Reference no: EM131449960

Question: GM Woes

In 32 countries around the world, General Motors (GM) produces approximately 20 000 cars and trucks each day. With over 300 000 employees, it may be the largest employer on the planet. However, once a highly profitable, successful company, GM is now struggling. Its inability to adapt to changing times and changing tastes has led to a steadily shrinking market share. Does GM have enough gas for the long haul? Japanese and Korean automakers have muscled onto GM's turf, outspending GM two to one on research & development. For example, Toyota rolls out smaller, more fuelefficient cars that consumers want and continues to build new assembly plants in North America. Toyota Canada enjoyed its biggest-ever Canadian sales month in April 2006, despite overall industry sales being down by 5 percent from last year. In contrast, GM took a major hit in April 2006 when it discontinued the deep discounts and incentives it was using to boost profits-sales for the month were 18.8 percent lower than sales in April 2005. Joseph D'Cruz, business professor at the University of Toronto, equates GM's situation to that of a huge powerful ship, stuck in a sea full of dangerous icebergs. The treacherous thing about an iceberg, D'Cruz notes, is that you can see only 10 percent of it above the surface.

D'Cruz sees five key problems lurking below the surface at GM, divided into two categories: people problems and production problems. People problems include GM's crushing health care costs, a pension plan that is seriously underfunded, and a rigid top-down management structure known more for bureaucracy than decisiveness. Health care costs for GM's American workers have been in the spotlight, and for good reason. GM spent $5 billion (US) on health care costs in 2005, with more than $1 billion spent on drugs alone. Health care adds $1500 to the costs of every vehicle GM produces in the United States. It's a cost that GM's Japanese and Korean rivals, who have a younger workforce, don't face. As a result, GM is threatening to cut health care for tens of thousands of its retired employees and is pressuring its unions to reopen contracts and give back some of the health benefits they won at the bargaining table. On the production front, GM produces too many brands and a vehicle lineup that does not excite customers. Even GM bosses admit their vehicles don't have the same pizzazz they once did. The pressure to build more stylish vehicles is urgent because the competition is doing so. The spike in oil prices has also hurt sales of GM's most important vehicle, the Sports Utility Vehicle (SUV). With gas prices heading higher and higher, consumers are now demanding fuel-efficient vehicles. The problems are deep and vast at GM, says D'Cruz, and with all the menacing icebergs he believes it should seek help from the courts and apply for bankruptcy protection in the United States while it reorganizes itself. Swamped with so many problems, GM faces a turbulent future.

1. GM was compared with the Titanic. Do you agree with this comparison? Why or why not?

2. What challenges does GM face at the organizational level?

3. What challenges does GM face at the individual and group levels?