...General Motors Co Strategic and Financial Analysis ADVANCED CORPORATE FINANCE April 22, 2012 Authored by: Ana Romero, Roshan Picardo, Carlos Castro, Shikhar Agarwal 0 General Motors Co Strategic and Financial Analysis Executive Summary This report provides an evaluation of strategic and financial evolution of General Motors Company (GM) in the last ten years. Events like the global economic recession lead to a deep restructuring of the firm, filling for bankruptcy and a government bailout. The report provides an analysis of GM’s business model, products, the markets it is competing in, the global automotive and manufacturing industry and it also assess its attractiveness for incumbents and new entrants is also With a brief history of GM we evaluate its reaction to the global recession. We compare their business model before, during and after the recession, comprising the strategic and financial implications of their restructuring plan. We provide results from this restructuring, including improvements in GM’s financial ratios like ROA (from 0.05 in 2010 to 0.07 in 2011) and ROE (from 0.23 in 2010 to 0.25 in 2011). While the recession significantly affected GM, it also affected the rest of the automobile industry, including their American competitor Ford Motors. We compare the main differences between these two important companies and analyze the way they reacted to the recession. We also observe the approach that Ford has taken to recovery, in terms of governance...
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...GENERAL MOTORS COMPANY (GM) History of the Company In 1900 New York held an Auto Show where there was a surprise turnout and it showed just how much interest the United States citizens had with automobiles. This enticed many different companies into entering the automobile history to try and meet the growing demand. On September 16, 1908, William “Billy” Durant founded General Motors Company (GM) who at one time was a leading manufacturer of horse-drawn vehicles in Flint, Michigan. Initially, GM consisted of only the Buick Motor Company but took only a number of years to acquire more than twenty different companies. Some of these companies include Oldsmobile, Cadillac, and Pontiac. Opel, a brand that was recognized worldwide, became General Motor’s first international acquisition (http://www.gm.com). The major recession that came about in 2008 dried up private sources of capital and had the United Sates Treasury give GM a bridge loan to aide in the restructuring of its operations. Furthermore, it is evident that sales of motor vehicles have increased since the rescue of the auto industry each year since 2009 (http://www.treasury.gov/resource-center/). The economy is finally recovering and we will soon see if GM is in a place to again thrive. In the 80’s and 90’s GM encountered its largest single production expansion outside of North America in Spain. Furthermore, since GM had joint ventures in both China and India, they were able to provide a variety of automobiles...
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...manufacturer, is more than a century old and has a large scope of the industrial activities, mostly focusing on the motorized transportation with engineering and manufacturing to make all possible. GM was founded in 1908, by William Durant, as a holding company for Buick and McLaughlin Stocks. Global headquarters are located in Detroit, Michigan with manufactures located throughout 35 countries. GM designs, builds and sells trucks, cars and automobile parts around the world, also providing financing services with General Motors Financial Company, Inc. Analyzing results of the business with five segments: GM International Operations, GM North America, GM South America, GM Europe and GM Financial. Consolidated financial statements include accounts and the subsidiaries that are controlled by ownership with a majority voting interest and consolidated interest entities, which are the primary beneficiary. Continuing evaluations with involvement with variable interest entities determines whether GM still have interest that are variable and are primary beneficiaries. When criteria gets met, GM requires consolidation of the VIE’s. Share of earnings or the losses of the nonconsolidated affiliates are included in the consolidated operating using the equity method for accounting when able to exercise significant influence over operating and financial decisions, using the cost method of accounting when unable to exercise significant influence over operating and financial decisions. Intercompany transactions...
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...General Motors Corporation (GM) is one of the largest automobile manufacturing companies, which was founded in 1908. The headquarters of the company is situated in the United States. It has been leading in global sales figure for last 77 years. The company has operations in 34 countries spread across the world. The major brands of the company are Chevrolet, GM Daewoo, Buick, Cadillac, GMC, Holden, Pontiac, Saab, Saturn, Hummer, Opel, Vauxhall, and Wuling. The company faced a severe financial turmoil in recent years due to global financial meltdown including a $38 billion loss in 2007 (Welch, 2010). GM is recognized as one of the companies that have formulated and executed their policies and strategies very well since more than a century to become a global leader and that have created and maintained their market all around the world. Through this report, we analyze the strategic quotient of the company by analyzing its current situation and corporate governance in terms of strategic posture, Board of Directors and the Top management of the company. Current situation: GM products focus primarily on its four core divisions – Chevrolet, Cadillac, Buick, and GMC. The White House characterized the GM restructuring as a shift toward a new leaner, greener GM, which will aim to break even with annual sales much lower than previously stated. President Obama declared that the restructuring "will mark the end of an old GM, and the beginning of a new GM; a new GM that can produce the high-quality...
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...……….…p 4 Extenal Factors……….…..…………………………..……….………………….p 5 III - Discuss the latest stage of the new (smaller) GM……………….………...p 6 What are the characterisics of the new GM?..………………………………...…p 6 Some encouraging signs of recovery………………………………………....….p 9 Threats regarding GM’s trials to regain its golden past………………………….p 11 Summary and Observations……………………………………………………...p 13 IV - With a majority government ownership, what operational and management challenges might GM’s management confront when trying to regain its golden past?…….………………………………….………..p 14 Operational Challenges..………………………………………………………….p 14 Management Challenges………………………………………………………….p 15 Summary and Observations………………………………………………………p 16 V - Critically Analyse Whether it was GM’s Failure or its Competitors’ enormous success in cost savings and innovation that brought about GM’s demise…………………………..…...….……………………..…….….….p 17 Cost Savings - a poorly designed cost structure……...………………………….p 17 Innovation Processes…………….…………..…………………………………..p 18 Summary and observations……………………………………………………...p 21 VI - Conclusion……………….……………………………………………….….p 22 VII - References……………………………………………………….……….....p 23 2 I - Introduction General Motors (GM) is an American multinational which was founded by William Durant in 1908. It is known as one of the world’s largest auto manufacturers. GM employs 209,000 people around the world and produces...
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...The U.S. industry alone is highly concentrated with the top four companies account for about 75 percent of sales. General Motors Company is one of the world’s largest auto manufacturers which designs, manufactures, and markets cars, crossovers, trucks, and automobile parts worldwide. It operates in five segments: GMNA (GM North America), GME (GM Europe), GMIO (GM International Operations), GMSA (GM South America), and GM Financial. Financing activities are primarily conducted by General Motors Financial Company. The company markets its vehicles primarily under the Buick, Cadillac, Chevrolet, GMC, Opel, Holden, and Vauxhall brand names, as well as under the Alpheon, Jiefang, Baojun, and Wuling brand names. It also sells cars and trucks to dealers for consumer retail sales, as well as to fleet customers, including daily rental car companies, commercial fleet customers, leasing companies, and governments. In addition, the company offers connected safety, security and mobility solutions, and information technology services. The company, through its subsidiary, General Motors Financial Company, Inc., provides automotive financing services and lease products through GM dealerships in connection with the sale of used and new...
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...Financial Analysis of General Motors and Toyota General Motors Co. is an automobile company, which develops, manufactures and markets cars, trucks and parts worldwide. The company operates through the following automotive segments: GM North America, GM Europe, GM International Operations and GM South America. The GM North America segment sells vehicles under the brands Chevrolet, GMC, Buick and Cadillac with sales, manufacturing and distribution operations in the U.S., Canada and Mexico and distribution operations in Central America and the Caribbean. The GM Europe segment sells vehicles under the brands Opel, Vauxhall and Chevrolet with sales, manufacturing and distribution operations across Western and Central Europe. The GM International Operations segment sells vehicles under the brands Buick, Cadillac, Chevrolet, Daewoo, FAW, GMC, Holden, Isuzu, Jiefang, Opel and Wuling brands with sales, manufacturing and distribution operations in Asia-Pacific, Russia, the Commonwealth of Independent States, Eastern Europe, Africa and the Middle East. The GM South America segment sells vehicles under the brands Chevrolet, Suzuki and Isuzu with sales, manufacturing and distribution operations in Brazil, Argentina, Colombia, Ecuador and Venezuela. It also provides automotive financing services through its subsidiary, General Motors Financial Co., Inc. (GM Financial). It finances its loan origination volume through the use of credit facilities and securitization trusts that issue...
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...A Brief History of General Motors (GM) General Motors Corporation is the predecessor of today’s General Motors Company. It was founded in the early 1900’s, a time when the infant auto industry teemed with thousands of companies, large and small (Author Unknown). Billy Durant, GM founder invested in Buick in 1903 after which he assembled the company that became GM. He incorporated GM in September 16, 1908. Durant included Oldsmobile, Cadillac, and Pontiac into the family within a few years after the incorporation. His fast pace of acquisition wore out GM’s bankers and Durant stepped down in 1910 as the president of GM. Durant together with Louis Chevrolet, a racecar drive, created a new brand of cars to challenge the Ford Model T. By 1916, Durant had acquired a lot of GM stock that enabled him take control of the company once again. In 1920 during a sharp recession that forced GM to rethink its business, Durant stepped down once again. (Author Unknown) In the process of creating a new post-Durant company, GM also created the archetype for the modern corporation. Alfred Sloan set up policy committees and staffs to coordinate GM’s different divisions; a strategy that he called “decentralized operations and responsibilities with coordinated control.” It was under Sloan’s leadership that GM organized divisions to provide “a car for every purse and purpose,” it allowed the customers to start with a lower-priced Chevrolet and then move up to a Cadillac if they could afford...
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...“There and Back Again - A Falling Giant’s Tale” MGMT-591 Leadership in Organizational Behavior 20 April 2013 There and Back Again – A Falling Giant’s Tale General Motors Corporation (GM) was once a king in the auto industry. Founded in 1897, the small company grew from the fledgling Buick Motor Company to a huge corporation with over twenty different major brands of automobiles to include Chevrolet, Pontiac, GMC, Opel, and Cadillac to name a few. The main factory and office is headquartered in the United States and based out of Detroit, MI. The automobile manufacturing company is broken down into four different segments: GM North America, GM South America, GM Europe, and GM International Operations. Life was good being a part of the GM team and the company flourished into a giant in the auto industry. In 2009, GM faced several growing problems that they could not overcome. As a result, the corporation became involved in one of the country’s biggest and most controversial bankruptcies. GM was facing total shutdown if help was not received. In a move to prevent the loss of thousands of jobs and a very serious blow to the United States already declining economy, the United States Department of Treasury bailed GM out of bankruptcy and acquired all GM assets and liabilities. The freshly formed company emerged as the new General Motors Company (vice General Motors Corporation) and was kept in business. A new head was appointed to the board of directors who...
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...than 120 countries. GM and its strategic partners produce cars and trucks in 31 countries, and sell and service these vehicles through the following brands: Buick, Cadillac, Chevrolet, GMC, Daewoo, Holden, Isuzu, Jiefang, Opel, Vauxhall and Wuling. (Elizabeth, GM, 2009). GM was the largest automaker for 77 consecutive years from 1931 through 2007. It is longer than any other company in the world. In 2008, it was surpassed by Toyota (Elizabeth, GM, 2009). 2009 was a very important year in the 103 years history of GM. General Motors filed for Chapter 11 bankruptcy protection on June 8, 2009, after racking up losses of $81bn (£50bn) over four years, as part of the Obama administration’s plan to shrink the automaker to a sustainable size and give a majority ownership stake to the federal government. GM sold its good assets to a new, government-owned company. Federal government took a 60 percent ownership stake in the new GM. The Canadian government took 12.5 percent, with the United Auto Workers getting a 17.5 percent share and unsecured bondholders receiving 10 percent. (Isidore, 2009) There is a serious of issues existing such as demand shift and uncertain energy policy, high financial burden incurs from legacy cost, failure in innovation and hyper competition that lead to GM‘s bankruptcy. The bankruptcy of GM not only impact on their shareholders but also the employees and consumers are involved. Impacts of the collapes Concerning with the employees of GM, the collapse leads...
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...poorly managed for years and was almost eliminated when the economy crashed in 2008. Without the help of the U.S. government, General Motors and Chrysler would not have been able to survive. How did GM, as the number one auto manufacturer and seller, go from being at the top to almost ceasing to exist? This kind of financial mess usually takes years of poor decisions and does not happen to a large company overnight. To come to my conclusion I analyzed four books written by people with inside knowledge of the company, as well as magazine articles and a couple of online websites. As a result of my research, I believe that the problems that GM faced stemmed from poor risk management. Rick Wagonner, former CEO, made several poor business decisions that did not take into account any future risks or market changes. A new management team and a fresh perspective were able to turn the company around and put them back at the top of the automotive industry. Risk Management within the General Motors Company General Motors has been in business since 1908 and currently employs 202,000 people in 157 countries world-wide. It is a well-known fact that GM took government bailout money and filed bankruptcy in 2009. How did one of the largest companies in the world fall to needing financial assistance and declaring bankruptcy? One of the largest issues within the company was the lack of risk management practiced by leadership. How did the company then bounce back from declaring bankruptcy...
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...Running head: AUTOMOTIVE BAILOUT The Automotive Industry Bailout: Rewriting History ECON 625: Managerial Economics Abstract The automobile has long been a symbol of American growth and prosperity. Throughout the 20th Century owning and driving a car was an essential part of everyday life for vast majority of U.S. citizens, but few took much time to think about how they were manufactured. Early in the 21st Century, as the U.S. economy began to trend downward, it became apparent that two of the three primary automakers were in significant financial peril. With government aid already being allocated to some of the nation’s largest financial institutions, difficult decisions had to made as to how to approach the alarming crisis at the heart of an industry woven throughout the lives of so many United States citizens. Introduction Beginning in the early twentieth century, automobile makers began marketing and ultimately selling cars to middle-class Americans. It did not take long for a deep love affair for cars to develop across the nation, and ownership became woven into the fabric of the “American Dream”. The invention of the assembly line in the 1910s made automobiles relatively inexpensive, and by 1929 it is estimated that American car companies were producing 5.3 million cars per year (Miller-Wilson, n.d.). The automotive industry surely had its share of ups and downs during the 1900’s, with two World Wars, the Great Depression, an oil crisis in the 1970’s,...
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...Introduction Toyota Motor Corporation: A brief history The Toyota Motor Corporation was founded in 1937 by Kiichiro Toyoda. It originally started as a subsidiary of his father’s company Toyoda Industries. The first vehicle, the Toyota AA, was produced in 1936 even the company was still associated with Toyoda. The brand was established as an independent company in 1937 and changed their name to Toyota. The change of its name was implemented to signify a separation of work and home, to simplify the pronunciation and because it only took 8 brush strokes (which is considered lucky) to write in Japanese. Toyota opened their first factory in 1938 but it had to be cease production during World War II. In 1950 the Toyota Motor Sales Company was established and the company began production on the BJ Toyota Jeep, the BX truck and the SG small truck. In 1956 the Toyopet chain was established. The first vehicle to be sold under this name was the Toyopet SA. The product line was discontinued in the 1960s due to negative connotations with the words toy and pet. During the 1960s Toyota opened a new research and development facility as well as establishing a prominent presence in Thailand. During this time Toyota also celebrated the production of its 10 millionth model. In 1982 the Toyota Motor Sales and Toyota Motor Company formed a merger to become one company, the Toyota Motor Corporation. Following this the company entered into a joint venture with General Motors called the New United...
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...auto industry, and General Motors? General Motors (GM) has suffered different threats and difficulties that have put in risk the continuity of its production. Before the year 2000, GM has been going through different production, financial, and development problems. Wagoner has tried in different ways to address each problem in order to make GM more successful. Unfortunately GM had high losses that have made it very difficult to solve those problems. All this is due to a very competitive environment in each there were different forces that affect the development of the firm. According to Porter’s Five-Forces Model of the Industry, there are five aspects to analyze, the threat of new entrants, the bargaining power of buyers, the bargaining power of suppliers, the threat of substitute products and services, and the intensity of rivalry among competitors in an industry. First, the threat of new entrants highly affected the firm. GM has so many divisions and units which made the firm weak in its integration. GM had 27 different units within the firm that purchase parts that made it difficult to achieve economies of scale. All those units worked independently and do not contribute each other. In other to solve that, Wagoner started working to integrate each unit, especially overseas. Also, he took the decision to reduce the number of units and divisions which helps to integrate a lower number of divisions. In addition, GM decided to change its products line. One way was reducing...
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...INDUSTRY PROFILE Fast Moving Consumer Goods (FMCG) goods are all consumable items (other than groceries/pulses) that one needs to buy at regular intervals. These are items which are used daily, and so have a quick rate of consumption, and a high return. FMCG can broadly be categorized into three segments which are: 1. Household items as soaps, detergents, household accessories, etc, 2. Personal care items as shampoos, toothpaste, shaving products, etc and finally 3. Food and Beverages as snacks, processed foods, tea, coffee, edible oils, soft drinks etc. Global leaders in the FMCG segment are Nestlé, ITC, Hindustan Unilever Limited, Reckitt Benckiser, Unilever, Procter & Gamble, Cadbury India Coca-Cola, Carlsberg, Kleenex, General Mills, Pepsi, Gillette, Nirma etc. Strengths: 1. Low operational costs 2. Presence of established distribution networks in both urban and rural areas 3. Presence of well-known brands in FMCG sector Opportunities: 1. Untapped rural market 2. Rising income levels, i.e. increase in purchasing power of consumers 3. Large domestic market- a population of over one billion 4. Export potential 5. High consumer goods spending Weaknesses: 1. Lowers cope of investing in technology and achieving economies of scale, especially in small sectors 2. Low exports levels 3."Me-too" products, which illegally mimic the labels of the established brands. These products narrow the scope of FMCG products in rural and semi-urban market. Threats: 1. Removal...
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