SWOT Case Study - General Motors

Introduction

General Motors is an omnipresent company in the United States, a company so essential to the overall health of the U.S economy that it spawned the phrase “as GM goes, so goes the nation”. Long known for the manufacturing of cars, trucks and automobiles, General Motors has also engaged in finance and insurance.

However, most recently the global recession has had a devastating impact on its, cash flows, financial condition and operations. To survive, the company has had to accept a government bailout plan and its employees the United Autoworkers of America, has also made concessions. This SWOT analysis is about General Motors.

Strengths

• Branding - Born in Detroit Michigan in 1910 General motors has produced a stable of automobiles such as Chevrolet, Pontiac Cadillac and Buick which have become household names in the U.S. As such, the General Motors Brand is well rooted not only in America but throughout the world.
• Worldwide Presence - General Motors truly has an international presence with factories in Poland, Russia, South Africa Ecuador, Egypt, Germany, Argentina, Australia, Belgium, Brazil, China, Colombia, South Korea, Spain, Sweden, and Thailand. The company is even in Viet Nam. In addition, it also has assembly, manufacturing, distribution, office and warehousing operations in 55 other countries.

Weaknesses

• Diminishing Dealer Network - General Motors has compiled a list of more than 1,000 dealerships market for closure. The company has announced that it will not renew its franchise agreements with nearly one quarter of its U.S. dealerships. As of December 31, 2008, GM had 715 dealerships in Canada, as recent as May of 2009 plans called for a anywhere from 40 to 200 closures.
• Insufficient Liquidity - General Motors has experienced a reduction in liquidity to $14 billion in FY2008 from $27.3 billion in 2007. Losses are attributed to lower sales volumes and a reduction in working capital. Both research and development, as well as relationships with suppliers are negatively affected by the reduced liquidity.
• Inadequate Performance among Some Business Segments - In 2008 the GME segment accounted to 21.8% of the total revenues and its revenues decreased 8.8% to $32,440 million. Other business segments experiencing declines include GMNA which fell 23.9% to $82,938 million, and GMAP which stood at $12,477 million for FY 2008, a decline of 15%.
• Low Debt Ratings - Four independent credit rating agencies assess GMs debt ratings and ability to pay interest, dividends and principal on securities. Moodys Investor Service, Fitch Ratings DBRS and Standard & Poors evaluate GM. As of 2008, all four had downgraded their assessment ratings for GM.

Opportunities

• Growth Potential in India and China - There are positive projects for GM business in China and India. In China the market for new cars is in the midst of a 14% growth rate projected to reach over $97 billion in 2008. Meanwhile in India, the market for new cars grew by 15.5% in 2008 to a dollar value of $28 billion. A sign that India will play an even bigger is the projected increase to 2.5 million units by the end of 2013.
• Increased Global Truck Market - Steady growth rates are projected in the next few years. The market's volume is expected to rise to 21.5 million units by the end of 2013. The light commercial vehicles segment was the market’s largest in 2008, generating total volumes of 9.8 million units, equivalent to 58.1% of overall value.
• Rising Demand for Hybrid Vehicles - General Motors produces six hybrid models in the US including the Saturn Vue and Aura Hybrids, Chevrolet Malibu and Tahoe Hybrids, GMC Yukon Hybrid as well as a Cadillac Escalade Hybrid. The company is also investing in hybrid and plug-in vehicles, for both cars and trucks. It is anticipated that GM will produce up to nine hybrid models following the introduction of the Chevrolet Silverado Hybrid and GMC Sierra Hybrid. International demand for light hybrid electric vehicles (HEVs) is expected to increase. It is expected to rise to 800,000 units in 2009 and estimated to reach 4.5 million units in 2013. Therefore, a positive outlook for light hybrid electric vehicles and plug-in vehicles market would boost the demand for GM’s products.

Threats

• The Continuing Global Recession - Dire predictions for the global economy were realized in 2009 and stalled economic growth continued into 2010. The economic decline reduced consumer demand for less fuel efficient vehicles, including full size pick-up trucks and sport utility vehicles, which had been GM’s most profitable products. In addition, the economic climate has resulted in tighter credit markets making it harder for consumers to finance automobile purchases.
• Weakness in Global Automobile Industry - Consumer Requirements for commercial vehicles declined in the NAFTA region, Western Europe and Japan. The Western European automobile markets suffered as well particularly the volume markets of Spain down 28.1%, Italy down 13.4% and the UK down 11.3%. Germany declined 1.8%) and France 0.7% also experienced downward trend in the second half of 2008. In total, 8.4% fewer automobiles were sold in Western Europe. The Japanese car market also declined, with a drop in sales of nearly 4% in 2008.
• Intense competition - GMs financial status makes it vulnerable to fierce competition from fits such as AB Volvo, Bayerische Motoren Werke, Daimler, Fiat Group Automobiles, Ford Motor, Honda Motor, Hyundai Motor, Isuzu Motors, Mazda Motor, Nissan Motor, PACCAR, PSA Peugeot Citroen, Renault, Toyota Motor and Volkswagen. Many have responded to the crises by adding vehicle enhancements, providing subsidized financing or leasing programs in order to sell more vehicles. They are also offering option package discounts, other marketing incentives and are reducing vehicle prices in certain markets. These actions are expected to have a negative effect on GM’s vehicle pricing, market share and operating results particularly on the low end of the market.
  
  
  by Mkt Teachers