General Motors Problems
Essay Preview: General Motors Problems
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US automobile industry began at the end of the 1800s and by the 1890s one out of seven jobs and one out of six businesses owed their existence to the automobile. Also this industry was the largest single customer for many raw materials but now With analysts debating whether or not the American economy is already in a recession, the big three automakers in the US especially General Motors are sharply scaling back production. The facts described by Danny Hakim in an article (G.M. Sees a Loss Near $1 Billion; Stock Falls 14%) published in NYtimes on March 17, 2005 say that announcement by GM about losses of almost a billion dollars for last six month dropped its share to the lowest level in more than a decade. Also it is considered to be ever biggest single day loss since 1987, as GMs share lost 35 points on Dow Jones. GM once considered as strongest among big three is now way behind in the race with the plans to cut off 10% production of cars in North America. Investors have lost their confidence in GM. Market researchers and analysts are also waving red flags. Main reasons for GM crisis are crucial home industry and increasing health care cost, as company is providing health coverage to almost 1.1 million people in America. Despite all these facts, companys chief executive Mr. Wagoner has neither yet announced any serious plans to overcome this situation nor has he shown any intention to change their corporate strategy.
Globalization is the first concept which could be related to this article. Due to globalization, markets have expanded but these expended markets are now contributing towards the economic problems of the United States. US companies especially the auto industry are no longer enjoying monopolistic powers in business world. Local auto industry is facing a big threat from foreign companies like Toyota, Nissan and Honda.
General Motors, which controlled nearly half the American market as recently as late 1970s, is now finding it difficult to manage in new competitive environment and its market share has fallen to one quarter in February. Company is broadly struggling and Toyota is more likely to displace GM in next few years to be number one in auto industry. No doubt GM is innovative in models and designs but brands like Pontiac, Buick and Saturn are not appealing customers any more, described by J. D. Power & Associates, the quality and customer satisfaction analyst. Ronald Tadross, an analyst at