(Solved): Provide recommendations and action plan of the General Motors Case Study. GENERAL MOTORS IN 2017 ...

Provide recommendations and action plan of the General Motors Case Study.

GENERAL MOTORS IN $$2017^{?}$$ On February 14, 2017, Mary T. Barra, the CEO of General has acquired Cruise Automation which has built a comMotors, floated the possibility that the company could exit plex array of software and hardware that uses, artificial the large but troubled European market by selling its chroni- intelligence to pilot a car. cally unprofitable Opel unit to the French maker of Peugeot By making these moves, GM is constructing a portfolio and Citroen cars. The sale would free the firm from persis- of assets that are dedicated to disrupting its own core busitent losses in Europe and fulfill pledges by Barra to improwe ness from within. Barra is keenly aware that GM's 223,000 overall profit margins and increase returns to shareholders. employees will have to behave differently for its future plans Shedding Opel would reduce GM's wolume by 10 percent to succeed. She must replace a culture of blame and bureauand knock the leading U.S. automaker out of the chase to cracy with one driven by accountability and speed. "In this be the top seller globally, a spot it had owned until recently. area of rapid transformation, you have to have a culture Under Barra, the firm had been dismantling unprofitable that's agile," she said. "We still have a lot of work to do."1 operations. which included abandoning Russis and certain Asian markets. Moving through Bankruptcy Industry analysts expocted that Barra, who had worked GM has fallen from its dominant position when it held almost for GM her entire career, would let the firm relapse into 50 percent of the U.S. market for automobiles. A succession the arrogance. complacency, and denial that plunged it into of CEOs over the years failed to halt its decline in spite of bankruptcy in 2009 . Soon after she assumed the helm of their resolve to turn things around. When Richard Wagoner GM in January 2014, Barra had to deal with a devastating took over in 2000, he carricd out three major restructurings, ignition switch flaw that was tied to 139 deaths and that climinating dozens of plants, tens of thousands of jobs, and eventually resulted in $$\$2.1$$ billion in fines, lawsuit settle- jettisoning hundreds of dealers. In spite of these efforts, GM ments, and recall costs. Barra has managed to avoid any sig- announced a loss of $$\$30.9$$ billion dollars for 2008 , amountnificant effect on the firm's reputation from the bankruptcy ing to a staggering $$\$50$$ a share. The firm had not managed and the safety issues. Over the past three years, GM has to post a profit since 2004, running up cumulative losses of shown considerable growth in its net income, although its over $$\$82$$ billion between 2005 and 2009 . Wagoner eventually stock has been stuck below the IPO price of $$\$33$$ per share began to run short of funds and turned to the U.S. governof 2010 (see Exhibits 1 to 3). ment for loans in order to survive. The Obama administra- Barra has been preparing GM to be a formidable player tion demanded his resignation for its support. in the future. She has pushed the firm to be more involved Wagoner was replaced on an interim basis by Frederick in new developments, such as electric vehicles, ride sharing. A. Henderson, who had been president and chief operatand driverless cars. When the firm launched its first hybrid ing officer of the firm since 2008 . Under Henderson, the car, the Volt, in 2010, it was significantly lageing behind all firm was asked to negotiate with bondholders and the other competitors in terms of investing into emerging teeht union for further concessions in order to reduce its bloated nologies. Nevertheless. Barra claims that it was an impor- cost structure. Unable to reach any agreement, the firm tant first step in acknowledging where GM necded to go. announced in late July 2009 that it must seek Chapter 11 Since then, GM has launched the new all-electric bankruptcy protection. Under the terms of the bankruptcy Bolt, which promises an almost 240-mile range between protection, GM was able to wipe out a big chunk of its debt, charges for a price of $$\$30,000$$ after federal tax credits. reducing it from over $$\$46$$ billion before the filing to around It hais mowed quickly to beat Tesla's new budget-priced $$\$17$$ billion afterward, saving about $$\$1$$ billion a year in Model 3 to market. In January 2016, GM announced a interest payments. The U.S. governmeat agreed to invest $$\$500$$ million investment in Lyft. the country's second another $$\$30$$ billion into the firm, in addition to the $$\$20$$ billargest ride-share service. It has subsequently worked with lion it had already contributed, in exchange for 61 percent Lyft to develop a program which allows Lyft driwers in of stock in the new GM. seven big cities to rent GM cars at a discount. The firm Shortly after the bankruptcy flling. changes were made to the boand of directors and there was a shake-up of the ranks of GM's senior management. The new board was Copyriqu w w 2017 Jamal shamsit and Alan B. Ehantr. to investigate GM in early 2009. They were particularly FXHIBIT 1 Consolidated Income Staternents (in millions of dollars) EXHIBIT 2 Consolidated Balance Sheets (in millions of dollars) EXHIBIT 2 Current Liabilities Commitments and contingencies Equity Common stock, \$0.101 par value Additional paid-in capital Retained earnings Accurnulated other comprehensive loss Total stockholders' equity Noncontralling imterests Total Equity Total Llabilities and Equity \begin{tabular}{rrr} 15 & 15 \\ 26,983 & 27,607 \\ \hline 26,168 & 20,285 \\ \hline 9,330$$)$$ & 18,0361 \\ \hline 43,836 & 39,871 \\ \hline 239 \\ \hline 44,075 & 452 \\ \hline$$\$221,690$$ & 40,323 \\ \hline \end{tabular} source. GM loK repart. C122 CASE 18 : GENERAL MOTORS IN 2017 Source: GaM 15F repurt. astonished by the emphasis on past glories and the com- Since it has cut down on its brands, GM has been mitment to the status quo they had found to be quite wide- working on revamping its remaining lineup of cars. The spread among the firm's management ranks. "Those values firm has been able to successfilly reinvent Chevrolet as a were driven from the top on down," said Rob Kleinbaum, a global mass-market brand, with over 60 pereent of its sales former GM executive and consultant. "And anybody inside now coming from outside the U.S. Recent sales have been who protested that attitude was buried."2 driven by the new Cruze and the plug-in hybrid-Voll. The Over the following year, GM was led by two different Volt family of vehicles now ranks as one of the world's leadboard members. Edward E. Whitacre, Jr., ran the firm ing hybrids. GM is expecting to build upon this success for about a year before being replaced by Dan Ackerson. with the new Bolt all-electric subcompact car, which can Ackerson had been appointed by the U.S. government as run for almost 230 miles on a single charge. An executive a board member during GM's bankruptey. A no-nonsense explained the motivation behind pushing to develop cars former navy officer, Ackerson began to address the various that move away from a reliance on fuel: "We wanted to problems that continued to plague the firm. There was a prove we could do it." strong consensws among the executives that the company GM has also been focusing on strengthening its more was beginning to change its approach to its business. upscale brands such as Buick and Cadillac. Buick, the oldShortly after he took over, Ackerson wrote in an internal est active automobile brand in the U.S., caters to a shrinkmemo: "Our results show that we are changing the com- ing population of people over 65 . Over the last couple pany so we never go down that path again. $${}^{?3}$$ of years, the firm has, worked on updating the brand by In January 2014, GM was finally able to move past sticking to its image of "refined luxury" but moving away the bankruptcy. The government-appointed Ackerson was from being regarded as a living foom on wheels. GM has replaced by Barra, who had worked her way up within the tried to accomplish this by adding new models such as the firm, and became the first woman to ever run a big auto- Casada and the Envision designed to attract a younger, mobile company. She had been a rankand-file engineer, a performance-oriented customer. In spite of these efforts. plant manager, the head of corporate human resources and China has become the major market for Buick, which most recently, the senior exccutive oversecing all of GM's contributes as much as 80 percent of its sales. Buick is no global product development. Barra's appointment eame on longer offered in most other markets other than the U.S.. the heels of the sale of the last shares that the U.S. govern- Canada, and Mexico (sce Exhibits 4 to 6 ). ment held in the firm, finally making it free of its bank- Finally. GM has separated its Cadillac laxury brand ruptcy obligations. "This is truly the next chapter in GM's from the others and relocated its headquarters to the recovery and turnaround history." Barra told employees trendy SoHo area of New York City. The firm hired Johan upon her appointment. "Andl I am proud to be a part of it." de Nysschen away from Audi to manage the brand. De Nysschen pushed for the change, as he believed that the Focusing on Fewer Birands marketing and sales departments will be more in touch with One of the issues that GM had wrestlled with for years was their target customers in super-fashionable SoHo rather the number of brands of vehicles that it offered. For years. than in Detroit. GM earmarked roughly $$\$12$$ million for the firm had built its position of dominance by offering cars developing new Cadillac models in order to compete with that were designed for different customers by separate divi- the elite class of top-level luxury cars. "It's going to take tresions. Each of these divisions came to represent a distinct mendous time and money." said. Uwe Ellinghaus, Cadillac's nameplate or brand. Its extensive brand lineup had long energetic chief marketing officer. "There's a lot of cultural been GM's primary weapon in beating back both domestic incrtia behind Cadillac, and there's a huge amount of comand foneign rivals. But as the firm's market share began to petition coming from a German auto industry that's getting decline, it became difficult to design and market cars under cven more aggressive." "7 several brands. In order to cut costs, GM began to share designs and parts across divisions, leading to some loss of Revamping Product Development distinctiveness among the different brands. GM is trying to get all of the functional areas to work Analysts had been questioning for many years GM's together more closely throughout the product development decision to stick with as many as cight U.S. brands, with the process. In the past, even if a bold design made it off the recent addition of Hummer. The decision to carry so many drawing board, it had little chance of surviving as it was brands placed considerable strain on GM's efforts to revamp handled over to marketing, then passed to engineering, and its product line on a regular basis. The firm agreed to cut out finally sent to manufacturing. In a concentrated effort to four of its brands, Pontiac, Saturn, Saab, and Hummer, when wean the GM culture away from a focus on engineering it was foroed to turn to the U.S. government for funding to processes, the firm is pushing for designers to get more stay afloat. A. Andrew Shapiro, an analyst, believes that GM involved with the development process and for engincers to should have started to think seriously about cutting back on find ways to stick with the original car design. its car divisions during the 1980 s. "There are always short- Another problem that has plagued GM's product develterm reasons for not doing something "' commented Shapiro." opment process has been the lack of standardization of C124 CASE $$18=$$ GENERAL. MOTORS IN 2017 "platforms" on whieh the firm has built its cars. A platform The firm has assigned engineersi to work in car dealeris the basic underpinnings of a wehicle, and building mul- ships to learm more about | What customers want and need tiple vehicles on a single platform redwees. development in their cars and trucks. And it has encouraged everyone and production costs. In India, for example, GM has been involved with the design of new wehicles to raise concerns producing seven car models using as many as six different during the development process and to take steps to hold underlying platforms, resulting in considerable inefficien- back a new model in order to make changes to improve its cies. Executives admit that the firm has lagged behind its chances of success, Sannee the bankruptcy, GM has been tryt rivals and is only now trying to cut the number of platforms. Ing to reduce their reliance on sales incentives to sell cars. down to 14 by 2018, compared to 30 in 2010 . It is also plan- At the same time. GM has also been attempting to roll ning to cut down to 12 engine families and eventually just out new models fastet by making changes to its cumber 10 , compared to 20 a few years ago. some decision-making process, Under the old system, any EXHIBIT 5 Income by Operating Regions (\$ millions) EXHIBIT 6 GM Global and Regional Market Share product decisions would be reviewed by as many as 70 Questions were being raised about the delay of several executives, often taking months for a decision to wind its years in recalling these vehicles in spite of knowledge way through a series of committees. The firm has reduced of a faulty ignition switch that could cause these cars to the number of executives overseeing a vehicle program and shut off and disable the airbags. In 2004 , engineers had come up with a new system where all product decisions are suggested a fix, but executives decided against it because made in a single weekly meeting that is run by the top man- of potential delays and cost overruns in production. GM agement team. This has led to mueh faster decisions. finally decided to move only after the reports of accidents Responding to Safety Concerns that had led to deaths and injuries could no longer be Responding to Safety Concerns ignored. This was particularly embarrassing for the firm Even as. Barra was working on making $$GM$$ more effi- as $$GM$$ had developed the Cobalt to show that it was no cient, GM executives decided that a recall of the 619,000 longer cutting corners and was capable of making comChevrolet Cobalts and Pontiac G5s was necessary. petitive small cars. In testimony before a subcommittec of the House Maven. A Zipear-like offering. Maven taps into another Committee on Energy and Commerce, Barra acknowl- possible future of mobility: replacing ownership with sharedged that the safety problems resulted from decp ing. This start-up within GM, which has features that are underlying problems with the GM culture. A report was not available on Zipcar, lays the groundwork for a possible released by Anthony R. Valukas, a former U.S. attorney future when GM owns and operates a flect of its own autonwhom the firm hired to conduct a three-month investiga- omous cars that could be tapped for ride-sharing. tion of the decision to ignore the problems, with the igni- Product chief Mark Reuss believes that with its acquition switch. The findings indicated that all the issues that sition of Cruisc. GM is well positioned to integrate selfarose were passed through a number of committees with- driving technology into its cars. Over the last couple of out being resolved. This was typical of the organization. years, GM has already begun to incorporate aspects of selfFurthermore, no minutes were taken of any of the meet- driving technology into a few of its models, including saftings to indicate who was responsible or accountable for ware that alerts drivers if they veer out of their lane or stops any decisions that were taken. the car if it detects an imminent colläsion. Talking about Välukus concluded that |l| shafting responsibulity for the challenges of this technology in cars, Reuss said: "The problems back and forth was deap in the firm 3. DNA. He piece that is not well understood outside of the automotive referred to a GM salute that involved a crossing of arms and industry is how hard it is to take technology and integrate it pointing outward toward others. indicating that responsibit - into a car. It seems like you should be able to layer it in and ity always belongs to soumeone else.. In particular. Valikus have it work and that would be great." 10 found that employees at GM were actually given formal Barna is aware that none of these moves will matter training about how to awoid accountability in documenting unless GM coatinues to make changes in its culfure. She any salety issues. They were told to avoid using words such has launched initiatives across the firm to push GM in a as "problem" of "defect" and replacing them with softer new dirsction. These range from a program called GM words such as "safety" or "eondition." "The story of the 2020 which builds cross-funetional "eo-labs" to address all Cobalt is one of a series of individual and organizational kinds to problems to a year-long "transformational leaderfailures that led to devastating consequences," Valukus ship" course for development of senior executives. With her stated to a committee hearing. $${}^{\text{. }}$$. vision of GM's revved-up culture. Barra tells cveryone at Under Barra, GM executives have moned more quickly GM that best efforts alone will not be cnough. "Are you to respond to the safety problems. The firm dismissed doing what you can?" she asks. "Or are you doing what it 15 enaployees, including a vice president for regulatory takes to win? affairs and several corporate lawyers, and disciplined others. GM has appointed a new global head of vehicle safety and named a new vice president in charge of global pnoduct ENDNOTES integrity. The company has more than doubled to 55 a team 1. Rick Tetzeli. The Nccelerators. Fast Campaney: Navember 2016, p. 72 of safety investigators that work within engineering. Funally, 2. Bill Vlasic. Cubture Shock: G.M. Surupgles in Shed a Legendry it hired a compensation cxpert to cxamine claims and make Bureascrucy. New Nark Thies, Novemher 13, 2009, p. B4. sash settlements for those that either died or were injured 3. Michaed J. De Ia Merced 2 Bunl Vhasic. U.S. to Shed Its Stake in as a result of accidents caused by the defective ignition Gitnenal Motors. Nre York Tinaen, December 21. 2012, p. B3. switch. "We ane a good company," Barra insisted. "But we 4. Bill Vlasic. Company Woman Hecones New G.M. Chief. Iasernanianat san and must be mauch better. Now York Thaes, December 12, 2013, p. 1. 5. Micheline Maynard. A Painful Departare for Some G.M. Brands. Ner Jork Tinw, February 18, 2009, p. B4. Firing on All Cylinders? 6. Bill Vlasic. To Make Timy American Car, G.M. Also Shrinks Plant and Barra feels confident that the investments GM has been Whask. Now Van' Tiawes, July 13, 201L, p. Al9. making will yield results in the future. Not only is the Bolt 7. James B. Stewart. $$\mathrm{A}$$ Bid to Bring Back Thar Cadillac Swagger. Nor the first inexpensive long-range electric car on the road, it is York Times, Aprill 3, 2015, p. B2. 8. Bill Vlasic As Danielle Ivory. Ci.M. Yows to Address "Cultural also expected to function as the firm's platform for testing Problems' That Led to Deadly Recall Dellys fasruationad Yew York new models for ride-sharing and autonomous driving. Soon Thmer, June 19, 2014, p. th. after GM made an investment in Lyft, it also announced 9. I Dild. that it would launch a proprietary car-sharing service called 10. Fav Canpung, Noventher 2016, $$p$$. T4. 11. Itbid, 100.