General Motors Failure Analysis Essay
Business & Management What factors led to General Motors’ 75% drop in share price over 10 years? General Motors, like many corporations in the automobile industry, are struggling more than ever through the economic downturn. However, it is imperative that one consider the many other factors that has impacted General Motors to the extent that it’s stock declined by more than 70% over an eight year period.
This dramatic descent exposes the troubling cracks within the company’s apparently fragile framework, and it thus becomes essential for the company to gain an understanding of its problems and subsequently form a motion going forward that would solve these underlying issues. This self-awareness and confrontational approach to its issues, a sharp contrast with the denial and ignorance the company has been described as having during it’s seemingly perpetual freefall in value, could prove to be the company’s second saving grace after the substantial bailout gifted by the Obama administration.
The most crippling of factors adversely affecting the company is the ruthless competition it is up against within both its domestic and foreign markets. Although it can be said that General Motors was for an extended period its own worst enemy in numerous mistakes that only resulted in tarnishing its image, it can equally be said that the near flawless performance and efficiency of its Japanese and German adversaries have contributed significantly to their drop in market share. This issue is primarily revolving around quality and reliability problems that have risen from the company’s lack of direction and vision.
At Bob Lutz’s (former Vice Chairman at GM) own admission the company failed to implement adequate quality control and assurance measures during the late 90’s, early 2000’s and onwards, which were sacrificed for the sake of meeting production output quotas. This leads on to the other flaws in its design department, where many if not all of its vehicle line-up were gravely ill designed and impractical. The focus of the company deviated from crucial and forward-looking concepts such as fuel economy, efficiency, environmental friendliness, aesthetics (exterior and interior finishes) to name but a few.
The company failed to act when development, expansion and other potentially beneficial opportunities would have set solid foundations for a successful and profitable future, and has gradually fallen victim to its passivity and limited foresight. This is especially evident in the company’s failure to learn from the fuel crisis in the 70’s when the company suffered heavy losses, and has thus caused the company to be just as vulnerable in the contemporary context.
There are many instances in the company’s history where its competitors have beaten them to the market with products that were under development long before General Motor’s version or competing product was in the works, with the Ford Mustang being a prime example. This is exemplified in its severely misguided judgment to focus its efforts on the SUV and truck industry, in which the company erroneously predicted its long term success would derive from. This proved to be a failure in ideology, perhaps proving the company was slow, insular and bureaucratic as critics have described.
These missteps and company-wide narrow-minded and backward thinking led to a domino effect of issues that arose as a direct consequence from the flawed policies and direction plaguing the company, leading to a particularly sharp decline in domestic sales and market share in the US. The company is no longer able to engage customers in the US as it once did with the Camaro in 1957, a car that evoked emotions within many in the general public and was and still is desired by car enthusiasts.
This near legendary status of the Camaro as well as many other successful projects in the 60’s and 70’s built a formidable brand image and reputation. This established customer loyalty and a hardcore devotion to the company from many within and without the US’s borders, an invaluable asset to have in the automobile industry. The many regressive steps taken by the company during the 80’s, 90’s and early 2000’s have led the company astray – aligning the company with negative associations such as poor reliability, design and quality.
This has led to a decrease in its customer base throughout the US and customer loyalty has mostly ceased to exist. The company lost its connection to and understanding of their customers, resulting in the company no longer being able to provide for their essential needs and expectations. This loss of trust and faith in the company will be incredibly difficult to re-establish, and will only make the standard to which its product line-up will need to meet all the more challenging to reach.
The mistakes made by the company as a whole are near suicidal, and have compounded with the economic downturn to nearly bankrupting the company. This is the consensus reached by many industry analysts and the stock market reflects the widespread doubt and skepticism felt by many regarding the future of the company. The company is thus in a position to prove itself as a worthy contributor to the highly competitive and cut-throat industry in which it hopes to succeed, and it is truly up to the company to learn from its past mistakes and take advantage of its new lease of life.