The Case of General Motors
Just one month after Chrysler filed for bankruptcy, General Motors (GM) followed, earning the “distinction” as the fourth largest bankruptcy case in U.S. history. Even $19.4 billion in federal help was not enough to keep the trouble automaker out of bankruptcy court, and the government has further pledged another $30 billion to help the company during its reorganization. A “new GM” is expected to emerge out of bankruptcy that will revolve around a mere four brands, Chevrolet, Cadillac, GMC and Buick, as well as a few of its overseas operations. In its wake, GM’s bankruptcy will have a major impact on a cross section of Americans. The move will result in the closure of numerous plants and dealerships, which means thousands…show more content… Some of them were caused by improper corporate governance rules set by GM, but the role of external influences that affected GM’s production after 2000 must be taken into account as well. 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 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 which was too ensured that the position of GM is everlasting. This assumption was proven as incorrect. The market position of General Motors before 2009 was dominant in many, but after 2000 GM’s vehicle production was stagnating globally. Together with the fact that the automotive market was stably growing it implies that General Motors was losing its positions on all important markets relatively to other automakers. In U.S., traditionally known as the core market, GM was selling less and less cars even since 2000 (The New York Times, 2009) and lost one third of its position, covering 28,1% share in 2000 and only 19,8% in 2009 (figures for cars and light trucks sales in U.S., Canis et al. 2010). From today’s point of view it could be surprising that GM still holds its leading position in…show more content… Five most important markets are US, China, Brazil, United Kingdom and Canada. U.S. market shares, passenger cars, trucks and crossovers. United States Securities and Exchange Commission Second argument touches the element of labour costs and connected expenses as health care insurance and pension funds, motivation programmes and other benefits paid to employees. American employees of GM are joined under UAW (United Auto Workers), very strong labour union, which negotiated in the past for many of the benefits. As seen that, the extent of these costs was unsustainable in long term, the estimated loss during years 2004 – 2007 caused by lay of motivation could have reached $50 billion (which is more than the profit of GM during 90’s). A great example of the costly heavy-handedness of production process is what mentioned Pfeffer & others (1998); the average time it took to GM to assemble a car was 46 hours, Ford needed 38 hours, while Toyota only 29 hours. The extra costs connected with health and pension insurance added to the cost of every car made in U.S. are quantified to be around $1500. In this light the backwardness of GM was just a natural development. GM was unable to rival neither the quality nor the efficiency of other market players,