Carzon, Monique Angelica C.

July 25, 2016

Paz, Jedrick Vonn Q.

MK4A

SECTOR
Consumer Durables

INDUSTRY
Motor Vehicles

MARKET CAP
$49.3B

General Motors Co. engages in the designing, manufacturing, and selling of cars,
trucks, and automobile parts. General Motors (GM), one of the world's largest auto
manufacturers, makes cars and trucks, with well-known brands such as Buick, Cadillac,
Chevrolet, and GMC. The company was founded by William C. Durant on September 16,
1908 and is headquartered in Detroit, MI.
Top Executives
Mary Teresa Barra

Chairman & Chief Executive Officer

Daniel Ammann

President

Charles K. Stevens

Chief Financial Officer & Executive Vice President

Randall D. Mott

Chief Information Officer & Senior Vice President

Jeffrey A. Taylor

Chief Compliance Officer & Deputy General Counsel

Formed in 1908, General Motors was the world's largest carmaker between 1931

and 2008.
GM filed for bankruptcy protection on June 1, 2009. In the bankruptcy petition,

GM claimed slightly over $82 billion in assets and nearly $173 billion in debts.
GM's failure of leadership is astounding and ironic given its early history as an

innovator, says HBS professor Nancy Koehn.

GM faces a unique opportunity to retool itself for the 21st century, says visiting
scholar Daniel Heller. Meanwhile, the U.S. government administration is embarking
on an interesting experiment in political economy, according to professor Joseph
Bower.

Along with GM co-founder Charles Stewart Mott, Durant acquired Oldsmobile.

The pair also consolidated several other motorcar companies including Cadillac, Elmore
and Oakland. In 1909, GM purchased the precursors of GMC Truck: the Reliance Motor
Truck Company and the Rapid Motor Vehicle Company.
The next decade was filled with ups and downs. After briefly losing control of GM,
Durant started the Chevrolet Motor Car Company. Shortly after Durants removal from
management, GM relocated its headquarters to Detroit and Alfred P. Sloan, Jr. took his
place. GM also created the Pontiac division, and this led to the demise of the Oakland
brand. Thanks to Sloans leadership, GM became the most dominant figure in American
car manufacturing.

WHAT WENT WRONG?

In an article written by Donald Cooper MBA he stated up to 3 factors as to what could
have went wrong in General Motors even though they were at their prime for years.
Factor #1: GM designed and produced 2nd rate vehicles for many years while the
Japanese, Germans and then Koreans made vehicles that were simply better and more
desirable. So, they and their Detroit buddies offered an endless series of big cash rebates
to bribe the unwilling into buying the unwanted.
By the time that GM were creating decent cars that were on par with their competitors,
their brand were so tarnished already that their customers had completely lost faith in
them and it will take many years to take their reputation back. And can GM hang on for
that long to take their customers back?
Factor #2: GM failed to develop a good relationship with their production employees
over the years and then, at contract negotiating time, they paid the price. They ended up
paying wages, pensions and benefits that no company could afford and, because of the

poisonous, adversarial relationship with employees, they had to deal with a militant union
that made it impossible to manage production effectively.
Maintaining a good relationship with your employees is a vital point to make your
company function effectively. And of course, if your production employees feel that you
dont value them as much as you should, then their work would be below satisfactory.
GM paid the price dearly and they lost a good deal of money just by not maintaining
good relationship with their production employees.
Factor #3: The third factor is the supreme arrogance and incompetence of companies like
GMcompanies that are run by people who are out of touch with reality or who lack the
courage to do what needs to be done. GM has been losing market share for years and did
nothing to fix their fundamental problems in the belief that they are simply too big and
too important to fail.
GM grew overconfident that just because they were doing good that they wouldnt fail.
They were wrong. The fact that thet were losing market share and they did nothing
reflects the way that they think. GM thinks that by ignoring the problem ahead of them
and just by simply focusing on the fact that their products are on top then their problems
would fix themselves. They grew arrogant and overconfident that by the time they
acknowledged their mistakes, it was simply too late for them to right their wrongs. And
they suffered the price very dearly for it became the cause of their downfall.
Other reasons behind General Motors downfall:

GM maintained too many divisions and products that lookalike too much
They didnt cut off production much during the economic crisis
Unsustainable strategies
Pension liabilities and health-care issues
All these practices resulted into GM having a total of $172 billion liabilities
Loss of market focus across the many different portfolio levels in the company
Oil prices; cars made by GM are traditionally not of those with low gasoline
consumption (This could be highlighted as another example of rigidity of GM and
unwillingness to accept new trends and to respond to market needs).

GMs financial metrics have focused on growing market share and revenue, rather

than on creating and sustaining positive net cash flow.

General Motors is running out of cash, desperately seeking government support
and considering bankruptcy.

CORPORATE GOVERNANCE PROBLEMS

For over 100 years, General Motors played a huge role in the global auto industry.
Then suddenly, General Motors was in a downfall. Was it the recession? Was it the
competition or was it the poor Corporate Governance?
GMs problems can be traced back to its roots, when founder, William Durant recklessly
bought 39 companies that nearly brought them into bankruptcy in the early 1920s. In
1940, GM introduced policies such as free health care and substantial pensions.
However, the not-so-good period for General Motors was during 1981-1990,
under the leadership of Roger Smith. First, he failed in reorganizing GMs
administration. Second, the failed attempts in turning the companys business units into
big-car and small-car division. Another is the fact that Japanese companies were able to
offer high quality cars at a much cheaper price. The Board mostly consisted of Smiths
close friends rather than people who could actually make the company better. The culture
of an open and frank debate between board members did not exist.
At the time of its Bankruptcy, the CEO was Richard Wagoner and was named as
the man who lost GM. He didnt learn from the mistakes that Smith did but instead, he
just repeated the same mistakes. In short, General Motors was run by a spineless board.
Improper corporate governance rules set by GM caused its downfall; first of all, it was
the corporate culture as mentioned by Canis et al. (2010) or by Monks & Minow (2008):
...the company was managed like an institution. It was highly risk-averse,
chronically slow to change, endlessly bureaucratic, and contemptuous of
competition. General Motors produced inefficient cars (in terms of requirements on

consumption) that did not match to the demand of customers after year 2000. This was
caused partly by the high self-confidence of the top management.

Recommendations:

General Motors must differentiate their products so that customers can get a sense

of value-added
Create/Change the organization that will make the company more flexible to be

able to create a right product for the right market

Key processes such as R&D, Marketing and Human Resources should be

centralized to achieve consistency

Coordination amongst divisions
Begin to phase-out brands that are no longer generating profit
Reassess the approach to Corporate Governance
Too many processes are centralized at the corporate level; start with
decentralization but strive for a more coherent working environment

INNOVATIONS OF GENERAL MOTORS

General Motors has made plenty of innovations, especially during their prime
years. Some articles even say that their innovations are 3 generations advanced. In the
year 1986, their electronics developed for Lotus Active Suspension Technology. In an
article written by Ronald W. Cox, Delco Electronics, a subsidiary of GM Hughes
Electronics, provided CPC Engineering with prototype active suspension electronic
control modules during 1986.
In early 1987, CPC Engineering established a program to evaluate the technology
by building a fleet of 50 active suspension Corvettes with the ZR-1 32-valve engine.
Instrumentation for this program was initially proposed to be the vehicle qualified Buick
Touchscreen CRT system developed for the 1986 model year Riviera and Reatta, but the
vehicle engineers preferred to have the instrumentation on their new laptops. This was the
way motorsports instrumentation was developed, so DSO quickly developed the required
instrumentation to communicate on the vehicles data bus and the CRT idea was scrapped.

In 1972, General Motors made the First Automotive Brake System (ABS).
Production hardware and support was provided by the component divisions: Delco
Moraine (brake pressure modulator),Delco Electronics (controller), Delco Remy
(solenoid valves) and Packard Electric (wiring harness). This initial offering of ABS,
however, started what would become a significant industry penetration of digitally
electronic controlled ABS in the 80s & 90s and it enabled the next generation of braking
sophistication: stability control systems of the 2000s.
In 1973 a project was initiated to develop a vehicle computer using a
microprocessor. The effort was executed at the Electronic Control Systems Department
within the GM Engineering Staff. This ECS Department was created in 1971 by Trevor
O. Jones under the directive of Edward Cole to advance the utilization of electronics in
automobiles. The algorithms and interface circuitry used in these projects provided a
good knowledge base for this microprocessor specification. By the early 80s,
microprocessors were integrated into production vehicle systems. And their biggest event
yet happened in 1971 when General Motors made the 1 st car that the Apolo 15 drove on
the moon. These are only a handful of their innovations over the years. What makes these
innovations unique are the fact that it became a baseline for other car companies to
follow for future generations of car innovation.

PRACTICAL LEARNINGS/ CASE LEARNINGS

Problems denied and solutions delayed will result in painful and costly days of
reckoning
Never resist change
In corporate governance, the right people is better than the right structure
All stakeholders must work together to make GM's bankruptcy filing a comma

rather than a period in the storied history of this American corporate icon
The most important point for anyone in management to learn and remember is

just who is the customer.

Lose sight of the customer and you lose sight of the future.

Sources:
money.cnn.com General Motors Co (Company Description)
Access: <http://money.cnn.com/quote/profile/profile.html?symb=GM>
watchmojo.com The History of General Motors: From Buick, Cadillac and Pontiac to
Chevrolet (Video Script)
Access: <http://www.watchmojo.com/index.php?id=9956>
bobmaconbusiness.com Management Lessons to be Learned from the Failure of General
Motors. 2009, April 6
Access: <http://bobmaconbusiness.com/?p=230>
hbswk.hbs.edu GM: What Went Wrong and Whats Next. 2009, June 15
Access:< http://hbswk.hbs.edu/item/gm-what-went-wrong-and-whats-next>
Dshort.com. Weekly U.S. Retail Gasoline Prices Since 2000 [online]. 2009, June 4 [cit.
2012-04-28]. Access: <http://dshort.com/inflation/headline-coreCPI.html?gasoline-crudesince-2000>.