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General Motors Co. (formerly General Motors Corporation), also known as GM, is the world's largest automaker and has been the global industry sales leader for 75 years. Founded in 1908, GM today employs about 327,000 \rp. and Isuzu Motors Ltd. of Japan. GM also has advanced technology collaborations with DaimlerChrysler AG and BMW AG of Germany and Toyota Motor Corp. of Japan, and vehicle manufacturing ventures with several automakers around the world, including Toyota, Suzuki, Shanghai Automotive Industry Corp. of China, AVTOVAZ of Russia and Renault SA of France.

Genuine GM Parts and accessories are sold under the GM, GM Performance Parts, GM Goodwrench and ACDelco brands through GM Service and Parts Operations, which supplies GM dealerships and distributors worldwide. GM engines and transmissions are marketed through GM Powertrain.

GM's largest national market is the United States, followed by China, Canada, the United Kingdom and Germany.

History

File:800px-Detroit GM headquarters.jpg

General Motors (GM) was founded in 1908 in Flint, Michigan, as a holding company for Buick, then controlled by William C. Durant, and acquired Oldsmobile later that year. The next year, Durant brought in Cadillac, Elmore, and Oakland. In 1909, General Motors acquired the Rapid Motor Vehicle Company of Pontiac, Michigan, the predecessor of GMC Truck. A Rapid became the first truck to conquer Pikes Peak in 1909.

GM surpassed Ford Motor Company in the 1920s thanks to the brilliant leadership of Alfred Sloan. While Ford kept inventing new ways to cut manufacturing costs, Sloan was inventing new ways of managing a complex worldwide organization, while paying special attention to consumer demands. Car buyers no longer wanted the cheapest and most basic model—they wanted style, power and prestige, which GM offered them. Thanks to consumer financing, easy monthly payments allowed far more people to buy GM cars—while Ford was moralistically opposed to credit. During the 1920s and 1930s, General Motors bought out the bus company Yellow Coach, helped create Greyhound bus lines, replaced intercity train transport with buses, and established subsidiary companies to buy out streetcar companies and replace the rail-based services with buses. GM formed United Cities Motor Transit in 1932.

General Motors bought the internal combustion engined railcar builder Electro-Motive Corporation and its engine supplier Winton Engine in 1930, renaming both as the General Motors Electro-Motive Division. Over the next twenty years, diesel-powered locomotives and trains — the majority built by GM — largely replaced other forms of traction on American railroads. (During World War II, these engines were also important in American submarines and destroyer escorts.) Electro-Motive was sold in early 2005.

At one point GM was the largest corporation ever in the United States, in terms of its revenues as a percent of GDP. In 1953 Charles Erwin Wilson, then GM president, was named by Eisenhower as US Secretary of Defense. When he was asked during the hearings before the Senate Armed Services Committee if as secretary of defense he could make a decision adverse to the interests of General Motors, Wilson answered affirmatively but added that he could not conceive of such a situation "because for years I thought what was good for the country was good for General Motors and vice versa". Later this statement was often garbled when quoted, suggesting that Wilson had said simply, "What's good for General Motors is good for the country." At the time, GM was one of the largest employers in the world – only Soviet state industries employed more people.

On December 31, 1955, General Motors became the first American corporation to make over one billion dollars in a year.

After GM's massive lay-offs hit Flint, Michigan, a strike began at the General Motors parts factory in Flint on June 5, 1998, which quickly spread to five other assembly plants and lasted seven weeks.

GM's status as both an automotive and corporate juggernaut is in jeopardy. Its financial difficulties have dragged stock value down (see below); as of March 23, 2006, GM's market capitalization is roughly $12.5 billion.

General Motors Hughes Electronics

GM Hughes Electronics was formed in 1985 when Hughes Aircraft was sold by the Howard Hughes Medical Institute to GM for $5 billion. GM merged Hughes Aircraft with its Delco Electronics unit to form GM Hughes Electronics (GMHE). This division was a major defense contractor, civilian space systems manufacturer and communications company. The defense business was sold to Raytheon in 1997 and the space and communications division was sold to Boeing in 2000.

FIAT relationship

In 2000 GM sold a 6% stake to Fiat in return for a 20% share in the Italian automaker. As part of the deal Fiat was granted a put option which, if exercised between January 2004 and July 2009, would force GM to buy the company. GM agreed to the put option as it feared Fiat may be acquired by DaimlerChrysler and seriously challenge GM's Opel and Vauxhall marques.

The relationship suffered due to Fiat's failure to improve its finances or market share. The relationship worsened in 2003 when Fiat recapitalised, reducing GM's stake to 10%. In February 2005 GM paid $2 billion USD (€1.55 billion) to buy itself out of the put option.

Corporate structure and issues

Current members of the board of directors of General Motors are: Percy Barnevik, Erskine Bowles, John Bryan, Armando Codina, George Fisher, Karen Katen, Kent Kresa, Ellen Kullman, Philip Laskawy, Jerome York, Eckhard Pfeiffer, and Rick Wagoner (chairman). York was elected to the board on February 6, 2006 to represent Kirk Kerkorian, as E. Stanley O'Neal stepped down.

Rick Wagoner is also the chief executive officer of the company (since June 1, 2000), succeeding John F. Smith, Jr.

Environmental and social policies

General Motors was named one of the 100 Best Companies for Working Mothers in 2004 by Working Mothers magazine.

Due to its highly compensated workforce GM has the highest health care and labor costs in the industry, and some analysts have criticized the company for this.

Subsidies

In March 2005, the government of Canada "gave C$200 million to General Motors for its Ontario plants, and last fall it awarded C$100 million to Ford Motor Co. to expand their Canadian auto production, provide jobs and contribute to the economy," according to Jim Harris. With additional subsidies promised to non-North American auto companies like Toyota, Premier Dalton McGuinty said the money the province and Ottawa are pledging for the project is well-spent. His government has committed C$400 million, including the latest Toyota package of C$125 million, to the province's automobile sector, which helped finance $5 billion worth of industry projects.

Marketing problems

Each of GM's automotive divisions were once each targeted to specific market segments and, despite some shared components, each distinguished itself from its stablemates with unique styling and (to some extent) technology. The shared components and common corporate management created substantial economies of scale, while the distinctions between the divisions created an orderly upgrade path, with an entry-level buyer starting out with a practical and economical Chevrolet and, (assuming progressive prosperity of the buyer), moving through offerings of the several divisions until the purchase of a Cadillac. The divisions were not competing with each other as much as passing along the same customer, who would thus always be buying a GM product, with the profits flowing to this single corporation.

The postwar industry became enamored with the concept of "planned obsolescence", implemented by both technical and styling innovations, with a three year product cycle typical within the industry. In this cycle, a new basic body shell is introduced and then modified for the next two years by minor styling changes. GM, Ford, and Chrysler competed vigorously in this new environment.

By 1958, the divisional distinctions began to blur, with the availability of high-performance engines in Chevrolets and Pontiacs, and the introduction of higher trim models such as the Chevrolet Impala and Pontiac Bonneville that were priced in line with some of Oldsmobile and Buick's offerings. By the time that Pontiac, Oldsmobile and Buick introduced similarly styled and priced compact models for 1961, the old "step-up" structure between the divisions was nearly over.

By the mid 1960s, most of GM's vehicles were built on a few common platforms and in the 1970s, began to use nearly identical body panel stampings, differing only in internal and external trim items. This was seen especially in the compact passenger vehicles offered by the divisions. Nonetheless, the 1960-75 period was perhaps the greatest in GM's history, as it eventually held slightly over 50% of the U.S. market.

The subcompact Chevrolet Vega, introduced September 10th 1970 was designed from scratch by a GM corporate design team headed by then-GM president Ed Cole. The Vega engine and its die-cast block technology were developed at GM Engineering Staff, long before the program was handed-off to Chevrolet to finish and bring it to production. Ed Cole, who had been very personally involved with the design of the 1955 Chevrolet V-8 as Chief Engineer at Chevrolet, was equally involved on a personal level with the Vega engine. The Vega H-body design expanded in 1975 with new models in four GM divisions that were produced through 1980. Vega's liner-less aluminum block engine proved costly for GM. Damaged cylinder walls were common with engine blocks often replaced within the engine's revised 50,000 mile warrenty. (New 76-77 Vegas had a 60,000 mile engine warrenty) Chevrolet trimmed the car and its aluminum engine from the line-up after 1977. The Vega H-body design had expanded in 1975 with new models in four GM divisions that were produced through 1980.

By the 1980's, GM frequently "rebadged" one division's successful vehicle into several models across the divisions, all positioned close to one another in the market place. Thus, a new GM model's main competition might be another model spawned off the same platform. This led to so-called market "cannibalization", where GM's respective divisions spent time stealing sales from one another, while other more co-ordinated efforts (notably from the Japanese manufacturers) were allowed to increase their market penetration. For instance, the company's GMT360 mid-sized light truck platform has, since its inception in 2002, spawned the basic Chevrolet Trailblazer, an extended version of the Trailblazer, the Oldsmobile Bravada, the GMC Envoy, the Envoy XUV (an extended Envoy with a reconfigurable tailgate) and later, the Isuzu Ascender, Buick Rainier, and Saab 9-7X. Though each model had a more or less unique mission, without custom engine choices or radically different suspension settings and trim choices, the cars can hardly be told apart.

Critics have suggested that this progressive blurring of well-defined brands has been a large contributor the late 20th and early 21st century market failures of GM.

During the 1980's and later GM divisions had market issues concerning quality - not that the vehicles produced had appreciably declined in quality but rather that they did not compare well to foreign competition in matters of fit and finish, durability of sheet metal, paint (which was not at all durable for several years after a formulation change), and plastic components. The plastic and paint problems were not immediately apparent, and their effect was to enforce negative perceptions of vehicle quality long after the problems had been corrected, as the defective vehicles severely deteriorated in appearance as they aged, with blistering paint, rusting exteriors, brittle and breaking flexible bumper fillers, and clouding headlight covers (the latter also a problem with Ford and Volvo products).

In 2004, GM redirected resources from the development of new sedans to an accelerated refurbishment of their light trucks and SUVs for introduction as 2007 models in early 2006. Shortly after this decision, fuel prices increased by over 50% and this in turn affected both the trade-in value of used vehicles and the perceived desirability of new offerings in these market segments. The current marketing plan is currently to extensively tout these revised vehicles as offering the best fuel economies in their class (of vehicle), although such advantages are expected to be minor until the introduction of new hybrid light trucks in 2007, with projected 25% mileage improvements. In contrast, Ford, GM's primary domestic competitor, has emphasized building more and better passenger cars with attractive styling, features, and quality, with profitability flowing from lower production costs through reduction of excess plant capacity and firm consumer demand, which enables avoidance of marketing incentives (such as low or zero interest, cash back, or free or low cost added accessory, appearance, and other packages). When the new models were released in early 2006, they were well received, with strong sales. An increase in fuel prices in the spring of 2006 continues to trouble both GM and Ford.

In the summer of 2005 GM announced that effective immediately, its corporate chrome emblem "Mark of Excellence" will begin appearing on all recently introduced and all-new 2006 model vehicles produced and sold in North America. The move is seen as an attempt by GM to link its name and vehicle brands more closely. The company's vehicle brands include Chevrolet, Pontiac, Buick, GMC, Cadillac, Saab, Hummer and Saturn.

And continuing for months afterward, GM promoted sales through an employee discount to all buyers. Marketed as the lowest possible price, GM cleared an inventory buildup of 2005 models to make way for its 2006 lineup. While the promotion was a temporary shot in the arm for sales, it did not help the company's bottom line.

Financial woes

As is the case with the two other U.S. automobile manufacturers, international exchange rates tend to favor Japanese and Korean competitors, although the extent of this advantage is often overstated by the companies to excuse poor performance. The expected future entry of China into the U.S. automotive market is likely to be advantaged by unrealistic currency exchange ratios that have become a structural problem owing to the Chinese government's extensive purchase of U.S. government debt in the form of bonds. Although some commentators have claimed that European manufactures are somewhat disadvantaged by over-regulation, this is clearly not the case, as Germany's automakers continue to gain global market share, (as evidenced by the turnaround of Chrysler's fortunes after it was purchased by Daimler-Benz in 1998). Irrespective of these various manufacturing conditions, various foreign manufacturers have demonstrated an ability to compete in the U.S. market with vehicles assembled in various U.S. states and using a substantial portion of domestic content. Such plants are advantaged over GM and Ford through the employment of a younger, non-union workforce.

General Motors has extensive "legacy" costs in pensions and health care costs from retirees and their families. Most of these obligations were taken at a time when GM had a much larger share of the domestic and worldwide market and could afford to be more generous. GM has also committed itself (through union agreements) to pay ongoing wages to non-working employees displaced by automation (the so-called Jobs Bank). These costs, combined with marketing problems, have severely impacted GM's ability to carry these obligations. As of March 2006, GM management is increasingly engaged in a high wire act to restore the company to financial health.

In April 2005, General Motors posted a US$1.1-billion loss, for the first quarter of that year. Its debt was also downgraded to junk bond status. GM announced plans to cut 25,000 jobs in the United States, and included plans to shut down one of the two Oshawa Car Assembly plants in Oshawa, Ontario by 2008.

By November 2005, within the first nine months of the year, GM had posted a near $4 billion loss. On November 21, 2005, GM had announced a revised plan of increased cuts. These cuts went from 25,000 to 30,000 employees, or 9% of its labor force. GM also increased the number of plant closings. Originally, the company planned eight plant closings; the new plan calls for the closing of twelve facilities.

In December, 2005, Standard and Poor's further downgraded GM bonds to "B", with the observation that it is "now dubious" whether the new line of SUVs and trucks would return GM's North American auto business to profitability.

In February 2006, GM decided to slash its annual dividend to $1.00 per share. GM had resisted the move for some time. However, the reduction will save GM about $565 million in cash each year.

In March 2006, GM divested 92.36 million shares (reducing their stake from 20% to 3%) of Japanese manufacturer Suzuki, in order to raise $2.3 billion. GM originally invested in Suzuki in the early 1980s. March also saw GM restating its prior-period earnings due to restructuring costs and the Delphi bankruptcy. Earnings from 2005 were reduced by $2 billion, pushing the loss for that year to $10.6 billion. On March 22, GM agreed to buyout more than 125,000 GM/Delphi hourly workers for up to $140,000. If enough workers sign up for buyouts or early retirement, GM's operating costs would drop significantly[1]. On March 23, a private equity consortium including KKR, Goldman Sachs Capital, and Five Mile Capital purchased $8.8 billion, or 78% of GMAC, GM's commercial mortgage arm. The new entity, in which GMAC will own a 21% stake, will be known as Capmark Financial Group[2].

On April 3, 2006, GM announced that it would sell 51% of GMAC as a whole to a consortium led by Cerberus Capital Management, raising $14 billion over 3 years. Investors also include Citigroup's private equity arm and Aozora Bank of Japan. The group will pay GM $7.4 billion in cash at closing. GM will retain approximately $20 billion in automobile financing worth an estimated $4 billion over three years.[3]

GM sold its 8% stake in Isuzu on April 11, 2006, to raise an additional $300 million.[4]

Delphi's Woes

In May 2006, a federal judge will consider Delphi's request to cancel its union contracts. The United Auto Workers and other unions have threatened to strike if that happens. In an effort to avoid a costly strike, GM has offered to pay for buyouts to up to 13,000 Delphi workers and allow 5,000 Delphi workers to flow back to GM.

Delphi has about 33,100 U.S. hourly workers, including 23,300 represented by the UAW and 8,500 by the International Union of Electrical Workers-Communications Workers of America.

April 2006

Bo Andersson, GM's vice president of global purchasing and supply, confirmed GM is stockpiling parts in case Delphi workers strike. GM stopped buying spark plugs from Delphi and transferred its business to Denso, Beru, NGK and Honeywell, which will make it easier for Delphi to close a spark plug facility in Flint, Michigan. GM stopped buying Air-induction from Delphi and transferred its business to Siemens.

Locations of plant closures

The plants scheduled to be closed include (source: General Motors Corporation):

Plants Location Closing Role # Employees
Scarborough Assembly van plant Ontario 1993 Van assembly 2,700
Moraine Assembly (3rd shift) Ohio 2006 Mid-size SUV assembly 4,165
Oklahoma City Assembly Oklahoma Early 2006 Mid-size trucks and SUV assembly 2,734
Lansing Craft Centre Michigan Mid-2006 Chevrolet SSR roadster assembly 398
Oshawa Car Assembly No. 1 (3rd shift) Ontario Mid-2006 Mid-size sedan assembly 3,600
Spring Hill Manufacturing Line 1 Tennessee Late 2006 Saturn Ion sedan and coupe assembly 5,776
Oshawa Car Assembly No. 2 Ontario 2008 Mid-size sedan assembly 2,700
Doraville Assembly Georgia 2008 Crossovers and minivan assembly 3,076
Lansing Metal Center Michigan 2006 Metal fabricating 1,398
Portland Distribution Center Oregon 2006 Parts distribution 95
Saint Louis Distribution Center Missouri 2006 Parts distribution 182
Pittsburgh Metal Pennsylvania 2007 Metal fabricating 613
Ypsilanti Processing Center Michigan 2007 Parts processing 278
St. Catharines Engine Ontario 2008 Engine/Transmission parts 1,699
Flint North 3800 Michigan 2008 Engines 2,677

For the first time ever, in 2004 the total number of cars produced by all makers in Ontario exceeded those produced in Michigan. GM officials cited profitability of their Oshawa, Ontario, plant in refusing to distribute the job losses.

Alternative vehicles

General Motors has long worked on alternative-technology vehicles, but has repeatedly failed to deliver them in a profitable way. The company was the first to use turbochargers and was an early proponent of V6 engines in the 1960s, but quickly lost interest as the muscle car race took hold. They demonstrated gas turbine vehicles powered by kerosene, an area of interest throughout the industry in the late 1950's, but despite extensive thermal recycling (developed by Chrysler) the fuel consumption was too high and starting torque too low for everyday use. They were also an early licensee of Wankel engine technology, even developing the Chevrolet Monza around the powerplant, but abandoned the alternative engine configuration in view of the 1973 oil crisis. In the 1970s and 1980s, GM pushed Diesel engines and cylinder deactivation technologies to disastrous results due to poor durability in the Oldsmobile diesels (this was a modified gasoline engine) and drivability issues in the Cadillac 4-6-8 variable cylinder engines.

In 1996, GM introduced the EV1, the first modern mass-produced electric car. Despite the positive publicity generated by this vehicle, the company never spread the technology beyond California and Arizona, and pulled the plug on the program in 2003.

GM was also an early innovator in hybrid vehicle development, building Diesel-electric trains since the 1930s and buses since the 1990s (but without stored energy recovery), but did not introduce a true hybrid passenger car until 2004. Their earlier hybrid pickup truck was such a mild application of the technology that many criticized it for being not a hybrid at all. In 2005, the new Opel Astra Diesel Hybrid appears. The 2006 Saturn VUE Green Line will be the first hybrid passenger vehicle from GM, but it too is a mild design. GM has hinted at new hybrid technologies to be employed that will be optimized for higher speeds such as are encountered in freeway driving. As a great bulk of GM's fleet fuel consumption is by high fuel consuming light trucks and SUVs, a modest improvement in their mileage applied across this large fleet (say twelve to fifteen percent) would in fact conserve a significant amount of refined fuel.

Rather than effectively deliver hybrid and electric vehicles at the present time, GM has extensively touted its research and prototype development of hydrogen powered vehicles, to be produced at some unspecified future time and using a support infrastructure yet to be built. Since production and use of hydrogen from fossil fuels is at present about 1/6 as efficient as direct use of the fuel (e.g, compressed natural gas), this is a future dependent upon the availability of extremely low cost electricity - as might be produced at some indefinite future time by speculative power sources such as nuclear fusion or free solar power.

GM in China

General Motors is the top-selling foreign auto maker in China, with 11.2% of the total market there. The Buick brand is especially strong, led by the Buick Excelle subcompact. Cadillac initiated sales in China in 2004, starting with imports. GM pushed the Chevrolet brand there in 2005 as well, transferring the formerly-Buick Sail to that marque. The company manufactures most of its China-market vehicles locally, through its Shanghai GM joint venture. The SAIC-GM-Wuling Automobile joint-venture is also successful selling trucks and vans under the Wuling marque.

Further reading

  • Barabba, Vincent P. Surviving Transformation: Lessons from GM's Surprising Turnaround (2004)
  • Chandler, Alfred D., Jr., ed. Giant Enterprise: Ford, General Motors, and the Automobile Industry 1964.
  • Cray, Ed. Chrome Colossus: General Motors and Its Times. 1980.
  • Farber, David. Sloan Rules: Alfred P. Sloan and the Triumph of General Motors U of Chicago Press 2002
  • Gustin, Lawrence R. Billy Durant: Creator of General Motors , 1973.
  • Halberstam, David. The Reckoning (1986) detailed reporting on the crises of 1973-mid 1980s
  • Keller, Maryann. Rude Awakening: The Rise, Fall, and Struggle for Recovery of General Motors, 1989.
  • Leslie, Stuart W. Boss Kettering: Wizard of General Motors Columbia University Press, 1983.
  • Maxton, Graeme P. and John Wormald, Time for a Model Change: Re-engineering the Global Automotive Industry (2004)
  • Maynard, Micheline. The End of Detroit: How the Big Three Lost Their Grip on the American Car Market (2003)
  • Rae, John B. The American Automobile: A Brief History. University of Chicago Press, 1965.
  • Sloan, Alfred P., Jr. My Years with General Motors, 1963.
  • Weisberger, Bernard A. The Dream Maker: William C. Durant, Founder of General Motors , 1979

See also


Automotive brands of General Motors GM, logo
Buick | Cadillac | Chevrolet | GMC | Holden | Opel | Vauxhall | GM Truck & Coach Division
Affiliates: GM Daewoo (50.9%) | Suzuki (3%) | Isuzu

References

  1. "GM, Delphi Offer Buyouts, Early Retirement". Archived from the original on 2007-11-23. http://web.archive.org/web/20071123051552/http://www.cbsnews.com/stories/2006/03/22/ap/business/mainD8GGTD280.shtml. Retrieved March 23 2006. 
  2. "article". Detroit Free Press. http://www.freep.com/apps/pbcs.dll/article?AID=/20060323/NEWS11/60323002. Retrieved March 23 2006. 
  3. "GM to sell 51% of GMAC for $14 billion". Automotive News. http://autonews.com/apps/pbcs.dll/article?AID=/20060403/REUTERS/60403001/1078/BREAKING&refsect=BREAKING. Retrieved April 3 2006. 
  4. "GM sells Isuzu shares for $300 million". Detroit News. http://www.detnews.com/apps/pbcs.dll/article?AID=/20060411/UPDATE/604110423/1148/AUTO01. Retrieved April 12 2006. 

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