The main purpose of this assessment is to analyze the financial information of a company which had undergone serious financial crisis and was ultimately declared insolvent. The company which is selected for this assessment is General Motors which operates in many countries and is regarded as one of the leading makers of automobiles in USA. The company has a rich history and is known to be a big company in USA.
The history of the business dates back to even a century where one of the largest car and truck makers were established. The company was founded in 1908 in Flint, Michigan by William C. Durant and the company is made up of several different companies which was acquired rapidly within a short period for the purpose of effectively establishing the business of General Motors in the country. Some of the main products which was manufactured by General Motors were Buick, Oldsmobile, Cadillac, Oakland and a variety of trucks (General Motors., 2018). The company then formulated strategies for rapid expansion in the market and for such a purpose engaged in research and development activities in order to facilitate innovation in the business (Kollewe, 2009). The company also had to face severe competition from other automobile companies such as Ford and therefore the management of General Motors needed to formulate strategies which included innovative approach, restructuring of the sales function of the business, making subtle improvements in the model of the cars or other automobiles which was offered by the business.
General Motors was always engaged in the business where there was intense competition and the management had to plan strategies which can make the products which was offered by the company better than the products which were available in the market. Therefore, in 1929, the company made a change in the management and also change the process of the business. The business started to invest more in innovations and better sales structure of the business. The management of the company was more concerned with innovation and better model of cars and therefore the introduction of Chevrolet Corvette and BelAir and also the Cadillac El Dorado redefined the car design which was then available in the market. The introduction of such models marked the era of golden generation of car deigning in the market and also attracted the customers in large numbers (Helper & Henderson, 2014). The key success factors which can be identified for General Motors was the brand of car which was initially acquired by the business and also the adjustments which was made towards the model and engines of such cars in order to differentiate the brand of General Motors from its competitors. Another success factor was the innovation activities which was undertaken by the management of the company for the purpose of making changes to the products which was offered by the business (Flores, Krueger & Clements, 2013). This resulted increasing need for innovation and development in the market and most of the companies in the industry adopted such an approach. Another successful policy which was formulated by the management of General Motors was the mass production of the automobiles in order to meet the increasing demand for automobile products in the market which not only improve the revenue of the business but also build a strong reputation of the business in the market. The financial performance of the business and the milestones which is achieved by the business is clear from the reign of the business as the top manufacturer of automobiles in the world. In addition to this, the acquisition made by the business also shows that the company has strong capital backing which also suggest that the business is very strong in financial terms. As per the estimates which are available for 2012, the company is regarded as the top manufacturer of automobiles in world as in previous year the company sold around 9 million cars
Due to the efficient performance of the business, the company gained popularity in the country and also globally. The models which was introduced by the business had become bestsellers for the business and the people were positively responding to the products which was offered by the business. The company was initially labelled as a company which resulted in emission of pollutants in the atmosphere. The company soon through its innovative strategy developed catalytic converters in order to reduce the emission which was caused by the automobiles. The company was also the first automobile company to suggest the incorporation of air bags in automobile in order to reduce the impact of accidents on people and reduce the casualties in accident. The automobile manufacturer was also engaged in developing navigation system and guidance system for first moon landing mission in Apollo II and was also engaged in designing the lunar roving vehicle for Apollo I5. Thus, it can be clearly stated that the business has been engaged in some of the important activities and has achieved a lot of success over the years. The company was so much important that the business was regarded as one of the top automobile makers and industrialist in USA. They had a brilliant hand in the framing the economy of USA effectively.
The business was established in 1908 and since then the management of the business has made it an initiative to acquire different business or brands which can help the business to establish a strong product line up for the business. The business in initial stages acquired the brands of Buick, Oldsmobile, Cadillac, Oakland and Chevrolet Corvette. This resulted in strengthening the business and the products which was offered by the business (Smil, 2013). The capital structure of the business has always comprised of long term debts which would help the business to effectively finance the products which are to be offered by the business and the innovation process and different activities which are undertaken by the business (Lucky & Takim, 2015). The company has engaged itself in numerous number of acquisition and takeovers over the years and the same has helped the business to further strengthen the business effectively.
As per the information which is available regarding the acquisition which was made by General Motors, Daewoo is the most recent acquisition which was undertaken by the business of General Motors in the end of 2000. The brand was mainly kept for the markets of South Korea , however by 2005, the brand was also being sold in areas of Australia and also in other markets under the flagship of General Motors. In addition to this, the company also holds an insurance and financing company with the name of GMAC financial services which offers commercial, residential and automotive finance services and also insurance services to the clients of the business. Therefore, it can be said that the business has a strategy towards acquisition of other businesses in order to strengthen its own business and the company during the 2000s were the market leaders of automobiles in areas of USA, China, Canada and UK. As regard, the capital structure of the business, the management of the company has always preferred application of debt capital in contrast to equity sources and the same can also be attributed to be one of the reasons for the financial turmoil which the business faced during 2007-2008.
The collapse of General Motors came as a surprise to the entire market when the management of General Motors filed for Chapter 11 bankruptcy in 2008. The business was regarded as one of the leading businesses in the country and therefore the economy was devasted with the fall of the company (Canis & Webel, 2013). The reasons which can be identified as the major causes which led to the fall of the business are listed below in details:
In 2008, the management of General Motors filed for the protection of Chapter 11 Bankruptcy which shocked the industry as this was the greatest industrial bankruptcy in the history and the economy of USA was shaken as a result of the same. The company was an important part of the business environment of USA as the business employed 234,500 people all over the world out of which 91000 people were from the USA and therefore the same resulted in rise in the unemployment in the country (The Economist, 2018). The company used to spend $ 50 billion in USA itself for parts and other services and was also provider of around $ 476 million as salaries for employee on monthly basis.
Thus, from the discussion which is covered in the above paragraph, the impact of bankruptcy of General Motors resulted in an economic crisis in the country. The company was considered to be one of the largest automobile makes in the country and therefore fall of the same adversely affected the needs of the society and the market of USA. Therefore, the government of USA put in every effort in order to save the business of General Motors from Bankruptcy by providing them with necessary financing. However, the control of the business was passed partially to the government in order to ensure that the business survived (Goolsbee & Krueger, 2015). The business also had to undergo restructure and reorganization process wherein the management of the business was changed and focus was imposed on innovative practices of the business.
Thus, from the discussion which is conducted in the above paragraph, it is clear that the business of General motors made the mistakes of effectively analyzing the market and also updating to the current needs to customers of the business. The business was also affected by the severe level of competition which was present in the automobile industry and the same affected the policies of the business. In addition to this, the management also needed to focus on innovation and further development of the product which was another area which was ignored by the management of the company and therefore the same resulted in the downfall of the business. After, reorganization of the business, the management has met all the above mentioned requirements and therefore has been successful to a level in the business environment.
References
Canis, B., & Webel, B. (2013). The role of TARP assistance in the restructuring of General Motors.
Flores, R., Krueger, C., & Clements, P. (2013). Second-generation product line engineering: a case study at general motors. In Systems and Software Variability Management (pp. 223-250). Springer, Berlin, Heidelberg.
General Motors. (2018). Gm.com. Retrieved 30 October 2018, from https://www.gm.com/
Goolsbee, A. D., & Krueger, A. B. (2015). A retrospective look at rescuing and restructuring general motors and chrysler. Journal of Economic Perspectives, 29(2), 3-24.
Helper, S., & Henderson, R. (2014). Management practices, relational contracts, and the decline of General Motors. Journal of Economic Perspectives, 28(1), 49-72.
Kollewe, J. (2009). The history of General Motors. the Guardian. Retrieved 29 October 2018, from https://www.theguardian.com/business/2009/apr/30/general-motors-gm-history
Lucky, B. O., & Takim, S. (2015). Manufacturing defects in the automobile industry, a case study of the remote causes and effects of Toyotas transmission malfunctions in cars. International Journal of Engineering and Applied Sciences, 2(8).
Smil, V. (2013). Made in the USA: The Rise and Retreat of American Manufacturing. MIT Press.
The Economist (2018). A giant falls. Retrieved 29 October 2018, from https://www.economist.com/briefing/2009/06/04/a-giant-falls
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