Crisis of General Motors

The last decade brought many financial difficulties for General Motors and the company faces many upheavals. It bid bye to its major shareholders, took wrong decisions, kept consistency and stubborn attitude on implementing the wrong made policies and finally found them being kicked out of the automotive market. Had it been another or any small company, you may assume that soon its models will be out and people will find themselves in hassle how to get rid of the taken vehicles from the company but surely this is not the case with GM.

General Motors continued its growth and managed to take it out of the storm. It was not as easy yet it forced the company directors and the policy makers to think seriously and plan some strategies to cope with the crisis. The company took certain steps which somehow brought it back to the market. It compromised on the engineers and kept its products going in the plants for having the business alive. One of the genius examples of compromising on the engineering is the trimming of Hummer’s width. When Hummer V3 was launched, the customers wanted it to be wider as being a small truck or pick up. Very genius, GM trimmed 6 inches which widened the vehicle and saved millions of dollars.

This is not old less than a decade that General Motors marked the giant position in the world auto vehicle industry. Though it suffered many financial crises and the economic distress yet it healed back and bounced its business right in the next years. The company was under worst conditions of financial stability on account of the one of the worst crises faced by it in 2005-06. All was caused due to the threat alarming business made by Toyota which led GM quite aside and exceeded its brands sales and surely became the giant threat for GM.

General Motors tried to save the reputation of not only of the company but also thought of the revival of the auto vehicle industry in United States. This led him to make certain strategies and plans. These devised strategies felt General Motors in the whirlpool where it has to pay heavy price charges instead of securing its sales back. Though there were multiple strategic plans which caused this economic disaster of GM, yet the most important to be mentioned is its contract with FIAT made in the year of 2000. It was a mega deal made between two giant companies whose sole aim was the restoration of automotive industry.

FIAT is one of the founder companies of automotives in Europe. It rules over the European market yet has the declining sales in japans and American automotive markets while Japanese brands hold a significant size of the US auto market. The true essence of the deal died with the CEO of FIAT. As per one of the conditions, FIAT had a right to compel GM for buying the remaining shares of the company. GM decided to take off the deal and accepted the heavy penalty paid to FIAT. The strategic contract failed between two companies and as it was violated by GM, it has to pay off heavy price charges.

One of the main reasons for the crisis of 2005 was the outbreak of two huge wars led by United States on Iraq and Afghanistan. These led to the sudden rise of oil price in the world market which led consumers to give the demand of high petrol consuming vehicles. This factor brought a general power recession period in US market and many companies and stakeholders faced the decline in sales and some were ceased and bankrupt.

Bankruptcy and the general power recession performed very major role in the fall down and the crises of General Motors. The company ran on the debt because it has already made a policy for the customers to own a car on credit. Company failed to borrow money needed to drag itself out from the storm of this financial disaster.

One of the misstep taken by GM was the high prices of the stickers. With the period of recession, many companies offered low sticker prices while GM kept the same high sticker price. This took GM’s customers away and they considered the cars of the competitor companies which offered low sticker prices. It was very late that GM realized that its slow financing deals and high rebates is very damaging and can bring the disastrous effects on its sales. But it was too late for the company to recover the loss.

Another common but the great mistake made by GM was the wrong policy of advertisement. It kept on emphasizing the promotion of the heavy incentives while the car was always found in the background. This wrong advertisement policy did not let the customer to consider the car instead of the incentive policy offered by GM.

By: Ammarah Khan


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