Managing in Troubled Times Case Study

GM in 2005: Facing Challenges in North America

OR

Abstract:
In the face of intense competition from its Japanese rivals such as Toyota and Honda, GM was losing its market share in North America. Analysts pointed out a number of reasons for the downslide. GM’s health care benefit costs for existing employees and the legacy costs, in terms of pensions for retirees, were steadily increasing. Skyrocketing gasoline prices caused a decline in the demand for GM’s gas guzzling Sports Utility Vehicles (SUVs) and trucks. The share prices, which were more than US$80 even five years back, came down and were hovering around US$ 28 to US$ 30 on the New York Stock Exchange, by March 2005. In April 2005, GM posted a net loss of US$ 1.1 billion for the first quarter, the biggest quarterly loss since 1992, when the company almost went bankrupt. The Case discussed causes for the problems in detail and analysed the possibilities of GM’s turnaround.

Pedagogical Objectives:

• To understand the concept of generic competitive strategies
• To understand the structure of Auto manufacturing industry
• To analyse competitive strategies along with industry life cycle with reference to GM.

Keywords : General Motors; Automobile industry; Sports utility vehicle; Saturn; Hybrid vehicle; Automotive research; Business strategy; Toyota; Japanese automaker; Cost competitiveness; Managing in Troubled Times Case Study; Gasoline engine; Component supplier; Competitive edge; Mid-size segment; Production system