General Motors (GM), which was established in September 1908 ceased to exist 101 years later. It is a United Auto Workers and has made big fortune for the past nine years dominating the car industry (DePamphilis par. 2-4). The bankruptcy has seen a decrease in sales hence scarce cash.
It therefore becomes a symbol of management failure due to its numerous losing actions that caused a big imbalance to its balance sheet, discouraging many of its customers. As a result, the damage caused to the economy due to finance being made the “tail that wags the economic dog” is portrayed (Cohan par.1-6).
Mismanagement These poor steps include the Chevy Corsair, and acquisition of a hummer which was a big environmental offense. The major causes of this failure were poor financial policies, uncompetitive vehicles which were poorly designed, manufactured for a high price and took too long leading to few buyers, ignorance to competition, innovation failure as concerns customer needs, new competitors and technology and managing in the bubble through promotion of managers and ignoring external changes. It also had a large burden paying legacy costs such as healthcare and retiree pensions.
With an increasing variety of brands, it could not support marketing funds needed (DePamphilis par. 1). In addition, it gave poor customer service while it over served its employees who got extra pay generously, and future benefits to management despite its fray authorization dispute. There was also poor leadership in relation to design, strategy and the self-discipline required to maintain affordable labor contracts followed by the crisis involving mortgage then the recession (Szczesny par 1-4). Subsequently, it led to huge loans and “debtor-in-possession financing” (Cohan par 1).
Effects of GM’s bankruptcy are that many were left unemployed and customer income and confidence eroded. Management Strategies One of the strategies used for restoration of GM includes division of the firm into two, where one group contains the old products while the other which would rise from bankruptcy by selling it to a new company owned by several stakeholders, a union trust fund and bondholders would contain new, and more attractive assets. The assets to be auctioned under new GM include the Hummer, Saturn and Saab which already have potential buyers.
There should be a decrease in the number of workers in the new firm in addition to formation of a new board which includes Canada and United Auto Workers (UAW) healthcare trust and offloading worker healthcare liabilities to the VEBA trust. In addition, GM should focus on interior brands such as Chevrolet, Cadillac and GMC. The agreements signed with UAW have given GM labor costs competition as compared to Toyota (DePamphilis par. 1-5). GM should restore its financial position in the United States first as its home territory (Barboza and Bunkley par.
1-5). According to the plans in place, new products that surpass the potential customers’ expectations must be developed and new competitive energy efficient models introduced. Any prior actions that led to problems should be avoided. The firm’s corporate culture which has been accused of slow innovation, risk adverse and bureaucracy will have to be changed through elimination of the current managers. Although it will be a step towards a better culture, it will lead to the loss of meaningful experts and experience (DePamphilis par. 1-5). Conclusion
Things are currently looking up for GM following repayment of its loan to the United States government and China’s big contribution to sales and its potential as an investor. In addition it has enlarged its engineering and design work force and is now the leading vehicle manufacturer in China due to its association with China’s S. A. I. C Motor Corporation. This has resulted from Buick’s significant perception in China as compared to the United States GM should avoid discounts on its products as this will give the notion of eventual fall in prices.
Any missteps should be avoided despite the rapid growth as it will lead to serious worldwide repercussions (Barboza and Bunkley par. 3-6). Works Cited Barboza, D and Bunkley, N. “G. M. , Eclipsed at Home, Soars to Top in China. ” 21 July 2010. New York Times. 23 July 2010 <http://www. nytimes. com/2010/07/22/business/global/22auto. html? pagewanted=1&_r=2>. Cohan, Peter. “After 101 years, why GM failed. ” 31 May 2009. DailyFinance. 23 July 2010 <http://www. dailyfinance. com/story/company-news/after-101-years-why-gm
failed/19052641/? icid=sphere_copyright>. DePamphilis, Donald M. “Case Study: The General Motors Bankruptcy–GM Arises from the Ashes? ” 10 October 2009. Knol. 23 July 2010 <http://knol. google. com/k/case-study-the-general-motorsbankruptcy-gm-arises-from-the-ashes#>. Szczesny, Joseph R. “General Motors: 10 Milestones on the Road to Bankruptcy. ” Tuesday, 2nd June 2009. Time. 23 July 2010 <http://www. time. com/time/specials/packages/article/0,28804,1899913_1899931,00. html#ixz0uVNR07aR>.