Case Study Analysis: GMAC Essay
Case Study Analysis: GMACINTRODUCTION:Thesis:After suffering from three consecutive quarterly loss in profit, from $1.
6 billion to $3.8 billion in 2005, and to produce higher yield for its stockholders, GMAC embarks on an urgent bid to restructure, slashing 30,000 jobs and closing of 12 plants in the U.S. and Canada till the end of 2008.
Background:GMAC, the world’s biggest automaker, to stave off an imminent bankruptcy possible to occur in two years, opined by many financial analysts reported by Editorial Board (2005), was invalidated by its CEO Roger Wagoner. The company’s declining share in the US market, now only at 25%, down by half, stems from its own complacency to design and introduce more fuel-efficient cars in the market that began in the 1970. Instead, stubbornly, it continued to set the luxurious standard of the American public for big and spacious vehicles, has come to a screeching and hurtful halt. This attitude, in part, accounts to an overstock of SUVs. A painful realization for the company was that customers, by nature, are volatile, and are driven by economic forces, especially, by the lingering instability of fuel prices.One other issue pertains to the situation that the company’s long-term goals are subordinated to the demands of wealthy investors, the like of Kirk Kirkorian, GMAC’s biggest investor.
(Isaacs, 2005) Any big demand to pull out their stocks can create a dentCase Study Analysis GMACin the company’s capital pool. By its nature, any business pursuits of its long-term goals, consequently, are being hindered and bridled. GMAC is as much vulnerable as any other corporations in this respect.Major effect of the problem is felt on the company’s attack on its workers’ health care programs, extending to the retirees benefits. With the company’s profit margin pattern been wacky in the past, negotiations have actually resulted to temporary agreements where the workers will be accepting a “defined contribution” where for the first time in the company’s history, workers are co-paying for medical insurances.
The problem has rattled the UAW organization, after having been accepting concessionary deals, in an attempt to avert the corporate collapse, but in the process infuriating the retirees and other employees to the point that they are going to court suing their own union. (Read Isaacs, 2005).Alternatives:1. Mobilize the think tankers to design line of cars with unquestionable fuel efficiency, using all the available resources and technology available to the company to attain the goal.To compete with the competitors, GMAC must mobilize its designers for lines of cars with unquestionable fuel efficiency. Utilizing all the available resources and technology is the way to do it, which GMAC has in its disposal.2.
Pay close attention to economic forecasters.Case Study Analysis GMACPaying closest attention to economic forecasters, and use it as guide in the forecast of the oil price, by which the price index is pegged. In staff economists could provide this service, and should not be so costly a pool of staff to keep inhouse. In case superfluous a part of the organization, similar services are available externally from companies, just like the weather forecasters selling to the public and government.3. Utilize best designed surveys to identify the whims and dispositions of consumers.
Finding the whims and consumer dispositions on buying cars, and mixing them up to come up with a highly popular model of cars. Consumer survey companies are plenitude, and it is the closest to forecasting as can be to come up with more realistic picture of the community of buyers. 4. Lobby the government to sponsor regulations that would cap sales or to assign higher tariffs on foreign car imports.
While it may be an anathema to capitalism, but putting restrictions on importations of cars, with a preconceived notion that without control, imports pose to topple the indigenous companies with devastating effect on the national economy.5. Appeal to the government with a strong sense of nationalism to implement research on alternative fuel.Seeking for an alternative fuel, since the majority of it is controlled by the OPEC nations, themselves, profit-centered and power wieldy, America stands to sustain its own stability if it has its own source of inexhaustible supply of alternative fuel. To this end,Case Study Analysis GMACthe US car companies should endeavor to appeal to the government for their unstinting focus.6.
Seek for strict regulations against financial speculators.An emerging value of greed among big financiers and corporate officials, do not in any way, help for the sobering of the economy where it will become stable. Government intervention is required here in the form of legislations.
There should be a limit to the wanton appetite of many wealthy people, which should be capped, if not left unchecked. Let human nature be the guide, that we are intrinsically greedy.The lists above are all applicable and viable solutions on its own, and all at once executable. But considering the exigent nature of the situation, demanding urgent, practical, and rational solutions, the most efficient measure for GMAC to adopt and arrest the problem, short-term and long-term benefit is to activate its own designers. Fuel efficient and aesthetically built cars are the ultimate and permanent solutions.
Proposed Solution:From among the alternative lists of solutions, I highly propose the American auto designers to employ the highest source of intelligence and creativity. The aerospace principles and discoveries should be incorporated into the design. Bright minds are plentiful in America, and they are young, astute, and research savvy.Recommendations:Insidious as the problems have been, prove a point of a definite neglect and complacency that characterized the GMAC attitude as a corporation. We’ve noted theCase Study Analysis GMACdysfunction the problem has caused, in general, to the corporate structure manifesting in the drastic measure of massive lay offs and plants closings.
Bad of all the results are theCase Study Analysis GMAC ire, ill-will, contempt impacts on workers, active and retirees, with an ultimate percolating effect in the national economy.To this effect, foremost, I feel that each member in the organization is well advised to maintain a corporate sense of discipline, led by the CEOs and stockholders that instead of pursuing for insatiable profits, they should have egalitarianism foremost in their minds. Teach the dogma of wealth accumulation has a satiation point and spiritually decadent. This should inhibit the corporate high officials in engaging oneself in excessive self- rewarding.
GMAC is also well-advised that in a highly changing and competitive corporate climate, GMAC, to be lead by the CEO, with strong united support from the workers, should have in place, an idea pool, by which to encourage and motivate one another for ideas and solutions.APPENDIX 1 Case Study Analysis: GMAC 2005BIBLIOGRAPHY:Isaacs, Jerry (2005). Delphi demands US auto workers accept poverty wages. World Socialist Web Site.The Editorial Board (2005). General Motors to close 9 plants, slash 30,000 North American jobs. World Socialist Web Site.
