General Motors Business Strategy - Matthew Norton

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.

                                                                      Plan
                                 2000        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.

                                                                          Plan
                                     2000         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.