General Motors and Honda Financial Analysis This text seeks to compare the finances of General Motors (GM) to those of Honda Motors (HMC) in an attempt to determine why the latter has been more successful than the former. In so doing, the paper will amongst other things utilize a number of financial management concepts and measures of performance including but not limited to financial ratios and managerial capabilities.

Although the biggest headache for GM right now could be its stock price which is essentially on a retreat, the company's second quarter earnings were also not impressive. According to Mespell (2012), GM's "second quarter earnings plunged by nearly half." The company's market share has also been on a downward trend so far.

GM's lagging performance can be attributed to a number of things. To begin with, the number of new models the company has churned out in recent times are quite a few (in comparison to some of its competitors). The company has thus done little to excite buyers on this front. Further, in my opinion, GM has been reluctant to embrace a new cast of management. Indeed, even after the government bailout, GM chose to retain quite a number of its former executives in top management positions with the outgoing chairman being replaced with his vice. This in my opinion did little to turn around the company's...

Honda's decision to have a chief executive with a research background may have worked to its advantage. Prior to being appointed Honda's CEO, Mr. Takanobu served in the same company as its R&D director (Business Week, 2012). This has in a way made Honda focus more on product innovation than its peers, thus drawing more potential buyers into its showrooms.
It is also important to note that GM's lack of business focus could have significantly affected or destabilized its market share in the long-term. In the opinion of More (2009), the net cash flows of "highly market-focused competitors like Toyota and Honda" were largely solid at the time GM was experiencing financial challenges. Indeed, in the author's opinion, this was the main reason for GM's failure three years ago. The company may take quite a while to recover from this particular strategic blunder.

A look at selected GM's financial ratios in comparison to those of Honda also highlights some of the company's other weaknesses. Regarding the ratio computations, I will take into consideration General Motors' and Honda's financial statements for the year ended 30th Dec 2011 and 30th March 2012 respectively.

Table 1

Ratio

Formula

Computation

General Motors

Honda

G.M…