General Motors

GM's number one priority must be to cut costs. The company spends $2,500 more than its Japanese rivals to build each car and truck in the U.S. (Robison).

Health care benefits account for a huge chunk of this amount, about $1,400 for each vehicle (Porretto). Unfortunately, according to Porretto, GM's contract with the UAW isn't set to expire until 2007 and the union isn't open to opening up contract negotiations until this time. Better relations between the union and management will be necessary to avoid confrontation and win concessions.

However, all the cost cutting measures in the world won't do any good if GM doesn't become more proficient at delivering the products that customers want. Even though the company rolled out an industry-leading 29 new vehicles in 2004, its U.S. sales so far this year are off nearly 5% (Porretto). Most notably, the company has faltered in developing smaller, fuel efficient cars and is late in the move toward hybrids (Robison). Therefore, GM must downsize its portfolio and begin rebuilding it with cars that reflect current market dynamics.

Last, but not least, GM needs to ensure that it has adequate cash and liquidity to finance its operations and to undertake necessary restructuring. The company's $291 billion in debt has recently been downgraded to below investment grade and it has about $16.5 billion of debt coming due this year (Snide). GM and General Motors Acceptance Corp (GMAC)., the carmaker's finance unit, each have about $23 billion of cash available. In addition, the company had about $50 billion in unused credit facilities at the end of last year. The company must carefully watch its cash and liquidity position and, if need be, raise additional cash. A painful, but obvious opportunity is the sell of GMAC.

Bibliography

Porretto, J. (2005, May 7). GM's Wagoner needs quick turnaround. Associated Press. Retrieved May 9, 2005 from Web site: http://biz.yahoo.com/ap/050507/gm_s_future.html?.v=2

Robison, P. (2005, May 6). GM, Ford stumbled to junk on designs, unions, Japan's challenge. Bloomberg. Retrieved May 9, 2005 from Web site: http://www.bloomberg.com/apps/news?pid=10000087&sid=ar0Cm.CPxVWM&refer=top_world_news

Snide, M. (2005, March 22). Godzilla V.Mothra: General Motors's debt vosts durge as GE pulls support. The Auto Channel. Retrieved May 9, 2005 from Web site: http://www.theautochannel.com/news/2005/03/22/018106.html