GM's Pension Fund Problems

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Case Details:

Case Code : HROB077
Case Length : 21 Pages
Period : 1995 - 2005
Pub. Date : 2006
Teaching Note :Not Available
Organization : GM
Industry : Automobile
Countries : US

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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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Background Note

In 1887, Ransom E. Olds started Olds Motor Vehicle Company, Inc., (Olds) with a capital of US$ 50,000 in Michigan and build the first Oldsmobile vehicle. In May 1903, David Dunbar Buick incorporated Buick Motor Company (Buick) and produced its first car in 1907.

By 1908, Olds, which had been selling 6,500 Oldsmobile vehicles per year since 1901, was being driven down by competition from Buick, Cadillac Automobile Company (Cadillac)13 and Oakland Motor Car Company (Oakland).14 In 1908, William Crapo Durant (Durant)15 started General Motors Company (GM) as a holding company for Buick. Later in the same year, Durant bought Olds. In 1909, GM bought Cadillac and Oakland. In 1910, the sales of motor vehicles dropped and many manufacturers exited the business. GM also sold some of its companies at a loss, and Durant was forced out of GM's management due to the company's financial problems. In 1911, Durant joined Chevrolet Motor Company (Chevrolet).16

By 1916, Chevrolet was making considerable profits and Durant traded Chevrolet shares to buy a majority stake (54.5%) in GM; through this move he became the President of GM. Meanwhile, GM started General Motor Truck Company and established General Motors Export Company to sell GM products outside the US and Canada.

In 1917, GM was incorporated to form General Motors Corporation in Delaware. In 1918, GM bought the operating assets of Chevrolet. In the same year, GM also started General Motors of Canada Limited and United Motors Corporation (UMC)17 was made a part of GM. During World War I (1914-1918), GM manufactured military vehicles. For the fiscal year 1919-20, GM sold two million cars through it financing body GMAC. In 1920, Durant resigned as President of GM and was replaced by Pierre S. du Pont. In 1924, GM established its assembly plant in Europe in Copenhagen as General Motors International A/S, to build and sell Chevrolets in Germany, Poland and Czechoslovakia. Between 1920 and 1930, GM expanded to countries like Australia, New Zealand, China, Japan, Germany, Argentina and Egypt...

Excerpts >>

13] Cadillac was founded by Henry M. Leland in Detroit in 1902, after Henry Ford moved away from Henry Ford Company. Cadillac was named after the French explorer Antoine Laumet de La Mothe, sieur de Cadillac who founded Detroit in 1701.

14] Oakland was founded in August 28, 1907 in Pontiac, Michigan by Edward M. Murphy. In 1909, GM initially acquired 50% stake in Oakland, but later in the same year acquired the company completely, after Murphy died. In 1932, the Oakland division was renamed Pontiac.

15] Durant (1861-1947) was the leading manufacturer of horse-drawn vehicles in 1890s in Michigan. He was the General Manager and president at Buick before starting GM.

16] Chevrolet was founded by Louis Chevrolet, William Little and Edwin Cambell in Detroit, Michigan in 1911.

17] UMC started in 1916 by Durant, consisted auto repair shops from five auto parts and accessories manufacturing companies such as Dayton Engineering Laboratories and Hyatt Roller Bearing. In 1919, UMC dissolved and the businesses under it continued operating under GM.


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