Gm Bankruptcy
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- Date Submitted: 05/25/2011 06:06 PM
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A Financial Historical Analysis of General Motors (GM)
Virtually all companies experience financial hardships at one time or another. Yet, rarely has a company fallen as far and as fast as General Motors (GM). When we analyze such a fall, the blame for failure can be attributed to a combination of factors. Unbothered by competition and looming economic threats, GM’s management thought to coast its way to increasing market share while maintaining its grip on the automotive industry. Rather than imitate their eastern competitors, such as Honda or Toyota, the bureaucratic giant completely ignored cost-cutting initiatives, believing that large profit margins would more than make up for increasing legacy costs (i.e., healthcare and pension obligations to an increasing retiree population) [ (Gearino, 2010) ]. More precisely, its passive labor negotiations proved fatal in conceding to the demands of the United Auto Workers (UAW), when unrealistic contracts were struck in the early 1970s, including the right to retire after 30 years with full pension and benefits. The result: It fell behind its Japanese competitors in innovation, research & development expenditures and patent filings.
Following multiple corporate restructuring attempts in the 1980s, Rick Wagoner took the helm at GM as Chief Executive Officer (CEO) in 2000 (Holstein, 2009). Rather than learn from his predecessor’s mistakes, Wagoner drove the company into a multitude of potholes. According to John Baldoni, a leadership consultant recognized as one of the world’s top 25 leadership experts by Top Leadership Gurus International, Wagoner failed to do three things effectively: (1) Resist a non-confrontational culture, (2) Demand creative solutions, and (3) stimulate change in the midst of crisis (Baldoni, 2009). First, Wagoner never challenged the non-confrontational culture at GM, where, according to Baldoni, “if you went along, you got along.” In the automotive industry, where urgent...
Virtually all companies experience financial hardships at one time or another. Yet, rarely has a company fallen as far and as fast as General Motors (GM). When we analyze such a fall, the blame for failure can be attributed to a combination of factors. Unbothered by competition and looming economic threats, GM’s management thought to coast its way to increasing market share while maintaining its grip on the automotive industry. Rather than imitate their eastern competitors, such as Honda or Toyota, the bureaucratic giant completely ignored cost-cutting initiatives, believing that large profit margins would more than make up for increasing legacy costs (i.e., healthcare and pension obligations to an increasing retiree population) [ (Gearino, 2010) ]. More precisely, its passive labor negotiations proved fatal in conceding to the demands of the United Auto Workers (UAW), when unrealistic contracts were struck in the early 1970s, including the right to retire after 30 years with full pension and benefits. The result: It fell behind its Japanese competitors in innovation, research & development expenditures and patent filings.
Following multiple corporate restructuring attempts in the 1980s, Rick Wagoner took the helm at GM as Chief Executive Officer (CEO) in 2000 (Holstein, 2009). Rather than learn from his predecessor’s mistakes, Wagoner drove the company into a multitude of potholes. According to John Baldoni, a leadership consultant recognized as one of the world’s top 25 leadership experts by Top Leadership Gurus International, Wagoner failed to do three things effectively: (1) Resist a non-confrontational culture, (2) Demand creative solutions, and (3) stimulate change in the midst of crisis (Baldoni, 2009). First, Wagoner never challenged the non-confrontational culture at GM, where, according to Baldoni, “if you went along, you got along.” In the automotive industry, where urgent...