General Motors Business Strategy
Matthew Norton
Background
General Motors Corporation has been in business for 100 years, has produced nearly 450 million vehicles globally, and operates in virtually every country in the world. While GM has recently enjoyed rapidly growing sales and revenues outside the United States, the U.S. remains the company‘s largest single market. The auto industry today remains one of America's top employers with 1 in 10 Americans working in the industry. GM is also one of the largest purchasers of U.S. steel, aluminum, iron, copper, plastics, rubber, and electronic and computer chips. U.S. auto sales across all manufacturers, foreign and domestic have declined by more than 30% which is the steepest decline in 50 years. These major economic shifts demand a fundamental change in the way we do business at General Motors.
Vision
Recent economic conditions have reminded us at GM that the status quo is no longer enough to remain America's top automobile brand. This recent crisis has forced us to look into the future of the auto industry and contemplate what place General Motor's will have in this rapidly evolving automobile market. Our vision is a streamlined brand that represents quality and fuel efficiency through innovative design with the utmost respect for quality. GM must appeal to the modern day environmentally friendly and economical American citizen in order to regain the trust and confidence we once enjoyed. Through the rebuilding and strengthening of our core business then we can successfully expand not only domestically but multi nationally, then we can share our vision of the new and improved General Motors not only with America but throughout the world.
Strategy
Brand Re-Structuring
Over the next five years GM will be focusing on restructuring of our brand while focusing on our core business. Chevrolet, Cadillac and Buick will remain at the core of our business. Other brands such as Saab, Saturn and Hummer will either be sold or closed. This decision is based on sales statistics that are lagging in our domestic market. Saab and Saturn sales lag behind throughout the board and introducing new models and re branding of these franchises this late in the game will only push our break even point further rather than having a positive impact on the bottom line. Hummer doesn't fit with GM's strategy of fuel efficiency and sustainability but accentuates a lifestyle of excess that doesn't promote the green initiative. Although the brand is still profitable today it's viability for the future is in question.
The youth demographic is increasing rapidly, over 3 Billion People will be Between 15 and 44 In 2020. This statistic emphasizes the need to recognize the needs of todays youth and cater that need through vehicles with options and features that appeal to that market. Pontiac will fill this market niche and
will cater to the increasing youth demographic offering entry to mid level vehicles such as the G5, G6, Grand Prix and Grand Am. This will effectively reduce the number of SKU's thereby reducing manufacturing and overhead costs. With this brand restructuring will also come a significant number of GM dealer closings to further reflect cost cutting initiatives.
Plan2000 2004 2008 2013
Total Nameplates 51 63 48 40
GM Dealer Count 8,138 7,497 6,450 4,500
Fuel Efficiency
Scientific research on the effects of global warming and green technology have pushed industries across the board to become more sustainable and environmentally friendly in their practices. This new environmental initiative isn't only forcing industry to evolve but the consumer as well. This is reflected throughout the automobile industry with new product lines that offer fuel efficient choices to consumers including electric, hybrid and FLEX fueled automobiles. Coupled with the average price of oil spiking over recent years fuel efficiency and environmentally conscious automobiles have been top priority for consumers. Many foreign brands have been industry leaders in fuel efficiency and General Motors has been forced to play catch up. But over the past five years we have more than doubled our models that can average 30mpg or more. And in the next five years we plan to increase our fuel efficiency capabilities through our Flex-Fueled cars, according to our projections about 50% of the GM cars on the road will be Flex-Fueled.
Plan2000 2004 2008 2013
Car Fleet Average (MPG) 27.7 29 31.6 38
Truck Fleet Average (MPG) 21.0 21.8 24.6 28
Models >30 mpg (Highway) 8 8 20 25
Flex-Fuel (% of U.S. Sales) 2% 6% 17% 50%
Hybrid Models 0 2 6 18
Car/Crossover Nameplates 61% 52% 65% 75%
Cost Cutting
Through the reduction of GM brands and models we can gain significant cost
savings. With the sale of these brands will bring about many dealership closings that will be another cost reduction opportunity. But this is not enough to offset the lack liquidity and self sufficiency that General Motors currently faces. There needs to a reduction in salary expense here at GM.
Just as many consumers have had to tighten their wallets due to lay offs, pay cuts and bankruptcies GM executives will be asked to do the same. Upper level executive pay in the tens of millions of dollars plus stock options and bonuses should be a thing of the past. A more modest compensation model needs to be adopted. A maximum salary cap of $500,000 plus incentives should be implemented with the opportunity for increases based on key performance indicators.
Emerging Markets
Emerging markets such as China, India and Eastern Europe are increasing their buying power per capita therefore increasing their demand for automobiles. The Indian government supports a comprehensive system that will rapidly increase growth in the industry with the creation of the Automotive Mission Plan (AMP) and the Automotive Testing and R&D infrastructure project (NATRIP). Meanwhile the Chinese government is loosening financing restrictions in the automotive industry and allowing automotive dealers to create their own financing structures.
These rapidly expanding countries present an opportunity for GM to expand their global brand and become the center of these new markets. In order to capitalize on this global effort GM must establish manufacturing facilities which will not only create jobs in these countries but also establish favorable relationships with their governments.
Marketing and Promotion
GM must reestablish itself as America's brand. Commercials and advertisements in the US must promote this sentiment while also emphasizing the developments in sustainability and fuel efficiency. Throughout this marketing effort GM should be forthcoming with the American people about its plans for change perhaps even sharing specific strategies in restructuring and expanding its business. In our current economic condition the taxpayers are bearing much of the financial burden and a reassuring effort on the part of GM may go a long way in regaining its market share and consumer trust in the United States.