GM Analysis_en

FINANCIAL STATEMENT ANALYSIS

GENERAL MOTORS, GM, Corporation/Company

PREPARED BY: YOSEF ABU-NADA

SUPERVISED BY: LECTURER: EMAD ABUSHAABAN

Executive Summary

Chosen industry:This analysis focuses on the automotive industry, specifically, large-scale manufacturers of automobiles.

The automotive industry is inherently interesting: it is massive, it is competitive, and it is expected to undergo major restructuring in the near future due to globalization and decreasing oil reserves. The analysis team members (we) feel qualified to perform this investigation due to our familiarity with the industry and our education—several of us have studied and worked on problems associated with automobile manufacturing and we are all mechanical engineering graduate students.Analysis Methodology:The report begins with a historical overview of the automotive industry. This is followed by an analysis of the industry’s structural characteristics using Porter’s 5 Forces Model as a framework, which provides an understanding of the automotive industry as a whole in its current state.

Next, ten representative companies of varying sizes are analyzed and compared; the chosen companies and selection criteria follow. General Motors, Ford, and Toyota were chosen because they are the current market leaders.DaimlerChrysler, Nissan, Volkswagen, and Honda were chosen because of their status as stable international companies who have been in the automobile business for many years. Hyundai, Maruti Udyog, and Shanghai Automotive Industry Corp., based in Korea, India, and China, respectively, were chosen based on their growth potential and their status as relatively new to the industry.

Major Findings and Conclusions:

In the conclusions section, we identify and describe attributes of successful companies including:

production efficiency, well-planned cost structures, manageable size, distributed management of brands, attention to underserved markets, focused strategy, and well-respected brands and products. We then move from specific company attributes to identifying key trends in the automotive industry as a whole including: international expansion, conglomeration in mature markets, distributed competition in new markets, increased environmental regulation, increased energy constraints, and increased operational efficiency. Using these trends, we predict where the industry is headed and how it will evolve to meet new challenges.

GM History - A Brief History

The founding of General Motors on September 16, 1908, drew little attention. Motorcar firms were appearing virtually everywhere.

Success for the young automotive concern was not predestined. There was no guarantee of a place in the market or assurance of any profit. Of the nearly 1,000 companies that tried to build and sell motor vehicles prior

to 1927, less than 200 continued in business long enough to even offer a commercially suitable vehicle.

Most of the companies that comprised the young General Motors Company were weak, and their operations were uncoordinated. Many were in debt. It was not until the 1920s, when a new concept of management was forged and a new concept of product emerged, that GM really began to prosper.

General Motors sales for its first full fiscal year ending September 31, 1909, totaled 25,000 cars and trucks, 19 percent of total U.S. sales. Net sales totaled $29,030,000 and its payroll at the peak of the manufacturing

season numbered more than 14,000 mostly in Michigan. In 1995, GM sold 8.3 million cars and trucks worldwide with net income of $6.9 billion and worldwide employment averaging 714,000 workers.

General Motors has 284 operations in 35 states and 158 cities in the United States. In addition GM of Canada operates 21 locations, GM de Mexico operates 5 locations, and GM has assembly, manufacturing,

distribution or warehousing operations in 49 other countries, including equity interests in associated companies.

General Motors has operations in 41 countries outside North America and accounts for about 17 percent of the vehicles sold in the world's competitive markets. GM operations outside North American accounts for

over one-third of the corporation's vehicle sales. GM products (of all types) are sold in 170 countries around the world.

GM History, 1902-1920

The nucleus of the fledgling General Motors was the Buick Motor Car Company. It was formed in 1902 by David Buick in Detroit and later moved to Flint, Michigan, where William Crapo Durant, "king of the carriage

makers," took control. Durant, who brashly predicted that "a million cars a year would someday be in demand," oversaw Buicks rise to become the second largest and most influential automobile manufacturer in the

country. He also began organizing a network of suppliers and producers.

When General Motors Company was incorporated as a New Jersey firm, Flint had a population of about 25,000 and four streetcars. It was more than three months before Flint papers carried a single story about the new

enterprise.

Early members of the infant GM family were Buick, Oldsmobile, Cadillac, Oakland (now Pontiac), Ewing, Marquette, Welch, Scripps-Booth, Sheridan, and Elmore, together with Rapid and Reliance trucks. GMs other U.S.

automotive division, Chevrolet, became part of the corporation in 1918.

Only four of the car lines -- Buick, Oldsmobile, Cadillac, and Oakland -- continued making cars for more than a short time after their acquisition by GM. By 1920, more than 30 companies had been acquired by General

Motors, by purchase of all or part of their stock. Two were forerunners of major GM subsidiaries -- the McLaughlin Motor Company of Canada (which later became General Motors of Canada Limited) and the Fisher Body Company, in which GM initially gained a 60 percent interest.

Although legally a New Jersey corporation, all of GMs original facilities were in Michigan, and Mr. Durant encouraged other firms to locate their facilities in the state.

By 1911, the idea of a general staff organization had gained more than a toehold in the company, and a director of production was appointed. The company began to "create a general staff of mechanical engineers, gasoline

engine engineers, designers, production experts and other experts not attached to any particular factory, but whose advice and services would be available (to) ... the necessarily more limited staff of each individual

factory."

A testing laboratory also was established, as the annual report said, to "serve as an additional protection against costly factory mistakes and give the purchaser of every one of our machines an additional guarantee

not merely for his comfort, but to assure his safety."

This notion of consulting, advising, fact finding and testing is the genesis of GMs present comprehensive staff organization. Today it covers such fields as design, engineering, manufacturing, research, labor

relations, marketing and advertising, personnel, purchasing, consumer relations and service, environmental and energy activities, industry-government relations, communications, finance and legal.

About the same time GM was getting started in Michigan, an engineering development that was to prove critical to GMs subsequent leadership in research was occurring in Dayton, Ohio -- the introduction of the electric

self-starter. Designed by Charles F. "Boss" Kettering at his Dayton Engineering Laboratories Company, it first appeared on 1912 Cadillacs and, by doing away with the dangerous and unpredictable hand crank, definitely

popularized motoring. More than any other development, the electric self-starter is credited with making motor cars more accessible to a greater part of the population.

"Boss" Kettering later became the scientific mastermind of the corporation, in charge of its unparalleled research and engineering programs. He joined GM in 1920 when the Dayton Research Laboratories were merged into GM and moved the Research Laboratories to Detroit in 1925. He remained with the corporation until his retirement June 2, 1947.