Discuss two alternative solutions to address each issue and select the ones you think are more effective, providing theoretical arguments for your choices.

CASE 23 GENERAL MOTORS IN 2019 In 2019, General Motors (GM) was in the midst of a great Peugeot and Citroen cars. The sale had freed the flem from transformation. Mary T. Barra, the CEO of GM was mos persistent losses in Europe and fulfilled pledges by Mary to ing the firm away from many of the passenger cars that it improve overall profit margins and increase returns to had sold to generations of consumers. It had also moved shareholders (see Exhibits 1 and 2). away from many overseas markets, knocking the leading Industry analysts had expected that Barra, who had U.S. automaker out of the chase to be the top seller glob worked for GM her entire career, would let the firm re ally, a spot it had owned until recently. A couple of years lapse into the arrogance, complacency, and denial that ago. GM had exited from the European market by selling its had plunged it into bankruptcy in 2009. Instead, Barra chronically unprofitable Opel unit to the French maker of has been preparing GM to be a formidable player in the future. She has pushed the firm to be more involved with new developments, such as electric vehicles, ride sharing. Cappared by lasa Sunde Michigan State University, with the and driverless cars. When the firm launched its first hy ace of Pearl I., Pace Winnerdy Material ben brid car, the Volt, in 2010. It was significantly lagging be drawn from publicades to be a far para el cas discusion hind all other competitors in terms of investing into Copyright 2007 Jual Sed emerging technologies. Nevertheless, Barra claimed that EXHIBIT 1 Consolidated Income Statements in millions of dollars Years Ended December 31, 2017 2018 2016 $133.449 $133,045 14.004 147,049 12.129 $140,205 3979 149.184 145.5 120,556 116.229 121,784 12,298 11.128 8,369 9,650 9.570 10,345 Net sales and revenue Automotive GM Financial Total net sales and revenue Costs and expenses Automotive cost of sales GM Financial interest, operating and other ponses Automotive selling general and administrative expense Total costs and expenses Operating income Automotive interest expense Interest income and other non-operating income, Equity income Income before income taxes Income tax expense Loss from discontinued operations Net income (s) 140,498 142,504 4,445 135.927 8.651 8,586 555 575 563 1,503 2.596 1.645 2,163 8,549 2122 11.853 2.282 12,008 2,739 474 70 8,005 11,533 4212 13.882 9,260 Srce GM Anal Report 2015 C178 CASE 23: GENERAL MOTORS IN 2019 December 31, 2018 December 31, 2017 EXHIBIT 2 Consolidated Balance Sheets in millions of doll $ 20,844 5.966 $ 15,512 3313 6,549 8.164 26.850 9.816 247 20.521 10.653 1.106 5.021 4455 75,293 68.744 25,083 21.208 9.215 9.073 36.253 38,758 5.579 5.849 43,559 42 882 23.544 ASSETS Current Assets Cash and cash equivalent Mareatable securities Accounts and notes receivable net of allowance of $211 and 5278) GM Financial receivables, nat Inventories Equipment an operating lases, nat Other current assets Total current assets Non-current Assets GM Financial receivables, net Equity in tasts of nonconsolidated affiliates Property, nat Goodwill and intangible assets.net GM Financial equipment on operating lases, net Deferred income taxes Other assets Total non-current assets Total Assets LIABILITIES AND EQUITY Current Liabilities Accounts payable principally trade Short-term debt and current portion of long-term debit Automotive GM Financial Accrued abilities Total current les Non-current Liabilities Long-term debt Automotive GM Financial Postretirement benefits other than pensions Pensions 24,082 5.770 4929 152.046 143.738 212.482 227329 $ 22,297 $23.929 935 2515 30,956 24.450 28092 25.995 22.237 75 890 13,028 10.987 60.032 56 257 5,370 5.998 11,533 13.746 continued CASE 23 = GENERAL MOTORS IN 2019 CTM EXHIBIT 2 (Continue December 31, 2018 December 31, 2017 13,263 12,204 102,225 98,192 184,562 176.282 14 14 25,563 25, 371 Othorlab Total non-cument tables Total Liabilities Equity Common stock $0.01 par value Additional paid in capital Retained earnings Accumulated other comprehensive loss Total stockholders equity Noncontrolling interests Tuled Eyully Total Liabilities and Equity 22,322 17,627 19.099 (8,011) 38,850 35,001 3,917 1,199 42,777 $ 227,399 30,200 $212,482 Source: GMA Report 2018 it was an important first step in acknowledging where Moving through Bankruptcy GM needed to go GM has witnessed a long decline from its dominant post Since then, GM has launched the new all-electric Bolt, tion in the 1950s when it held almost 50 percent of the which promises an almost 240-mile range between charges U.S. market for automobiles. A succession of CEOs over for a price of $30.000 after federal tax credits. It has moved the years failed to halt its decline in spite of their resolve quickly to beat Tesla's new budget-priced Model 3 to market to turn things around. When Richard Wagoner took over In January 2016, GM announced a $500 million investment in 2000, he carried out three major restructurings, elim- in Lytt the country's second largest rideshare service. It nating dowens of plants and tens of thousands of jobs, and subsequently worked with Lyft to develop a program that jettisoning hundreds of dealers. In spite of these efforts allows Lyft drivers in seven big cities to rent GM cars at a GM announced a loss of $30.9 billion dollars for 2008 discount. A few months later, the firm apsint si bien ac amounting to a staggering $50 a share. The firm had not quiring Cruise Automation, which has built a complex ar managed to post a profit since 2004, running up cumulo ray of software and hardware that uses artificial intelligence the losses of over $82 billion between 2005 and 2009 that can lead to driverless cars. Wagoner eventually began to run short of funds and In order to shift its resources to fund these new initia turned to the U.S. government for loans in order to sur tives, GM announced in November 2018 that it was halting vive, but the Obama administration demanded his resign operations at four plants in the United States and one in tion for its support Canada, resulting in the loss of 6.000 factory jobs. All of Wagoner was replaced on an interim basis by Prederick these have been losing money because they have been pro A Henderson, who had been president and chief operating ducing small and medium sized cars such as the Chevrolet officer of the firm since 2008. Under Henderson, the firm Cruze and Impala and the Buick LaCrosse. The firm also was asked to negotiate with bondholders and the union for plans to trim its salaried staff by 8,000 representing over a further concessions in order to reduce its bloated cost third of its white collar employees structure. Unable to reach any agreement, the firm an By making all of these moves, GM is, in fact, construct nounced in late July 2009 that it must seek Chapter 11 ing a portfolio of assets that are dedicated to disrupting its bankruptcy protection. Under the terms of the bankruptcy own core business from within. Even as it lays of its older protection, GM was able to wipe out a big chunk of its debt. workforce, it has been recruiting younger employees with reducing this from over $46 billion before the filling to lelky-lawy skills gu cyd al vele mund $17 Lillian Wardhaving a $1 ili u ya design and engineering. The auto industry is on the cusp in interest payments. The U.S. government agreed to invest of change, and GM has to prove that a longtime established another $30 billion into the firm, in addition to the $20 bil- player is up to the task said Michelle Krebs, a senior ana lion it had already contributed, in exchange for 6 percent lyst for the car shopping site Autotrader! of stock in the new GM Shortly after the bankruptcy filing, changes were made the firm hired to conduct a three month investigation of the to the board of directors and there was a shake-up of the decision to ignore the problems with the ignition switch. Its ranks of GM's senior management. The new board was de findings indicated that all issues that arise are typically termined to address problems that had been laid bare by passed through a number of committees without being to the task force that had been assigned by the government to solved. Furthermore, no minutes were taken of any of the investigate GM in early 2009. They had been particularly meetings to indicate who was responsible or accountable astonished by the emphasis on past glories and the for any decisions that were taken. commitment to the status quo they had found to be quite Valukas concluded that shifting responsibility for prob widespread among the firm's management ranks. "Those lems to others was deep in the firm's DNA. He referred to values were driven from the top on down." said Rob a GM salute that involved acrossing of arms and painting Kleinbaum, a former GM executive and consultant. "And outwards toward others, indicating that the responsibility anybody inside who protested that attitude was buried. belongs to someone else. In particular, Valukus found that Over the following year, GM was led by two different board employees at GM were given formal training about how to members Edward E. Whitacre. It ran the firm for about a avoid accountability in documenting any safety issues. They year before being replaced by Dan Ackerson. Ackerson had were told to avoid using words such as problem or defect and been appointed by the US government as a board member replacing them with softer words such as safety or condition. during GM's bankruptcy. A no-nonsense former my officer, "The story of the Cobalt is one of a series of Individual and Ackerson began to address the various problems that contin organizational failures that led to devasting consequences, ued to plague the firm. There was a strong consensus among Valukas stated to a committee hearing. the executes that the company was beginning to change its Under Barra, GM executives did move quickly to te approach to its business. Shortly after he took over, Ackerson spond to the safety problems. The firm ordered the dis wrote in an interal memo "Our results show that we are missal of 15 employees, including a vice president for changing the company, so we never go down that path again." regulatory affairs and several corporate lawyers, and disc In January 2014, GM was finally able to move past the plined others. It appointed a new global head of vehicle bankruptcy as the govemment-appointed Ackerson was re- safety and named a new vice president in charge of global placed by Barra, who worked her way up within the firm product integrity. GM also decided to more than double to and unele Diwan Vs by wwi 35 cm fakty lustgas i would work will bile company. She has been a rankand file engineer, a plant engineering. Finally, it also hired a compensation expert to manager, the head of corporate human resources, and most examine claims and make cash settlements for those that recently the senior executive overseeing all of GM's global either died or were injured as a result of accidents caused by product development. Barra's appointment came on the the defective ignition switch. "We are a good company." heels of the sale of the last shares that the US government Barra insisted. But we can and must be much better had held of the firm, finally making it free of its bankruptcy obligations. This is truly the next chapter in GM's recovery Focusing on Fewer Brands and turnaround history." Barra told employees upon her up One of the lansea that had wrcated with for year was pointment. "And I am proud to be a part of it.** the number of brands of vehicles that it offered. For years, Responding to Safety Concerns the firm had built its position of dominance by offering cars that were designed for different customers by separate di Even as Barna was working on making GM more effective, sions. Each of these divisions came to represent a distinct GM ccecutives decided that a recall of the 619,000 Chevroletnameplate or brand. Its extensive brand lineup had long Cobalts and Pontiac GSs was necessary Questions were raised been GM's primary weapon in beating back both domestic about the delay of several years in recalling these vehicles in and foreign rivals. But as the firm's market share began to spite of knowledge of a faulty ignition switch that would cause decline, it became difficult to design and market cars under these cars to shut off and disable its altas. In 2004, engineers several brands. In order to cut costs. GM began to share had suggested a fix, but excecutives decided against it because designs and parts across divisions, leading to some loss of of potential delays and cost overruns in production. GM distinctiveness between the different brands. finally decided to my after the reports of accidents that had Analysts had been questioning for many years GM's de led to deaths and injuries could no longer be ignored. This was cision to stick with as many as eight U.S. brands, with its particularly embarrassing for the firm s GM had developed final addition of Hummer. The decision to carry so many the Cobalt to show that it was no longer cutting comers and brands had placed considerable strain on GM's efforts to was capable of making competitive small cars. revamp its product line on a regular basis. However, the In testimonies before a subcommittee of the House firm finally agreed to cut out four of its brands-Pontiac, Committee on Energy and Commerce, Barra acknowledged Saturn, Saab, and Hummer-when it was forced to turn to that the safety problems had resulted from deep underlying the US wernment for funding to stay afloat. A. Andrew problems with the GM culture. A report was released in Shapiro, an analyst, believes that GM should have started June by Anton R. Valukas, a former U.S. attomey whom to think seriously about cutting back on its car divisions ONS 22 IGRAL MOTORSIH 2210 121 EXHIBIT 3 Market Shares Years Ended December 31, 2017 2018 2016 GM 21.516 16.6% 4.670 Market Market Market Industry Share Industry GM Share Industry GM Share North America United States 17.694 2954 16.75 17.570 3.002 17.15 17.06 3.00 17.0% Other 3.835 536 14.0% 3,986 574 14.45 3,993 587 14. Total North America 21.529 3.490 16.2 3576 16.6% 21,870 3630 Europe Total Europe 19.045 19.190 6ES 361 18,620 1.161 6.73 Asia Pacific, Middle East, and Alica Chinala 26.466 264 13.8% 28,231 4041 14.3% 28,274 3.914 13. Other 22.252 555 2.5% 21,287 629 3.0% 20,602 720 3.5% Totalca Pacific, Middle East, and Alica 48.718 4200 49,518 9.4% 48,876 4634 9.5% South America Brazil 2.566 434 16.9% 2,239 394 17.6% 2,050 346 16.9 Other 1919 256 13.3 1,928 275 14.3% 1,523 237 14.6% Total South America 4.485 15.45 4,167 16.15 3,673 583 15.95 Total Worldwide 93.777 8.384 8.9% 94,431 9.600 10.25 93,048 10.000 10.8% United States 5.351 550 10.45 6,145 709 11.55 6,895 890 12.9% Trucks 5.351 1,360 25.4 5,041 1.328 26.3 5,464 1.325 24.2% Crossovers 6.972 1,034 6394 955 5523 828 15.00 Total United States 17.694 2954 16.7 17570 3.002 17.15 17.882 3043 17.0% Chinal SGMS 1149 1.905 1.806 SGMW and FAN-GM 1.896 2.135 2.100 Total China 13.8 21.231 4041 14.3 28,270 3914 13.81 (a) Indudes sale by the Automotive Chir SAC General Motors Sales Co. Lad (SGMS), SAC GM Wuling Automobile Co. LSGMW) and WON-GM Light Duty Creacial Vehicle Ca... (NGM) they ended December 31, 2015, wholesale ked for Industry GM and Maria Share. Our totalice ale in China 1,7 in the year ended December 31, 2016 Srce GMA Report 2018 Cars 143 15.15 26.466 1545 during the 1980s. There are always short-term reasons for brand, with over 60 percent of its sales now coming from not doing something." explained Shapiro. outside the United States (see Exhibits 3 and 4). Recent sales Since it has cut down on its brands. GM has been working have been driven by the new pickup trucks and sportutility on revamping its remaining lineup of cars. The firm has been vehicles such as the revamped heavy duty Silverado capable able to successfully rement Chevrolet as a global mass-market of towing 35.000 pounds with a diesel engine. But GM is also Years Ended EXHIBIT 4 Vehicle Sales deliveries in thousands December 31, 2018 December 31, 2017 476 617 969 926 522 591 155 156 219 207 555 562 2,954 3.002 United States Chevrolet Cars Chewiolat-Trucks Chevrolet Crossovers Cadillac Buick GMC Total United States Canada, Mexico, and Other Total North America Europe Opel/Vauhall Chevrolet Total Europe Asia Pacific, Middle East, and Arica Chevrolet 535 574 3.576 31.490 1,159 1.113 63 1.207 1.176 959 980 Muling 1.141 1,071 1,020 1,183 840 997 213 184 Buick Baojun Cadillac Other Total Asia Pacific, Middle East and Africa South America Total Europe Total Worldwide 97 4,200 690 195 4670 669 4 695 8,384 9.600 Source: GM on Fabrary 6, 2018 expecting to be successdal with its new Bolt allelectric sub the last couple of years, the firm worked on updating the compact car, which can run for almost 230 miles on a single brand by sticking to its image of "refined luxury but moving charge. An executive explained the motivation behind push away from being regarded as a living room on wheels. New ing to develop cars that move away from a relance on tal models of the Enclave. Encore, and Envision have been "We wanted to prove we could do it." designed to attract a younger, performance-oriented cus GM has also been focusing on strengthening its more up tomer. In spite of these efforts, China alone has accounted scale brands such as Buick and Cadillac. Buick, the oldest for as much as 80 percent of its sales. Buick is no longer active automobile brand in the United States, has been offered in most other markets other than the United States, catering to a shrinking population of people over 65. Over Canada, and Mexico CASE-SENCES IN 2019 Finally, GM continues to struggle with its Cadillac costs of making cars and enable them to travel more safely luxury brand, which has had difficulty in competing with at higher speeds. European automakers. It has slipped in quality ranking In order to prepare for its launch, Cruise is already 27th out of 31 brands in the J.D. Power 2018 U.S. Vehicle testing about 180 self driving cars in San Francisco. Its Dependability Study. The firm abruptly replaced four year vehicle, the Cruise AV, is a small electric car that has no Cadillac chief Johan de Nysschen who was leading a steering wheel or pedals. It navigates streets using nadar, $12 billion overhaul that was designed to make the brand cameras, and other sensors that allows the car's computer more competitive. Steve Carlisle, who has taken over, real systems to identify pedestrians, intersections, other veh izes the challenges the faces in reviving the fortunes of the cles, and obstacles. With no steering wheel, it has two pas brand. He has focused on improving its quality, boosting its senger seats in the front and a center console with a marketing, and better defining its identity. Cadillac has display screen, and also buttons and knobs for audio and done better with its strong selling XTS, a midsized SUV and climate control. hopes to do well with its newer XT4 compact SUV. "There's With Cruise GM may be the first to rush into the field. no excuse to not be at the top of the pack in vehicle quality but it faces plenty of competition from Ford, Uber, Lyft. these days," said Maryann Keller of auto industry analyst and Waymo. However, Barra is confident that GM is well firm Maryann Keller & Associates positioned to achieve succes. "I do believe General Motors is a tech company," she recently stated. "We put these prod Preparing for the Future ucts on the road that integrate 30,000 parts and have hun Even as GM is relying on pickup trucks and sport utility Cruise is well on its way to developing a potentially signif dreds of millions of lines of code in them already. In fact, vehicles to make profits in the short run, it is banking on cant market value. GM has brought in SoftBank, the Japanese electric vehicles and self-driving cars for its future. In technology giant, and Honda Motor, the Japanese auto November 2018, Dan Ammann gave up his job as president firm, as partners of GM to become chief executive of Cruise, the division working on autonomous vehicles. The unit was formed when Ammann spearheaded GM's acquisition of Cruise Firing on All Cylinders? Automation, a San Francisco start-up for more than $1 Barra felt quite confident that the investments GM has llion in 2016 (see Exhibit) been making will yield results in the future. Although the The appointment of Ammann has provided more man firm is relying heavily on profits from its trucks and SUVs, agement heft as it prepares to launch a driverless ride ser it is banking on its new initiatives. Not only is the Bolt the vice before the end of 2019. "This is technology that we first inexpensive long-range electric car on the road, it is wanted to develop and deploy in a massive scale," he stated also expected to function as the firm's platform for testing about the commitment to self-driving vehicles in a recent new models for ride sharing and autonomous driving Interview. In particular. GM is focused on a new technol. Soon after GM made an investment in Lyft. It also ogy known as lidar, which uses near infrared light to detect announced that it would launch a proprietary car sharing the shape of objects around it. It has been making invest service called Maven. A Zipcar like offering. Maven taps ments into advancements to lidar, which will reduce the into another possible future of mobility-replacing EXHIBIT 5 Income by Operating Region 5 million Years Ended December 31, 2018 December 31, 2017 $10.769 423 $11.30 1,300 16131 (7281 1,893 1,196 uwating som GM North America (GMNA GM International GM GM Cruise General Motors Financial Company, Inc. GM Financial Total operating segments Corporate and eliminations EBIT-adjusted SEGMT , Tamry 06, 2009. 12 357 13,772 574 1828 11,783 12.844 ownership with sharing. This startup within GM, which Bill Rock a 23-year veteran who has been working on the has features that are not available on Zipcar, lays the development of autonomous vehicles: "We're on the cutting groundwork for a possible future when Gowns and op edge here. It's a very complicated process, but it's the direc erates a fleet of its own autonomous cars that could also to the company needs to go." be tapped for ride sharing. ENDNOTES GM realizes that it faces considerable competition in 1. Vale. 30. CM W Drive the Cars That Drive this new arena from other car firms as well as technology Tharacter. New York Thu, Jane 04 firms. However, product chief Mark Reuss believes that the 2. Vlasic, 2009. Culture shock Gregge to shed a legendy firm has an advantage because with its acquisition of Surendracy. Now York News, November 13, p.1. Cruise, it is well positioned to integrate self-driving technol 1. De La Merced, 1. ad Vlasie 2012 US so shed its stake in ogy into its own cars. Over the last couple of years. GM has 2. already begun to incorporate aspects of self-driving technol chia ogy into a few of its models including software that alerts Aurational New Hot Tees, December 12,p.1. drivers if they veer out of their lane or that stops the car if it detects an imminent collision. Talking about the challenges naticmallarticle/Birgrilledo-socale210x.php about the use of this technology in cars, Reuss said: "The piece that is not well understood outside of the automotive 1. Maymund, M. 2008. Apalnial departure for me GM bende. Ne industry is how hard it is to take technology and integrate it GM into a car. It seems like you should be able to layer it in and have it work and that would be great and New Toy1 p.A. 3. LaRem. 1.2. Cadillac hopes to get back on track with new modelu. In spite of this push into new technologies, sales for the Tas Jused, p1 Bolt have so far failed to exceed a few thousand cars a Bordet, NE. 20. GM chief to take hele welf-driving dire month, hardly enough to make a profit. Similarly, the profit Nuk Th November 30, potential is even less certain with GM's investments into I. Vale, 2017.G.M. Was e Dhe e ata of Cans The Drive self-driving technologies. It has been pouring billions into Therectus. New Hot Tues, June 04 Cruise, its autonomous-driving unit, but even if its efforts 12. Tamet. I 2014. Mary Barral Remakine GM'sahur. And The Company Sex Camp, October I. are successful, it could be years before the firm may be able 11. Vil 2017. CM. Wants to Drive the Future of Cans That Drive to earn back its investments. Nevertheless, in the words of Thenactice New York Times, June 04