General Motors’ Challenges and Their Implications

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Summary

General Motors (GM) deals with the manufacture and assembly of motor vehicle major components like the engine and the body. Some other components like the seats, lights, windshields and tires among others are manufactured by other companies through their operations are interrelated. GM has never had an easy road in the past 5 years. It is reported that the last half a decade has been the worst in GM’s life in fifty years. The latest reports show that it posted a $2.5 billion third-quarter net loss, leading to people speculating that it might go bankrupt. GM has about 1.1 million employees, retirees and dependents and its fall will bring a great loss to many. That is why if something is to be done, then it has to be very fast to stop it from bleeding dry.

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Several reasons have been put forward to be the cause of this sudden shift of the once American company that was considered to be both of the present and the future. They failed to meet their financial obligation to restore confidence in the eyes of the suppliers, creditors, employees, retirees as well as to overcome the threats from their potential competitors. Factors to be considered in this rescue plan are the market and customer dynamics, the global influence from other players in the field, sources and supply of energy, production cost, technological issues, the possibility of partnership, product development as well as government legislation.

Challenges

Just as already mentioned above GM has never had it easy in the recent past, the same applies to many manufacturing companies worldwide. To zero in on GM, let us highlight some of the challenges that have been reported to be facing this giant company. The GM stocks and bonds severely plunged a great deal (below $US19 billion) the least since 1982, their sales have gone from bad to worse, even those of the newly launched brands. The world oil and food prices have gone high causing potential buyers of GM products to re-think their need to acquire machinery. This has therefore resulted in a dismal performance in terms of profit collection.

This downward trend of GMs performance has led to the emergence of unhealthy customer perception especially in the US, particularly in the East, West and some of the South where GM vehicles are no longer as reliable as before, compared to foreign products. The main challenge that they face now is to win back their loyal customers as well as attract more customers to their camp to help them bounce back on track. Just as adding salt to a wound, GM has been reported to be under investigation by the SEC due to suspicion of accounting sins.

Implications

The impacts of the threats as well as the steps that the company plans to take have got various implications that run deep and wide. It will not only affect the employees of the company but also those individuals and companies that directly and indirectly depend on GM. To start with is on the stocks and bonds. Since the stocks and bonds of the company have dropped, the shareholders are bound to lose their investments. GM also has plans to cut down on the number of employees ( white-collar jobs), suspend 401(k) matching stock, suspend college tuition and adoption assistance programs to aid conservation of every little cash.

The implications also have got far-reaching effects on the amount available to retirees that have to be cut by some percentage; the salaries of the executive personnel will also be slashed a bit to put them at par with the others so that they too may bleed with the company. Cost-cutting measures have been put in place, for instance, reduction of the cost of engineering and spare parts. Several branches that are not performing will be shut down. The release of new models has been put on hold and emphasis has been put on the sale of the already launched models like the Hummer brand and ACDelco. They have plans to re-concur the market by their latest best selling brand-Camry. GM has hopes that these steps will not just forestall but completely bring to complete rest the crisis.

PEST Analysis (Political, Economical, Socio-cultural and Technological)

All businesses, GM inclusive, have to check on their marketing environment if they want to succeed. In analyzing the business environment, it includes the internal environment (internal customers, office technology, wages and finance.), micro-environment (external customers, agents, distributors, suppliers and competitors) and lastly macro-environment (political/legal, economic forces, socio-cultural and technological). These are what are referred to as PEST Factors (Scott, 1982; 200).

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Political factors

Political factors that influence the way the business fares on and the regulations set by the US government authorities on how to govern businesses have an effect on GM operations. These regulations may restrict activities that GM has to do in order to expand or counter the threats by its competitors. Different governments have different market ethics and the US has its share of some. A stable political environment is required for good business, the political situation witnessed in the US with serious campaigns and every candidate with a different stand was not a healthy one for GM. But that is now gone and they have to embark on a revival procedure. They have to identify those government policies that will affect their tax and trade agreements.

Economic Factors

The economy has not been doing that well and an international company like GM they have to check the state of the trading economy-both the domestic market (within the US) as well as the international one. The interests rates and how will it affect the profit, short and long term prospects of the Gross Domestic Product, the level of inflation the world over as well as factors that are directly and indirectly related to their sales and the purchasing trend of their customers are some of the things that they need to pay attention to.

Socio- Cultural

Since GM operates in almost every continent in the world where cultural practices vary widely, they need to understand them well and adjust to fit in such environments for the good of their business. They also have to identify the dominant religion and find out its take on their products. The attitude of the potential customers toward foreign products, the effects of language on the sale and promotion, literacy level and population have also to be attended to.

Technological Factors

It is no secret that the major driver of development and globalization is technology. GM needs to analyze the state of its technology and how it fares in its sales. They should get to know how far their rivals have gone technology-wise. Technology has its effect on the cost of production and quality, speedy services and comfort.

SWOT (Strengths, Weaknesses, Opportunities and Threats)

This is a tool that is used in the business world to audit an organization and its internal environment (Hill & Westbrook, 1997; 46). It helps in determining those factors that are favorable as well as those that are not favoring the business. Thus the financial position or state of the business can be determined, allowing the stakeholders to predict the future of their investments and make necessary adjustments needed. Strengths and Weaknesses are internal while Opportunities and Threats are external.

Strengths refer to those attributes of the organization that are helpful to achieving any set objective, they need to be used to the business’s advantage. GM has its strengths as having a good reputation in the market, a good track record in its dealings and a strong and effective advertisement. Weaknesses are the attributes of the organization that are harmful and hinder the company from achieving its objective. They call for an improvement wherever they are noted. What can be considered a weakness of GM is the shortage of consultants in some of its branches and its organizational structure?

Opportunities are those external conditions that are helpful to achieving the set objective. Everything that is considered an opportunity has to be exploited by any means to benefit the organization. GM has a well-defined position in the motor vehicle market and that is a plus for them. Another opportunity is the trend that is growing in the developing countries to acquire machinery en mass in their bid to become industrialized. Threats on the other hand are the external conditions that could do damage the business’s performance. A way should therefore be sort to mitigate such conditions. GM faces great competition from other players in the market for example Toyota and Nissan.

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The Five Challenges

All automotive industries are bound to face the below five highlighted challenges due to the changes in the economy as well as those from their consumers and suppliers (Booz, 2).

  • Globalization
  • Product differentiation
  • Product development
  • Supply Chain restructuring and
  • Marketing and Distribution

References

Booz Allen & Hamilton “Challenges Facing the Global Automotive Industry” : 1998; Vol 1 ; Issue 1;pg 2-7.

Hill, T. & R. Westbrook (1997). “SWOT Analysis: It’s Time for a Product Recall”. Long Range Planning 30 (1): 46–52.

J. Scott Armstrong (1982). “The Value of Formal Planning for Strategic Decisions”. Strategic Management Journal 3: 197–211.

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BusinessEssay. (2022) 'General Motors' Challenges and Their Implications'. 5 July.

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BusinessEssay. 2022. "General Motors' Challenges and Their Implications." July 5, 2022. https://business-essay.com/general-motors-challenges-and-their-implications/.

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BusinessEssay. "General Motors' Challenges and Their Implications." July 5, 2022. https://business-essay.com/general-motors-challenges-and-their-implications/.