Analysis of General Motors Holden Ltd - Case Study Example

General Motors Holden Ltd Student’s Name: Course Code: Lecture’s Name: Date of Submission: General motors Holden limited is a fully owned company of general motors (general motors), based in Detroit, in United States of America. Currently, Holden is one of the oldest transport brands that started as a saddlery business based in Adelaide in 1856 (Bebbington 2009, p 1). In 1917, Holden started large-scale car bodies construction for general motors. The Holden’s emblem of ‘lion rolling a stone’ was developed in 1928, displaying the fable of human’s invention of the wheel. The company has since been owned by general motors in 1931 and was one of the first industry to mass-produce a vehicle in Australia. By 1948 around 67-car brands were sold in the Australian market making the company the only unique Australian brand (Grant 2004, p 62). The car company headquarters is at Fishermans bed, Victoria, from 1936 to date. The car company’s manufacturing plant in Victoria entails a design office, head office and engineering centre, which is the company’s proving ground, engine operations and Holden service parts operations. The company’s car manufacturing operations are based in Elizabeth located in South Australia. Its state sales offices are found in Queensland, New South Wales, and Western Australia. The car company is one of the seven general motors operations that take a vehicle from the design stage on the initial sheet of paper and finally the showrooms, with precise expertise in rear-wheel-drive cars, power train, and alternative fuels (Don 2002, p 200). The car company has a highly skilled staff, with experience in design, engineering, robotics, logistics, ergonomics, purchasing, tool making, process control and assembly work. The Australian government opted to offer support to Holden and prevent it from closure (Kennedy 2005, p 4). A recent research done by South Australian government by Dr Barry Burgan of the University of Adelaide’s saw the closure of general motors company would reduce economic activity present in South Australia by approximately $1.5 billion per annum. Closure of general Motors Company would also influence negatively on the economy of Victoria because many car component producers of Victoria supply parts to general motors and the company does its engineering functions and design in Melbourne. In addition, closure of general motors company would increase unemployment rates due to job losses for 12,000 people (Angelique 2013, p 1). This important co investment helps to avoid the dislocation resulting from job losses and plant closures on this scale. On an important note, the proposal was seen to support the sustainability and viability of the Holden and an intercontinental competitive Australian car industry, including improving sustainability of the company and financial viability without this joint investment general motors company would stop producing automotive in Australia by 2016. This assistance will help contribute to the medium goal sustainability of the vehicle industry. The joint investment ensures general motors company will continue manufacturing cars not earlier than 2022 (Bill 2013, p 1). As general motors Holden constitutes almost 40 per cent of national vehicle output, its existence is a major driver of the medium goal of existence of the vehicle industry. Moreover, it will help improve international competitiveness of the vehicle industry. Holden company uses global platform cars, and low per unit engineering and design costs will assist general motors company realize future export chances. Moreover, it will give greater chances for Australian vehicle component producers to achieve work in supply chains globally. The proposal was aimed to strengthen and retain Australian capabilities in car engineering, design, and manufacture, plus enhancement of engineering and design services to be used in global platforms. The joint investment will maintain general Motors important capacity to engineer and design cars. The joint investment will be used to “localize” the new generation inventions for the Australian market population. It also means general motors company will continue to make major engineering and design development programs for other general motors organizations globally. The productions of automotive are important to sustain and build a positive business case for retaining engineering and design functions in Australia. In addition, it was seen to improve the enhancement of engineering and design services and increase manufacturing of parts and components by the supply chain, mainly those parts and components used in global platforms produced in Australia, and it helped increase the integration of Australian companies in the worldwide supply chains. The car company will produce two next generation cars in Australia, requiring the manufacture of components domestically. The competitiveness of Holden’s supply chain will be made by assisting component producers gain access to platforms globally and supply chains. The car company will also create a working group to look at opportunities for inclusion of its suppliers from Australia into the general motors global network. Yes. From an economic and social perspective, the support was justifiable. The economy of Australia was undergoing a transformation and the high-value and high-skill industry was mainly involved in the transformation (Mike 2013, p 1) The vehicle industry is the main pillar of advanced manufacturing found in Australia, it directly employs 55,500 staff and indirectly employs 200,000 jobs. The move to support Holden was a strategic joint investment that has several advantages. It allowed general motors Holden to build two excellent, new generation vehicles in Australia. It ensured general motors company continues domestic vehicle making not earlier than 2022. It could assist in retaining thousands of manufacturing jobs, more so in areas, for example, Adelaide’s northern employment and regional areas where vehicles component makers are located. The joint investment could keep critical knowledge-intensive design, innovation, and engineering based in Australia. It allowed general motors company to change its purchasing way to give a more long-term assurance to local vehicle component producers. It has assisted local vehicle component makers obtain a greater access to the entire supply chains, improve their competitiveness, and change their business into brand new non-auto markets located in Australia. It was seen to create new fuel-efficient technologies, and manufacture a more environmentally friendly vehicle (Hassall 2012, p 5). From a social point of view, the GM Holden continuity was seen as a success story on the eyes of the Australian citizens. The remarkable success and pride of the company being the only automotive industry in the country created a sense of ownership that blinded the eyes of its citizens. Its success and failures was seen as not disastrous by its citizens and called for the government to support their ‘heritage’ as they referred it (Grant 2004, p 62). The government protection offered to Holden Company played a very important part in assisting the making of the company and avoiding its closure (Bill 2013, p 1). The government proposal to support Holden generated economic benefits by employing thousands of Australian. Investment in equipment, plant, development, and research were done. The company’s investments include new equipment, new tooling, and support for engineering and design exports where there exist a huge potential for general motors company to export the brand new automobiles, although the rate of exchange is a major factor in export competitiveness (Shane & Andrew, p 1). It was noted that flow-on benefits to other automotive industry company included increase in local production. The joint investment by general motors company was seen to help investment inside the supply chain and assist the supply chain retain engineering, design, development, and research capabilities. It brought about flow-on advantages to other industries. Companies that give inputs to the car industry were advantaged. These companies include non-ferrous metals, steel, other fabricated metal products, polymer products and many others. It brought huge importance to regions in Australia, more so those with a high rate of unemployment. The northern Adelaide in particular the area of play ford, benefited the most since general motors Holden had an operating branch and the area had a very high unemployment rate. Employment in the vehicle component production is also regionally concentrated. The government support had no adverse effect on competition within the car industry. The recommendation did not have any serious effect on competition in the car manufacturing industry. The vehicle market in Australia was very competitive, with domestic manufacturers facing competition from cheaply imported cars (Kennedy 2005, p 4). The assistance will aid innovation in the general motors and the car industry at large, including the creation of technologies and innovations by the industry, firm, and nation. In addition to other innovations, general motors company will introduce new fuel efficient technologies and more efficient transmission , engine and drive systems on brand new cars to be produced in Australia (Robinson 2006, p 7). General Motors Company will introduce brand new fuel-efficient technologies on the new generation cars to be produced in Australia (Plunkett 2009, p 564). The positive effects from the creation to the local supply distribution and research of the Australian vehicle industry saw a huge amount of technology importance through the transfer of capability development and competencies from automotive manufacturers to suppliers. Moreover, the research study found several technology spillovers from the vehicle industry to other branches of the economy plus the environmental importance of the innovations. The brand new cars to be produced in Australia will contain a low greenhouse gas emission for every kilometer driven. The government protection has ensured continuity of production of automotive over several years (Davis & Kennedy, p 93-95). This has offered a sigh of relief to the consumers who love and cherish the brand. The government funding will supplement the investment of general motor and Holden. It brought huge advantages in Australia, more so those with a high rate of unemployment, like in northern Adelaide in play ford, where general motors company car assembly operations are found, has a 14.2 percent rate of unemployment. Employment in vehicle component production is also locally concentrated. The government support had no adverse effect on competition within the car industry. The proposal did not contain any adverse effect on competition within the car industry. The automotive sales market in the country was very competitive, with domestic manufacturers facing strong competition from cheaply imported cars. The government funding will support technological innovation in the manufacturing company and the car industry, including the intake of technologies and innovations by the industry, firm, world, or the nation. Amongst other innovations, general motors company will introduce brand new fuel-efficient technologies and more efficient engine The funding will help in the sustainability and viability of the company and offer a multinational competitive Australian vehicle industry (Mike 2013, p 1). This will portray a sense of stability to the competitive brands, which are currently on the market. Without the Australian government support, the company was set to close by the year 2016 but this has since changed and the company got back to its right tracks. The government support to General motor Holden gives the company brand an upper hand in the market and creates a chance for the company to start afresh. This placed the company at a higher level and new research was conducted in producing a fuel-efficient vehicle targeting the Australian population The taxpayers are affected negatively by the decision to support the failing general motors Holden limited. They are going to cough more from their pockets in order to assist their company, all the proceeds going to the automotive industry will be directly felt by the taxpayer, as the government through the lawmakers will effect addition of taxes to the Australian citizens. The government gets its fund majorly from the tax returns of its citizens. Any type of assistance of any amount will be obtained directly from its citizen. The continuous support amounting to millions of dollars was directly felt by the Australian citizens. A common and important problem in general motors Holden is anticipating the different needs and preferences of clients, and similar internal processes to those client’s preferences. If an entity ignores the changing client’s preferences, it gets the risk of reduced income due to a smaller market share and increased manufacturing costs (Park & Chu 2009, p 21). This is due to a growing difference between manufacturing and market preferences. The process selection and market preference issue is that of choosing a way of profit maximizing process innovations over time to fulfill evolving market needs. This is a major problem faced by executives in most companies serving most market population. As market preferences change and markets evolve, managers must use new and alternative process innovations to meet market needs. The market preference and process selection problem would be hard enough if market needs were accurately assumed. Nevertheless, market needs frequently change in capricious, unexpected, and sometimes fickle ways. Holden was slow to adapt to these changing needs and ended up creating automotive at a very high cost. This was not welcomed, and majority of Australians opted for the cheap imports. The market size also played a significant role in the cease of Holden’s production. Market size can be defined as potential sellers, buyers of a product. It can also be defined as the total volume of the potential market. Before launching a product, the company is very keen in determining the market size (Roberts 2005, p 45). Holden Company limited has been adversely affected by the market size. The Australian company records high losses due to low sales of its automobiles. The sales dropped rapidly due to the strengthening of Australian currency and high production costs. The country’s population prefers imported vehicles claiming to be cheap and affordable at the expense of Holden limited. The production levels of the vehicles have been slowly decreasing over the years. The market size of Holden now serves other competitive brands, and this serves a challenge on the sale of Holden vehicles, leading t its final closure. A production cost is a major factor leading to the closure of Holden’s production (Griffiths 2013, p 6). Production cost is the total cost incurred when manufacturing goods and services. It combines the labor and the raw materials used in the production. Costs can be direct or indirect. An example in Holden, the direct costs, include the metal, plastics and labor while the indirect costs include salaries, rent and various utilities costs. The higher manufacturing cost, the lower the profit returns (Stephen & Stuart 2007, p 40). Cost of production of Holden was extremely high due to the firm of the Australian dollar and its low market size. This adversely affected the company prompting its closure. It is approximated that the cost of manufacturing a car is two times higher in Australia as compared to England and 4 times higher as compared to Asian countries. The regulatory environment of the labor laws has influenced negatively on the downfall of Holden limited. This is after the laws define clearly the minimum wage of employees, their working conditions and the imposed liabilities imposed on the company (Stephen & Stuart 2007, p 7). These laws create a very strict environment and increase the cost of production of the company. The higher the production cost the lower the profits. Production process also influences the closure of Holden production. Production involves converting several inputs to the desired outputs. It involves the inputs and the desired outputs. Holden limited has been reducing its production scale over several years. This has led to low income at a higher cost of production amounting to huge losses. Its production of vehicles is noted to be good by the market but not preferred by the consumers. Production has continued to decrease leading to closure of some branches present in the country. Yes. The decision to cease production the General Motors Holden could have been made (Mike 2013, p 1). This is because Holden performance was not affected by the government funding. They existed way before Holden rushed to the government for funding. The operating costs of the company were too high, and it is estimated that the company ran at a loss every time it produces a single unit. This clearly shows that government support does not bring down the production cost. It only provides an advantage to the company and buys it more time before its closure. Several factors influenced the halting of the production but not the government subsidy. In conclusion, Holden limited’s slow decrease in sales volume has prompted the company to announce its closure in Australia. This amounted to a high-recorded annual loss and announcement of the government that it will halt its funding. The high loss as Holden says has been attributed to the increased production costs and a high Australian dollar (Griffiths 2013, p 6). These factors combined with a small market size have facilitated a faster decline in sales of its automobiles over the years. In regards to the closure of Holden limited, the government will lose more in its economy due to the major job losses that will be experienced after the company shuts down its processes. The general motors Holden’s leadership is partly blamed for it production closure caused by lack of accountability. Holden‘s leadership is blamed for a very high research costs with no real value in the production. This is a major cause to the increased cost of production. References Angelique Johnson, 2013, ‘Holden suppliers expecting more job losses’, ABC news. 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