case study on general motors

7/28/2019 case study on General Motors

1/17

Submitted by:-

1. Vishal dhamja (087)2. Mayank Shukla (010)3. Babita Gawain (078)4. Viswajeet biswal (061)

GENERAL MOTORSTHE CHALLENGES OF GLOBAL COMPETITION

Case Study on


2/17

THE CASE 1980 to 1990, GM experiences for certain strategic

decision taken by Roger smith (CEO of GM)

The major strategic efforts were

A Joint ventures with Toyota ,

The development of a completely new car (Saturn) ,A major reconstructing of GMs five divisions ,

And the acquisition of the two high tech subsidiaries ,Electronic Data System (EDS) and Hughes Aircraft.

Large car seller (1989 sale $127 billion)in the worldbut low market share (one-fourth lower than it hadbeen at the beginning of the decade)

In 1990 , Roger smith (CEO of GM) was preparing to

retire from the chairmanship .


3/17

INTRODUCTION

The Joint Venture with Toyota (NUMMI) In 1983 , GM announced that it would participate in a 50- 50 joint venturewith Toyota to build 2 lakh small cars per year at a plant in FremontCalifornia .

GM hoped to learn the secretes of Japanese automating method , & Toyotawould gain experienced in operating facilities in the United states ,something it had never done in the past

The new company was called New United Motor Manufacturing Inc.(NUMMI)

1983-1996 time frame they targeted three complete care developmentcycles at the plant.

1st car, Toyota already produced and sold in japan , but would bemarketed in US under the Chevrolet Nova name plate.

Toyota would produce the drive train and several other components inJapan and would ship them to the NUMMI plant where stamping and


4/17

Cont in NUMMI plant, they used Japanese production and

management techniquesjust-in time-inventory system to minimize expense save space and increase quality by providing no parts stock-

piles the effects of defective components. Innovated way to manage and select the workforce. i.e.

training (production philosophies) and selection process (35hr screening)

But GM believed their traditional management philosophy Which assumed an adversarial relationship between

management and labor and Assumed an intimidation wasrequired to make an employees work .

Inefficient labor ( workers dont know their contribution inproduction)

By 1986 NUMMI was in operation and by 1987 it seemedto be a success.

Workers productivity had increased enough that onestudy estimated it would cost $750 more and take 50 %


5/17

Cont GM had applied ill-prepared or unwilling application which

learned at NUMMI to its other operations. GM rotated teams of managers through NUMMI prepared

training tapes and other instructional materials on the NUMMIconcepts

NUMMI trained managers that moved other GM divisionsgenerally found that their new ideas received an unfriendlyreception . Some left for job elsewhere

Though NUMMI was profitable in its first two years ofoperations, it lost approximately $100million in1988 .

Sales of the nova were weaker than expected and wereexpected to fall by 50000 units to about 150000 cars in 1988

The 1996 cutoff date was rapidly approaching and GM had yetto decide what to do with NUMMI work force when theoperations was disbanded.

1987, they had contact with United Auto Workers(UAW) forwork force .


6/17

THE SATURN : GM starts fromscratch

Same year 1983 (NUMMI project announced), GMannounced another innovative project: the Saturn car ,named after the rockets that propelled astronauts to themoon.

The Saturn would be the first new GM name plate since1918

Companies mission would be to market vehicles developedand manufactured in the united states that are worldleaders in quality cost, and customer satisfaction throughthe integration of people , technology and business

systems and to transfers knowledge and experiencethroughout GM .

The Saturn plant was fully automated and the mostadvanced robotic and automation technologies wouldassemble more of the car then ever before.

Highly computerized accounting and management systemwould make whole o eration a erless .


7/17

Cont

There would be no hourly workers ; instead workers would bepaid additional pay based on 80 percent of the nationalaverage autoworkers wage , with additional pay based on anincentive plan which rewarded good worker performance.

The saturn production workers would enjoy more autonomy

than workers at any other automakers plant. They wouldparticipate in the hiring process and would approve newadditions their team (Workers were organized into 165 teamsof ten employees each)

And they have authority to stop the entire line if problemdeveloped

The original plans called for a $5billion investment in theproject, which would begin producing 500000 importfightingcars at the new plant in spring hill Tennessee, in 1990

As the year passed the plans were scales back instead wascut back to 6000 new hires , only 3000 workers would be

employed. Project budget was cut back to $1.7 billion and its projected


8/17

Cont The cars made more expensive and larger than

originally envisioned. (high fixed cost)

1990, GM announced new products before( likethe X cars and J cars )that were supposed to beatthe Japanese at their own game and had fallenshort .

Some analyst stated that what saturn really hadto offer the corporation and If the car was amoney loser before it ever hit the showroom floor,then its value had to in the lessons thecorporation would learn by producing the car .

1989, Saturn project seemed redundant.


9/17

1984: GM Reorganizes In 1980s it was becoming evident to GMs top management that

the corporation s organization was an impediment to the kind ofadaptability that was required to respond to the rapid changes inthe global auto industry .since 1916 GM had been composed offive separate divisionsChevrolet , Pontiac, Buick, Oldsmobileand Cadillac that operated independently of one another .

Two other major divisions, fisher body a nd general motorsassembly division (GMAD) were responsible for the engineeringand tooling / assembly operations.

As competition in the industry heated up and costs and quickresponses to market changes become more important the flawsof the ossified management structure became impossible toignore.

A consulting firm McKinsey and company was brought in toassess the situation it concluded that fisher body and GMAD hadbecome bureaucratic empires unto themselves and that acomplete reorganization was in order.

The five car division were divided into two super groups BOC,composed of Buick Oldsmobile and Cadillac and CPC,composed of Chevrolet, Pontiac , GM of Canada , NUMMI andSaturn.


10/17

Cont. The old division would continue to serve as a marketingarm Many of the 10000 fisher body employees affected were

upset by the change Another complications arose when it became clear that the

reorganization was serving the informal communicationsnetwork that had developed over the years and was largelythe means by which things were accomplished in theoverly bureaucratized behemoth.

By the late 1980s the reorganization seemed to have beenat least partially successful.

The quality of GM cars was higher than it had been at thebeginning of the decade and the organization was moreflexible for having gone through tremendous change

The head of the CPC super group had already organizedhis groups along functional lines with a strictly verticalchain of command , which meant that disputes had to beresolved at the highest levels of management .


11/17

GM Acquires electronic data systems(EDS)

In 1984 , while GM was adapting to the changes wroughtby the reorganization , the company made its biggestacquisition to date a $2.55 billion buyout of electronic datasystems (EDS) a rapidly growing firm that designed andoperated data processing systems. Founded by billionaireentrepreneur h. ross perot the company was the 3rd largest

in its field and was flourishing its earning per sharequadrupled between 1980 and 1983. Roger thought that EDS would be good for GM in number

of ways The automaker had 200ibm mainframe computers and

200000 terminals but no centralized data processingsystem to coordinate interdepartmental operations The system inefficiency was estimated to costs GM $600

million per year . Smith envisioned EDS developing a new data processing

systems for GM that would coordinate the collection of

financial and operations data from throughout the companyrocess health care claims the com an used 187


12/17

Cont Smith also felt that that exposure to the highly competitivecorporate culture of eds would be good for GM The company was known for its rigorous traning and

testing program , strict codes of ethics and emphasis onresults.

EDS was based largely on performance incentives at GM Poor performance by a GM employee often wentunaddressed for years

The merger of the 8000 GM computers employees with the6000 EDS employees did not go smoothly . There was noclear strategy for integrating the two companies

The news that they would be absorbed into the EDSorganization hit the GM employees hard

Already distressed that they would lose their generous GMpensions and benefits

Despite the difficulties by 1986 EDS had modernized GM

health care claim processing systems , saving thecompany $200 million annually .


13/17

Another high- tech acquisition:Hughes aircraft co. A year after buying EDS , GM outbid ford and Boeing to acquirethe Hughes aircraft company

The $5billion cost price tag was almost double the cost of EDSand made the sale the largest acquisition outside the oilbusiness in history

Hughes developed a wide range of electronic defense systems

that were used in everything from air craft and weaponsguidance systems to surveillance satellites

The company employed 26000 engineers and more than 1450PhD who were developing more than 100 different technologiesfor use in 12000 products and services.

Hughes was grouped with GM Delco electronics and Delco

systems operations subsidiaries and the instrument and systemsdisplay subgroup of the AC spark plug division to form GMHughes electronics corporation(GMHE)

Smith believed that high tech acquisitions like EDS andHUGHES would make GM the world leader in automotivetechnologies

In a letter to smith he noted that the Japanese are not beating uswith technology or money they use old equipment and buil better


14/17

The challenge ahead In 1990 GM had spend $77 billion in its decade-longeffort to modernize its plant, automate its equipment

and develop new car models. Trucks and foreign car operation were doing well,

earning more the $3.2 billion in 1989.

But in north American car business continued losemoney .

Despite of huge investment, car and truck assemblyefficiency had only improve 5% scince1980. comparewith 31 % improvement at ford .

GM average cost 250 $ more to build than ford carsand $750 more then Japanese modal made in US.

GM become high cost producer. Profitability per vehicle fell from $ 588 per vehicle in

1984 to $12 per vehicle. Market share fall down almost 12 % from 34.7 % . But


15/17

Cont In domestic market consumer buying behavior changed.Long term use of vehicle and household savings . Foreign manufactures penetrated and increase their the

market share due to success of transplant in US. the voluntary import quotas that had restricted the number

of cars Japanese manufacturers to look for new ways topenetrate the US market. In 1980, Establishing production facilities in the US

became economically attractive to Japanese manufacture . Many more Japanese company transplant their production

in US (eg. HONDA ) And US producers market share dropped two third of a

point and import market share fall down one third of apoint. And GM was the big domestic producer whosemarket share suffered most.

But GM still good and improve the quality in cars by 1990.


16/17

ROGER SMITHS RETIREMENT August 1990 , after spend 9 year as GMs CEO Roger

Smith retried. And Robert stempel took place of him.

At the endA Joint ventures with Toyota ,The development of a completely new car (Saturn) ,A major reconstructing of GMs five divisions ,

And the acquisition of the two high tech subsidiaries ,Electronic Data System (EDS)and Hughes Aircraft.

Transplant of foreign producer in US market


17/17

Question Evaluate the actions taken by Roger Smith during

the 1990s. Were they right action to take? Wasgeneral motors in better position at the end of thedecade than it had been when the decade

started?

What should roger smiths successors do?

Will general motors be able to survive in theworld auto industry?

case study on general motors

Documents