General Motors

Bryan Dickey
Jasmin Rush
Peter Crane
Robert Travieso
Richard Wagoner GM Chairman and Chief
Executive Officer

John M. Devine GM Vice Chairman and Chief

Financial Officer

Robert A. Lutz GM Vice Chairman, Global

Product Development
• Under Billy Durant’s leadership, General Motors Company is
organized on September 16, 1908

• Today, GM is recognized as the world’s largest automaker

• Global automotive sales leader since 1931

• Has manufacturing operations in 32 countries and its vehicles are

sold in 200 countries

• Currently, GM Dealers in the United States have sold 257,623 new

cars and trucks as of October and 445,555 of pre-owned cars
• Financial services: consumer vehicle financing, full service
leasing, dealer financing, car and truck extended service
contracts, residential and commercial mortgage services, and
vehicle and homeowners insurance
• Developing a portfolio of future options to internal
combustion engines

• Investing dedicated to improving cultural, economic,

educational, environmental, and social aspects of our
communities

• Supporting a strong and diverse base of K-12 education

programs, especially in science, mathematics, and
business
• Protecting human health, natural resources, and global
environment

• Improving vehicle safety for customers, passengers, and

other motorists

• Creating environmental, health, and safety reports

• Improving health, safety, diversity, wages, and benefits

• “North/South America Plant Quality Award” – J.D.
Power Quality Study– 2005

• “Supplier of the year” – Denso International America–

2004

• OnStar by GM receives the “Grand Enterprise Value

Award” – CIO Magazine
"The significant problems we face
cannot be solved at the same
level of thinking we were at when
we created them."

--Albert Einstein
• Company Recognition
• The number of brands
and brand recognition
• Committed workers
• Products like: OnStar and
XM Satellite Radio
• Corporate Responsibility
• The time GM has been
around
• Globally known and
located in 32 countries
• GM dealer locations
• The decline of market
share
• Health care costs
• Innovation of new
products
• Competition or lack there
of with China
• Too much invested in
SUV and Trucks
• Not enough Research
and Development
• New innovation can
compete with others
• Cut health-care costs
• Cut jobs and move
production overseas
• Shrink brand line
• Recapture market share
and be more competitive
with more money
concentrating on smaller
more fuel efficient cars
• The United Auto Workers union can hurt General Motors
if unhappy
• Cutting jobs or shutting down plants, and cutting health
care cuts could instigate a strike
• Delphi being a supplier who is already bankrupt, GM is
their former parent and could face up to $12 billion in
liabilities for Delphi
 Threat of New Entrants:
Low
Car manufacturing takes
extremely large amount of
capital to enter. To compete at
GMs level is next to impossible.

Intensity of Rivalry: Bargaining Power of

Bargaining Power of Suppliers:
Customers:
Very High
Moderate
High
GMs other divisions cannibalize
GM has the largest market share in
their own sales as well as all Tens of Millions of car buyers per
the US which could give it much
others. Each company will do year and over twenty companies
power over suppliers but it has not
what it takes to real in customers to choose from. Public is
used that and looks at suppliers
increasingly drawn in by costly
and their needs as equal.
incentives.

Threat of Substitutes:
Very High
GMs market share is continually
dropping. Most other car makers
offer higher quality and other
benefits. Many substitutes
available in the market
Porters Model illustrates the complexities of being
in the automobile manufacturing business.
Competition is fierce and substitutes abound.
Quality and brand image have an important
input into what consumers want to buy. With so
many high threats in this market an auto
manufacturer must be constantly be trying to be
better than its competitors in responding to
consumer demands. GM has failed in the last
20 years and is in turn losing market share.
 Star
Question
Mark

• Cars • SUVs
• Trucks

Dog
Cash Cow
 GM Operating Income

60,000

50,000

40,000
Dollars (mil.)

30,000
Revenue
Expenses
Income
20,000

10,000

-10,000
Sep-04 Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05
Date
 60,000

50,000

40,000

30,000 Revenue
Dollars (mil.)

Expenses
Income
Reduced Health Care
20,000 Income after savings

10,000

0
Sep-04 Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05

-10,000
Date
 Financial Perspective

Profit Margins

0.02

0.02

0.01

0.01

GM
0.00
Percent

FORD
1 CHRYSLER

(0.01)

(0.01)

(0.02)

(0.02)

(0.03)
1. Daimler Chrysler

2. Ford Motor Company

3. Toyota Motor Company

4. Volkswagen
 2004
Sales $193 Billion $16.2 $170.98 $175.48
Revenue Billion Billion Billion
Employees
At 2004
Year-end 324,000 37,000 384,723 324,864
• Development of passenger cars, light trucks, commercial
vehicles

• Operates as Mercedes Car group, Chrysler Group,

Commercial Vehicles, and Services

• Provides Financing to dealers for property, plant, and

equipment purchases, and vehicle inventory

• Strategic Partnerships with Mitsubishi Motors

Corporation, General Motors Corporation, BMW Group,
• Manufacture, distribute, finance, and rent vehicles and
equipment

• Brands include Mazda, Volvo, Jaguar, Land Rover,

• Operates as Automotive and Financial Services
• Automotive: Ford, Lincoln, Mercury brand vehicles
• Financial Services: Financing, leasing, and insurance

• Hertz Corporation: rents cars, light trucks, and

construction equipment
• Partners with Ups and New View
• Currently, operates 11 manufacturing plants in North
America

• Three additional facilities will open in Ontario,

Tennessee, and Texas

• By 2008, Toyota will have annual capacity to build 1.81

million cars and trucks

• Today, nearly two-thirds of all Toyota vehicles are built in

North America and sourced with parts from over 400
North American suppliers
• One of General Motors
greatest problems is how
good they are to not only
hourly workers, but
retired workers as well.
They must strike a deal
with the United Auto
Workers which allows
both parties to be happy
with the cuts needed in
health care costs to keep
from filing for bankruptcy.
• G.M. pays about $1,500 per
car assembled in the United
States for health care
• G.M. spends more on health
care than it spends on steel
• Provides health care to it’s
over 1 million employees,
retirees and their dependants
• Health care costs for 2005 will
increase to $5.6 billion from
$5.2 billion in 2004 (estimate)
• G.M. has lost nearly $4 billion
so far this year due to health-
care costs
• The largest private provider of
health care nationwide
• In 2002 G. M. spent $1.4
billion, or 31% of its total
health care expenditures on
prescription drugs
• The UAW doesn’t like to make
concessions on health care
benefits and pension plans
• Right now, retirees and active
workers pay no monthly premiums
and a small fraction of health care
costs
• General Motors and the United
Auto Workers union need to strike
a deal, 100% voter approved, that
will take off some of the costs
burden on GM and put a little
more on the workers and retirees
of GM by cutting long-term, and
hourly liabilities, and reduce health
care expenses by doing things like
using generic prescription drugs
when possible
Concessions must be made if UAW union workers
want to keep plants open and jobs occupied
• Some of General Motors recent problems are
uncontrollable. With prescription drugs increasing in
cost 15 to 20% per year, expenditures only go up. Also
the number of retirees due to the baby boomer
generation.
• Unions have power over companies they work for. Most
of what’s happening in GM is due to lack of cooperation
and understanding between the workers and General
Motors.
• If the UAW does not make large concessions to things
like wages and health care benefits, they won’t have jobs
at all because costs must be cut one way or another to
stay out of bankruptcy.
• Long-term health care liability
needs to be cut and GM needs to
save $20 billion just in the U.S.
Retirees need to be informed on
how to stay healthy, and generic
prescription drugs should be used
when possible. If not possible
only 50% will be paid for instead
of the whole price. GM pensions
of less than $7000 annually will
get health care free of charge, and
they will have to pay up $800
annually for families and $400 for
individual health care. Some
monthly premiums not covered.
• Hourly health care costs need
to be slashed by 30% to save
money by: implementing
health programs for workers at
work, threaten jobs if smoking
or obesity are problematic to
that worker, and creating a
membership at a local gym for
workers paid by GM to cut
down on trips to the doctor and
to keep employees healthy.
Also, forgo $1.50 an hour to
help retirees who will have to
pay more with the new plan.
1.) By December 1, 2005,
begin meetings and talks
between the UAW and
General Motors. Make
proposals that will need to
be voted on by 100% of
voters.
a.) Cut long-term health
care liability by $20 billion
b.) Cut its hourly health care
liability by 30%
c.) Save $5 billion annually
on health care expenses
2.) By April 1, 2006, start implementing these plans in health care
costs. Inform all employees and retirees of what HAS to happen to
stay in business. Direct calling and mailing to retirees and
employees must occur. Also, meetings at work for active employees
to know exactly what is going on.
3.) May 1, 2006 start mailing out health tips to retirees in pamphlets to
assist in healthier diets and exercise.
4.) May 1, 2006 have deal signed with Gold’s Gym, or Weight-
Watchers of America for active employees to be able learn about
dieting, eating, and a membership to workout when possible
5.) Provide a grace period or “trial run” to make sure all financial
calculations are correct on savings and evaluate plan for January 1,
2007.
6.) By the end of 2007 health care costs will be cut in half overall for
the year and only cost General Motors around $2.55 billion.
• The costs will be nothing compared to the
savings. With over 1 million employees and
retirees, costs will be significant however.
1.) $50,000 spent on food, space, and
presentations during the months of meetings
between UAW and GM in Detroit
2.) $3 million deal made with Weight-Watchers
and Gold’s Gym for employees health issues
3.) $5 million spent on mailing and calling to
inform workers and employees and
pamphlets on health
4.) A total of $10 million spent on research and
development of the plan, the financial
savings, the health ideas, and the pay for
those responsible of implementation
5.) The cost that some workers will quit because
of new standards, however, that would save
GM some money
• The UAW rejects new • The plan will work and GM
plan ideas will become more profitable
• GM must cut jobs or • Less money lost will lead to
close plants laying off more money put into solving
thousands because new other company problems
plan doesn’t work • More money dedicated to
the more fuel efficient R & D
• If health care to better compete with other
expenditures are not cut, auto makers
GM could go bankrupt • Share price will increase
• Workers could strike drastically and GM will re-
• GM goes out of business capture the market
percentage they once had
• GM will use their market share to bring suppliers in line
with their needs. We are suggesting that GM force their
suppliers to reduce prices and increase quality control.
With this increased leverage at each supplier costs will
come down and car sales will increase due to increased
consumer confidence. The goal will be to reduce their
manufacturing costs which will enable them to increase
revenues and profits. This strategy also suggests
greater transparency of suppliers financial situations to
prevent similar problems like Delphi.
• GM will notify all suppliers of this plan
on February 1, 2006.
• GM will evaluate each supplier
according to their “Total Value Promise,”
as well as the percentage reduction in
price.
• If quality is lacking suppliers dropped at
the end of each fiscal year.
• Suppliers evaluated on a quarterly
basis.
• Maintain “Total Value Promise” standard
and reduce price 1%, by 2008
• Reduce prices 5% by 2012.
• GM will hold meetings with suppliers at
the end of each fiscal year.
• Increased Sales
• Reduced costs
• Greater ability to estimate financials
• Increase Shareholder value
• Increase sales = Increase demand for
suppliers.
• Substantial amount of time to meet with
suppliers (>100k).
• Increased costs associated with Quality
Control evaluations (approx. 2 mil./yr.)
• Possible loss of suppliers.
• Hold Board Members and Upper
Management Responsible
• Turn GMs tech strategy from Follower to
Leader and look to the future
• Remake the Brand Image by focusing on
strengths and cutting weaknesses
• They must be held accountable for both
successes and failures
• Bureaucratic structure must change to
help decision making process
(decentralize decision making process)
• Incentivise and challenge management
• Change board to people who had turned
around failing companies
• No longer can GM survive being a tech
dinosaur
• Create a large centralized and well funded
R&D program to catch up and surpass
competitors immediately to have products
coming out by 1st quarter 2008
• Rush hybrid technology into a vehicle by
next model year
• Build back market share to over 30% by 2008
• Phase out sluggish brands by 2009
– Pontiac, Oldsmobile, and Buick (Ex. 13.1 in Book)
• More focus on brand specific vehicles
– No longer should every brand offer every type of
vehicle
• Destructive cannibalizing competition
• Too many models and platforms
• Vehicles all look the same to consumers
– Bring back exciting vehicles with quality, character,
and style
• Regain lost market share
• Better Corporate image
• Build up consumer confidence
• Fewer mistakes in the future
• Increased shareholder value
• Bottom line = More cars sold
• $2 Billion to R&D
department to get things
caught up quickly
• $200 million increase to
design budget to bring in
top designers for GMs
next generation models
•http://www.gm.com/
•http://www.cnn.com/2005/AUTOS/11/02/incentives.reut/index.html
•http://money.cnn.com/quote/quote.html?shownav=true&symb=GM
•http://www.msnbc.msn.com/id/8129876/
•http://www.msnbc.msn.com/id/7469954/
•http://online.wsj.com/article/SB113140909884990600.html?mod=us_bus
iness_whats_news
•http://online.wsj.com/article/SB113138258559290156.html?mod=us_bus
iness_whats_news
•http://finance.yahoo.com
•http://phx.corporate-ir.net/phoenix.zhtml
•www.valueline.com
•www.daimlerchrysler.com
•www.wsj.com