Financial Losses for GM Auto Manufacturers - Essay Example

MEMO June 28, 2006 Progress Report: Financial Losses for GM Auto Manufacturers Time Period: June 12, 2006 - July 18, 2006 Work Completed Factors Contributing to Losses Research to date indicates that General Motors (GM) suffered a devastating loss in 2005, brought about by the bankruptcy of Delphi Corporation, one of its most important suppliers, along with accounting errors at GMAC, its financial arm. This is an issue that needs further historical study to see exactly why GM was not prepared for these occurrences. Present short-term efforts to recoup GM’s effort to increase their market share seems like a desperate bid to plug the dike with short-term incentives related to the high cost of fuel and its focus on the company’s On-Star computerized system. In the meantime, other areas such as decrease in customer satisfaction and employee loyalty are weakening the structure. Studies so far show an increase in job layoffs and lack of foresight on the part of GM on what customers want. More research is needed on whether GM is actually making an effort to improve in these areas and what programs they have in place. Areas to be explored Customer and employee satisfaction: The recent effort on GM’s part to save on health costs in an agreement with United Auto Workers union will not increase employee incentive since the effort adversely affects the employees by increasing co-pay for doctor’s visits and pharmacy. In the growing Asian and European markets, GM has not kept up, focusing on light trucks when customers were more interested in owning cars. Further research will determine how GM plans to change its focus. Brand visibility: Asian and European auto brands have long been established as being well made and long lasting, with American brands suffering by comparison. At one time, American automakers pushed for customers to “Buy American,” a patriotic ploy that increased market share for GM until Asian and European companies opened companies in America. Even so, foreign cars continue to be considered superior. A study of GM’s research and development efforts will tell the story on future efforts. Global marketplace: Even though GM has addressed the Chinese market with Shanghai GM, problems have already been experienced in the company, with recall of Buick models. The saving factor here is that there was a recall of foreign brand cars as well. The future of GM depends on attention to: 1. Positive brand visibility 2. Global interaction through partnership and mergers 3. Increasing customer and employee satisfaction Work remaining As noted in the progress report above, several areas need further study. First, the history of General Motors from its beginnings to its phenomenal success in the 1990s should set the foundation for where GM is at present and what it must do in the future. In addition, comparisons with other American automakers and the efforts being made to increase the customer base must be made. Once this foundation is put in place, it is necessary to look beyond the American market and learn what GM has done to meet foreign competition and just how successful they have been so far in the 21st century (Appendix A). Toyota is obviously making a concerted effort to reach No. 1 in the automobile market, and the final report will show whether GM can maintain its lead and resolve its issues in the near future or whether it will not only lose to Toyota but be taken over by them as well. Appendix A: NPR Study in 2005 by Diane Geng By the Numbers General Motors Toyota Best selling vehicle In U.S. Chevrolet Silverado 680,768 sold in 2004 Toyota Camry 426,990 sold in 2004 U.S. sales in 2005 4,454,386 down 4.3% from 2004 2,260,296 up 10.1% from 2004 Profitability per vehicle Losses $2,331 per vehicle Makes $1,488 per vehicle Worldwide sales in 2005 9.2 million 8.2 million Global market share In 2005 14.2% down from 14.6% in 2002 12% up from 10.6% in 2002 http://www.npr.org/news/specials/gmvstoyota/ Read More