1. History
General Motors was founded in 1908 when William C. Durant formed the General
Motors Corporation by bringing together 25 independent car companies. In the
beginning, each company retained its own identity, and General Motors was a holding
company for 25 car divisions that produced hundreds of models of cars targeted at
wealthy customers.
General Motors main competitor was the Ford Motor Car Company, and in 1908, Henry
Ford announced the development of the Model T car that was to be produced by the
revolutionary method of mass production. In 1920, Alfred P. Sloan became GM’s CEO.
Sloan found that operating 25 different car companies producing hundreds of deferent
models was very inefficient compared to Ford’s. Sloan chose to group the 25
companies into five major operating divisions: Chevrolet, Pontiac, Oldsmobile, Buick,
and Cadillac. Sloan also decided to market the five brands of cars to customers in five
different socioeconomic segments instead of just the wealthy customers as before.
In the 1970s General Motors dominate position in the United States car market was
broken because of the global oil crisis and the emergence of low-cost/high-quality
Japanese competitors. Then in 1980, Roger Smith became CEO and began several
major programs to reduce costs and improve quality. Still, General Motors did not
confront their main problem of many.
General Motors needed to regain market share from the Japanese but was unable to
cut its high cost structure. Over time General Motors had to enter into bankruptcy on

2. June 1, 2009 because of its high cost structure coinciding with the plunge of vehicle
sales due to the recession that started in 2008.
Strengths
Branding: The company was founded in 1908 when William C. Durant formed the
General Motors Corporation bringing together 25 independent car companies. General
Motors is known to manufacture the automobiles brands of Chevrolet, Pontiac
Oldsmobile, Buick, and Cadillac which have become household names in the U.S.
General Motors has produced not just cars, but symbols of American culture.
IT: Permitting faster global coordination in design and engineering development and
reduced the duplication of work by engineers in different research areas increasing the
efficiency of General Motor’s supply chain operation.
International Presence: General Motors global structure from North America,
Europe, Asia Pacific, and Latin America. General Motors has assembly, manufacturing,
distribution, office and warehousing operation in countries worldwide.
Weaknesses
High Cost Structure: If employees were laid off, General Motors had agreed to
pay 60% of their salaries. Also creating to the high cost structure was the rising
healthcare costs, which had not been considered an important factor as did General
Motors pension liabilities to former and current employees. In 2002, it was estimated
that General Motors had more than $45 billion in unfunded liabilities.
Vehicle Line-up: Gas-guzzling SUVs and trucks that no longer matched customer

3. Case Study 18 GM 3
demand for smaller, more fuel-efficient cars. Hummer brand used to have status as a
“macho” exclusive SUV, but it too was seen as a gas-guzzling dinosaur out of synch
with customer tastes for new greener vehicles.
Dealerships: Contracts with its 5,600 dealerships draining its profitability. Each of
General Motors brands was distributed by different car dealerships, and all these
dealerships had contracts that guaranteed them a supply of cars and favorable
financing from General Motors financial division. When General Motors was forced to
reduce the number of models of cars it produced it had to shut down divisions such as
Oldsmobile, these dealerships became a major liability and General Motors was locked
into contracts with them.
The greater the number of dealerships, the higher General Motors distribution,
financing, and operating costs were. When General Motors sales plunged in the 2000s,
its excessive number of dealerships cost General Motors billions of dollars a year.
Opportunities
China: China is potentially the largest market in the world. China is a country with
a steadily growing economy and a huge customer base. China is growing and the
market for small and mid-sized car models will increase with China’s growth.
International: Expanding in Europe to offer United States customers a broad line
of premium, differentiated cars. Also, buying state-of-the art technology to build quality,
low–cost vehicles for customers.
Hybrid vehicles: Demand for hybrid vehicles is likely to increase so investing in

4. hybrid and plug-in vehicles, for both cars and trucks. International demand for small
hybrid electric vehicles is also likely to increase. China itself has a large carbon footprint
and offering benefits for people who buy vehicles with lower-capacity engines as well as
offering trade in for older cars to get more efficient greener cars. The small hybrid
electric vehicles and plug-in vehicles market would also boost the demand for an
automobiles company’s products.
Threats
Competition: Competition from Daimler, Fiat, Ford Motor, Honda Motor, Hyundai
Motor, Isuzu Motors, Nissan Motor, Renault, Toyota Motor, and Volkswagen. Many
competitors’ are offering added vehicle enhancements, providing subsidized financing
or leasing programs in order to sell more vehicles. Most automobile companies are also
offering option package discounts, and reducing vehicle prices.
Saturation: China is potentially the largest market in the world with a steadily
growing economy and a huge customer base. Many of the automobile companies could
start building new plants in China causing an oversaturation of vehicles.
Recession: Global recession and stalled economic growth reduces consumer
demand for vehicles. Consumers will spend less on newer vehicles and not trading in
the older model of automobile. Also, consumers demand for less fuel efficient vehicles
including full size pick-up trucks and sport utility vehicles decline.