GM in Trouble


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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

Case Details:

Price:
Case Code : BSTR320 For delivery in electronic format: Rs. 400;
For delivery through courier (within India): Rs. 400 + Rs. 25 for Shipping & Handling Charges

Themes

Managing in Tough Times/ Slowdown in Global Automobile Industry
Case Length : 20 Pages
Period : 2008-2009
Pub Date : 2009
Teaching Note : Not Available
Organization : General Motors
Industry : Automobiles
Countries : US

Abstract:

The case examines the problems faced by GM, the second largest automaker in the world. These problems have brought the company at the verge of bankruptcy. The major reasons for the crisis at GM were its inability to bring out new vehicles that suit the needs of the customers, poor business strategy, and high costs associated with employee healthcare and pension benefits. These problems, coupled with global financial crisis and recession in the economies of several developed and developing countries adversely impacted the revenues of GM, which fell by 11% in 2008 as compared to 2007. In order to solve its liquidity crisis, GM approached the US Government for financial aid.

The company was granted US$ 13.4 billion through a series of federal loans. In December 2008, GM got a loan of US$ 4 billion. The company was required to fulfill specific targets that included reduction in debt, renegotiation of employee contract terms with the unions etc, before a stipulated time as a part of the loan package. If GM failed to meet these targets by the predetermined time, it had to repay the loan amount with interest within 30 days. On February 17, 2009, while submitting the 'Restructuring Plan,' GM asked for additional financial aid from the US government to carry on its operations after March 2009. The case concludes with a note on the challenges GM is likely to face in the near future if it is not able to meet the targets specified. It also debates on whether the US Government should have offered any financial aid to GM at all and let the company file bankruptcy.

Issues:


» Examine the flaws in GM's business strategy that led the company face major problems.

» Understand the reasons behind GM's financial crisis.

» Debate whether the US government was right in bailing out GM.
 
» Analyze the challenges faced by GM in the near future.

Contents:

  Page No.
GM Asks for Financial Aid 1
About GM 2
GM - Losing Market Share 3
Other Problems 4
What Went Wrong? 7
Financial Aid for GM? 10
The Trouble Continues... 13
Exhibits 14

Keywords:

GM Corporation, Rick Wagoner, United Autoworkers Union, Pension Liabilities, Healthcare Costs, Global Financial Crisis, Financial Aid, Restructuring Plan, Delphi, US Bankruptcy Code, Market Share, Special Attrition Program, Reorganization, Auto Task Force, Financial Performance, Restructuring Targets, VEBA, Secured Term Loan Facility

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