered forecasted earnings from its December plan to around 11.5 million U.S. sales annually, "But even those lower sales numbers look optimistic in a year when most analysts predict the U.S. market will struggle to top 10 million units," (Lassa 2009:1). There still are large risks that the company will not meet even minimum projections and fall under. Also risky from outsider's perspectives, is CEO Henderson's move to not alter GM's product planning group, "Yet it has routinely missed major product trends and rarely sets them," (Welch 2009:2). This has serious potential consequences if GM can't get more life into its product planning.

Summary Scorecard

Perspective

Desirability of Alternatives

Financial

Great reduction of production costs with downsizing and outsourcing.