Enterprise Risk management at General Motors

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Case Details:

Case Code : ERMT-027
Case Length : 09 Pages
Period : 2003
Pub Date : 2003
Teaching Note :Not Available
Organization : General Motors
Industry : Auto and Ancillaries
Countries : Global

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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.

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General Motors (GM), the world's #1 maker of cars and trucks, owned brands such as Buick, Cadillac, Chevrolet, GMC, Pontiac and Saab. GM also produced cars overseas through its Holden, Opel, and Vauxhall units. Other operations included Hughes Electronics, Allison Transmission (heavy-duty automatic transmissions), and GM Locomotive (locomotives, diesel engines).

GM also had stakes in Isuzu Motors, Fuji Heavy Industries (Subaru), Suzuki Motor, Fiat (Alfa Romeo, Lancia), and GM Daewoo Auto & Technology. Subsidiary, General Motors Acceptance Corporation (GMAC) provided financing.

In 2003, GM looked well placed to regain some of its market share in the US. 2002 marked the second consecutive year of increased US market share - a feat it had managed to achieve for the first time in 26 years. GM hoped to maintain this momentum by launching 30 new vehicle products in 2003 across its global markets.

Asia had emerged as an important market for GM. The company had purchased 20% stakes in Fuji Heavy Industries (Subaru) and Suzuki, and a 42% stake in South Korea's bankrupt GM Daewoo Auto & Technology Company (formerly Daewoo Motor) for $251 million.

GM finalized the Daewoo deal with partners Suzuki and Shanghai Automotive Industry Corp. GM hoped that Daewoo would help it to make inroads to the largely closed South Korean car market while creating new opportunities in China. Meanwhile, GM retooled its relationship with Isuzu Motors by writing off its 49% stake and infusing the troubled carmaker with $84 million in cash. The resulting recapitalization reduced GM's stake in Isuzu to 12%.

GM was also sharpening its business focus by spinning off non-core units. The company had spun off parts maker Delphi Corporation, and sold its defense unit (armored vehicles) to General Dynamics for $1.1 billion.

Rupert Murdoch's News Corporation had striked a deal to take control of GM's 20% stake in Hughes Electronics, which owned DIRECTV, for about $6.6 billion. In 2002, GM recorded revenues of $186,763.0 million and a net income of $1,736.0 million...

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