General Motors’ Strategies for Recovery

Abstract:

As General Motors struggles to recover, it faces seven types of problems. First, the company needs to rationalize its product portfolio by decreasing its large reliance on light trucks, by reducing duplication in its model offerings, and by creating cars that will gain more profit. This also means aligning its product portfolio more closely with the income distribution in the United States. Second, the company’s position in the technologies of the future is uneven, so GM should at least consider rebalancing its efforts among these technologies. Third, GM’s product development processes require improvement. Fourth, it must shrink itself to the smaller market share it will actually have and reduce its costs to the decreased revenues this share will produce. The bankruptcy GM went through in the spring of 2009 was wrenching, but did slash costs. However, the company will continue to need cost containment. Fifth, GM must maintain enough capital to get through the current very deep recession. Sixth, General Motors will have to create different and more beneficial relationships both with its foreign automotive competitors and with the United States government. Finally, solving the first six types of problems probably requires changes in GM’s organizational structure and company ”culture.” The structure that Alfred P. Sloan, Jr. created for the company requires some updating to aid GM in being competitive in a global industry, but part of the difficulty is that some of the beneficial parts of Sloan’s structure have been diminished or abandoned. This has meant that GM has been prone to make poor decisions. The United States government is the primary owner of General Motors at this time. It is uncertain whether the new Board of Directors the government has established for GM will help GM change its structure and culture in beneficial ways.
 
The very deep international recession has done great damage to General Motors, as well as to Ford and Chrysler, but less harm to some of their foreign competitors. Part of the threat that GM faces is that its productive model has become less relevant to its current markets. As we discuss General Motors’ strategies for conquering the types of problems it faces, we highlight how we think the company must alter its productive model. Our emphasis is on GM’s operations in the United States, as that is where it is experiencing the most serious reverses.