Gm: What Went Wrong And What's Next
This document was uploaded by user and they confirmed that they have the permission to share it. If you are author or own the copyright of this book, please report to us by using this DMCA report form. Report DMCA
Overview
Download & View Gm: What Went Wrong And What's Next as PDF for free.
More details
- Words: 1,573
- Pages: 15
GM: What Went Wrong and What's Next For decades, General Motors reigned as the king of automakers. What went wrong? Reflections on the wrong turns and missed opportunities of the former industry leader, and ideas for recovery.
GM: What Went Wrong
Brands Owned by GM (once upon a Oldsmobile time)
Buick Cadillac Chevrolet GMC GM Daewoo Holden Hummer
Opel Pontiac Saab Saturn Vauxhall
GM: What Went Wrong
Formed in 1908, General Motors was the world's largest carmaker between 1931 and 2008. GM filed for bankruptcy protection (Chapter 11) on June 1, 2009. In the bankruptcy petition, GM claimed slightly over $82 billion in assets and nearly $173 billion in debts.
GM: What Went Wrong
Bankruptcy is a legally declared inability or reduced ability of an individual or organization to pay its creditors.
Creditors may file a bankruptcy petition against a debtor ("involuntary bankruptcy") in an effort to recoup a portion of what they are owed or initiate a restructuring. In the majority of cases, however, bankruptcy is initiated by the debtor (a "voluntary bankruptcy" that is filed by the insolvent individual or organization). Source: Wikipedia
GM: What Went Wrong
There are six types of bankruptcy under the Bankruptcy Code, located at Title 11 of the United States Code: Chapter 7: basic liquidation for individuals and businesses; Chapter 9: municipal bankruptcy; Chapter 11: rehabilitation or reorganization, used primarily by business debtors, but sometimes by individuals with substantial debts and assets; Chapter 12: rehabilitation for family farmers and fishermen; Chapter 13: rehabilitation with a payment plan for individuals with a regular source of income; Chapter 15: ancillary and other international cases.
Source: Wikipedia
GM: What Went Wrong
In Chapter 11, the debtor retains ownership and control of its assets and is re-termed a debtor in possession ("DIP"). The debtor in possession runs the day to day operations of the business while creditors and the debtor work with the Bankruptcy Court in order to negotiate and complete a plan. If a plan is confirmed the debtor will continue to operate and pay its debts under the terms of the confirmed plan. If a specified majority of creditors do not vote to confirm a plan, additional requirements may be imposed by the court in order to confirm the plan. Source: Wikipedia
GM: What Went Wrong
The General Motors bankruptcy is the Chapter 11 bankruptcy of automobile manufacturer General Motors and some of its subsidiaries in the United States Bankruptcy Court. The United States government-endorsed bankruptcy plan will permit Vehicle Acquisition Holdings, LLC ("New GM") to purchase the more productive assets of the old GM. Payments to employees continue uninterrupted, and warranty and other customer service continue uninterrupted. Operations outside of the United States are not included in the court filing. Source: Wikipedia
GM: What Went Wrong
The company received government assistance in 2008 under the condition it would produce a reorganization plan to become a viable company in the long run. The petition is the largest bankruptcy filing of a U.S. industrial company. The filing reported US$82.29 billion in assets and US$172.81 billion in debt. As ranked by total assets, the bankruptcy is the fourthlargest bankruptcy in U.S. history, following after Lehman Brothers Holdings Inc., Washington Mutual, and WorldCom Inc. Shortly after the Chapter 11 filing, it was announced that as of Monday, June 8, 2009, GM would be removed from the Dow Jones Industrial Average, to be replaced by Cisco Systems.
Source: Wikipedia
GM: What Went Wrong
General Motors was financially vulnerable before the automotive industry crisis of 2008-2009. It came close to insolvency and bankruptcy after falling sales caused a US$4.45 billion loss in 1991. Cost-cutting and management changes restored profitability for the next 10 years. In 2005 the company posted a loss of US$10.6 billion. In 2006, its attempts to obtain U.S. government financing to support its pension liabilities and also to form commercial alliances with Nissan and Renault failed. For fiscal year 2007, GM's losses for the year were US$38.7 billion, and sales for the following year dropped by 45%.
Source: Wikipedia
GM: What Next
Efforts to sell General Motors' European operations ran into difficulties, as the corporation was expected to file for bankruptcy by June 1, 2009. United States government officials suggested that, if they were satisfied with the company's plans to restructure, the U.S. government would take at least a 50% equity stake and reserve the right to name board members. On 31 May 2009 news broke that the U.S. would initially likely become the largest shareholder of the reorganized GM following a bankruptcy filing and reemergence from bankruptcy. The U.S. government would invest up to $50 billion and own 60% of the new GM and the Canadian government would own 12.5%. Source: Wikipedia
GM: What Next
On May 27, 2009, the U.S. Treasury, advanced a secured loan of US$ 360.6 million to GM, and GM issued a note to the Treasury for US$ 360.6 million. The loan also funded a separate account established by GM Warranty LLC, a new special purpose subsidiary of GM that was formed to operate the warranty program. On 30 May 2009, it was announced that a deal had been reached to transfer New GM Europe (Opel plus Vauxhall, minus Saab) assets to a separate company majority-owned by a consortium led by Sberbank of Russia (35%), Magna International of Canada (20%), and Opel employees and car dealers (10%). GM is expected to keep a 35% minority stake in the new company.
Source: Wikipedia
GM: What Next
Is there a light at the end of the tunnel for General Motors? Or are those just headlights from an oncoming train? Its future appears uncertain at best—yet expensive nonetheless. The government has pledged $50 billion to the company, with no assurances American taxpayers will recoup any of that investment. How should business leaders learn from this latest turning point? HBS faculty weigh in.
GM: What Next Daniel Snow, Assistant Professor of Business Administration:
GM will emerge from this crisis with a dramatically weakened portfolio of both current and future products.
Although much attention has been focused on electric cars, hybrids, and fuel cells, I believe that the key player in the carbon-conscious automobile market of the next ten years is the compact car, especially one powered by a diesel engine. But GM has just lost its ability to develop small cars with the sale of its Opel subsidiary. GM's best small cars are engineered (and some are manufactured) by Opel in Europe. But it's not just about design and engineering. The supply chains and factory networks that provide these cars will need to be divided. GM's explicit strategy of the last decade has been to foster areas of specialization within its subsidiaries around the world—small cars in Europe, subcompacts in Asia, trucks and SUVs in North America—and this has started to yield great results. Source: HBS Publn. 15 June
GM: What Next Joseph L. Bower, Baker Foundation Professor of Business Administration: The GM bankruptcy poses several questions. How did the board and management of a great company ever allow this extraordinary situation to develop? It is easy to point to:
the labor agreements from the 1950's, and the slow response to the superior engineering and manufacturing of Japanese competitors, and a reluctance to take environmental issues seriously. But these were not overnight developments.
Did GM's financial controls become too powerful a force for the product engineers to overcome? Did the marketers not see what Toyota was doing with the Camry and Lexus? On another front, what does it mean for the U.S. government to be supporting one competitor against a group of healthy rivals? Is that what our bankruptcy laws were designed to accomplish? Doesn't a healthy industry require less capacity, so that the winning companies can actually prosper? The administration is embarking on an interesting experiment in political economy. Source: HBS Publn. 15 June
GM: What Next Nancy F. Koehn, James E. Robison Professor of Business Administration: General Motors had laid the groundwork for decades of industry dominance, offering "a car for every purse and purpose" and pioneering the multidivisional structure. Consider the root causes of General Motor's decline, which has been under way for 30 years. Although there are many factors that contributed to the company's long, slow bleed, the three fundamental issues are
First, pay close attention to what is happening to consumers' lives in the context of the larger environment—not only their stated preferences, but their hopes, dreams, wallets, lifestyles, and values. Second, keep an equally close eye on the competition. And third, understand how a company's structure and culture relate to its strategy. Use all this understanding to place innovative bets. This is what the early leaders of GM did. And this is what several generations of executives have consistently failed to do.
It has been a failure of leadership as astounding and momentous (and ironic) as the company's early achievement: management's consistent failure to do the very things that made the business so successful initially. Source: HBS Publn. 15 June
GM: What Went Wrong
Brands Owned by GM (once upon a Oldsmobile time)
Buick Cadillac Chevrolet GMC GM Daewoo Holden Hummer
Opel Pontiac Saab Saturn Vauxhall
GM: What Went Wrong
Formed in 1908, General Motors was the world's largest carmaker between 1931 and 2008. GM filed for bankruptcy protection (Chapter 11) on June 1, 2009. In the bankruptcy petition, GM claimed slightly over $82 billion in assets and nearly $173 billion in debts.
GM: What Went Wrong
Bankruptcy is a legally declared inability or reduced ability of an individual or organization to pay its creditors.
Creditors may file a bankruptcy petition against a debtor ("involuntary bankruptcy") in an effort to recoup a portion of what they are owed or initiate a restructuring. In the majority of cases, however, bankruptcy is initiated by the debtor (a "voluntary bankruptcy" that is filed by the insolvent individual or organization). Source: Wikipedia
GM: What Went Wrong
There are six types of bankruptcy under the Bankruptcy Code, located at Title 11 of the United States Code: Chapter 7: basic liquidation for individuals and businesses; Chapter 9: municipal bankruptcy; Chapter 11: rehabilitation or reorganization, used primarily by business debtors, but sometimes by individuals with substantial debts and assets; Chapter 12: rehabilitation for family farmers and fishermen; Chapter 13: rehabilitation with a payment plan for individuals with a regular source of income; Chapter 15: ancillary and other international cases.
Source: Wikipedia
GM: What Went Wrong
In Chapter 11, the debtor retains ownership and control of its assets and is re-termed a debtor in possession ("DIP"). The debtor in possession runs the day to day operations of the business while creditors and the debtor work with the Bankruptcy Court in order to negotiate and complete a plan. If a plan is confirmed the debtor will continue to operate and pay its debts under the terms of the confirmed plan. If a specified majority of creditors do not vote to confirm a plan, additional requirements may be imposed by the court in order to confirm the plan. Source: Wikipedia
GM: What Went Wrong
The General Motors bankruptcy is the Chapter 11 bankruptcy of automobile manufacturer General Motors and some of its subsidiaries in the United States Bankruptcy Court. The United States government-endorsed bankruptcy plan will permit Vehicle Acquisition Holdings, LLC ("New GM") to purchase the more productive assets of the old GM. Payments to employees continue uninterrupted, and warranty and other customer service continue uninterrupted. Operations outside of the United States are not included in the court filing. Source: Wikipedia
GM: What Went Wrong
The company received government assistance in 2008 under the condition it would produce a reorganization plan to become a viable company in the long run. The petition is the largest bankruptcy filing of a U.S. industrial company. The filing reported US$82.29 billion in assets and US$172.81 billion in debt. As ranked by total assets, the bankruptcy is the fourthlargest bankruptcy in U.S. history, following after Lehman Brothers Holdings Inc., Washington Mutual, and WorldCom Inc. Shortly after the Chapter 11 filing, it was announced that as of Monday, June 8, 2009, GM would be removed from the Dow Jones Industrial Average, to be replaced by Cisco Systems.
Source: Wikipedia
GM: What Went Wrong
General Motors was financially vulnerable before the automotive industry crisis of 2008-2009. It came close to insolvency and bankruptcy after falling sales caused a US$4.45 billion loss in 1991. Cost-cutting and management changes restored profitability for the next 10 years. In 2005 the company posted a loss of US$10.6 billion. In 2006, its attempts to obtain U.S. government financing to support its pension liabilities and also to form commercial alliances with Nissan and Renault failed. For fiscal year 2007, GM's losses for the year were US$38.7 billion, and sales for the following year dropped by 45%.
Source: Wikipedia
GM: What Next
Efforts to sell General Motors' European operations ran into difficulties, as the corporation was expected to file for bankruptcy by June 1, 2009. United States government officials suggested that, if they were satisfied with the company's plans to restructure, the U.S. government would take at least a 50% equity stake and reserve the right to name board members. On 31 May 2009 news broke that the U.S. would initially likely become the largest shareholder of the reorganized GM following a bankruptcy filing and reemergence from bankruptcy. The U.S. government would invest up to $50 billion and own 60% of the new GM and the Canadian government would own 12.5%. Source: Wikipedia
GM: What Next
On May 27, 2009, the U.S. Treasury, advanced a secured loan of US$ 360.6 million to GM, and GM issued a note to the Treasury for US$ 360.6 million. The loan also funded a separate account established by GM Warranty LLC, a new special purpose subsidiary of GM that was formed to operate the warranty program. On 30 May 2009, it was announced that a deal had been reached to transfer New GM Europe (Opel plus Vauxhall, minus Saab) assets to a separate company majority-owned by a consortium led by Sberbank of Russia (35%), Magna International of Canada (20%), and Opel employees and car dealers (10%). GM is expected to keep a 35% minority stake in the new company.
Source: Wikipedia
GM: What Next
Is there a light at the end of the tunnel for General Motors? Or are those just headlights from an oncoming train? Its future appears uncertain at best—yet expensive nonetheless. The government has pledged $50 billion to the company, with no assurances American taxpayers will recoup any of that investment. How should business leaders learn from this latest turning point? HBS faculty weigh in.
GM: What Next Daniel Snow, Assistant Professor of Business Administration:
GM will emerge from this crisis with a dramatically weakened portfolio of both current and future products.
Although much attention has been focused on electric cars, hybrids, and fuel cells, I believe that the key player in the carbon-conscious automobile market of the next ten years is the compact car, especially one powered by a diesel engine. But GM has just lost its ability to develop small cars with the sale of its Opel subsidiary. GM's best small cars are engineered (and some are manufactured) by Opel in Europe. But it's not just about design and engineering. The supply chains and factory networks that provide these cars will need to be divided. GM's explicit strategy of the last decade has been to foster areas of specialization within its subsidiaries around the world—small cars in Europe, subcompacts in Asia, trucks and SUVs in North America—and this has started to yield great results. Source: HBS Publn. 15 June
GM: What Next Joseph L. Bower, Baker Foundation Professor of Business Administration: The GM bankruptcy poses several questions. How did the board and management of a great company ever allow this extraordinary situation to develop? It is easy to point to:
the labor agreements from the 1950's, and the slow response to the superior engineering and manufacturing of Japanese competitors, and a reluctance to take environmental issues seriously. But these were not overnight developments.
Did GM's financial controls become too powerful a force for the product engineers to overcome? Did the marketers not see what Toyota was doing with the Camry and Lexus? On another front, what does it mean for the U.S. government to be supporting one competitor against a group of healthy rivals? Is that what our bankruptcy laws were designed to accomplish? Doesn't a healthy industry require less capacity, so that the winning companies can actually prosper? The administration is embarking on an interesting experiment in political economy. Source: HBS Publn. 15 June
GM: What Next Nancy F. Koehn, James E. Robison Professor of Business Administration: General Motors had laid the groundwork for decades of industry dominance, offering "a car for every purse and purpose" and pioneering the multidivisional structure. Consider the root causes of General Motor's decline, which has been under way for 30 years. Although there are many factors that contributed to the company's long, slow bleed, the three fundamental issues are
First, pay close attention to what is happening to consumers' lives in the context of the larger environment—not only their stated preferences, but their hopes, dreams, wallets, lifestyles, and values. Second, keep an equally close eye on the competition. And third, understand how a company's structure and culture relate to its strategy. Use all this understanding to place innovative bets. This is what the early leaders of GM did. And this is what several generations of executives have consistently failed to do.
It has been a failure of leadership as astounding and momentous (and ironic) as the company's early achievement: management's consistent failure to do the very things that made the business so successful initially. Source: HBS Publn. 15 June
Related Documents
Gm: What Went Wrong And What's Next
June 2020 5
Cloning Went Wrong [from Www.metacafe
November 2019 4
08.21.what Went Where
June 2020 20
What Went Before Moa-ad.docx
May 2020 5
What I Did Wrong
November 2019 21
What To Say Next
May 2020 10More Documents from ""
Patrick Leung 2
June 2020 1