GM: Tough Maneuvering in a Fast-Moving Market

GM: Tough Maneuvering in a Fast-Moving Market

GM’s announcement to close five plants has sparked a lot of criticism. How can a company bolstered by a taxpayer-funded bailout and generous tax cuts lay off 14,000 people? Is it betrayal or foresight?

CEO Mary T. Barra has justified the job cuts, citing slowing sales and changing markets. GM’s actions are easy to criticize, but compassionate solutions are difficult to come by.


Video Spotlight: GM’s planned layoffs


This post is based on the New York Times article, GM to Idle Plants and Cut Thousands of Jobs as Sales Slow, by N.E. Boudette, November 26, 2018; and the Time.com video on GM’s planned layoffs, by A. Abrams, November 29, 2018. Image source: Glow Images.

Discussion Questions:

1. Identify the specific elements in a SWOT analysis that may have triggered Ms. Barra’s decision to close several plants.

Guidance:

Threats

  • economy (higher interest rates, tariffs)
  • legal environment (push for higher minimum wages gaining momentum in several states)
  • competition (competitors’ investments in self-driving and electric cars)
  • markets (shifts in vehicle sales)

Opportunities

  • economy (low unemployment rates potentially easing employees’ reintegration into the workforce; financial boost with new of capital)
  • new technologies to facilitate the development of self-driving and electric cars
  • societal trends (growth of environmentally conscious markets)
  • legal environment (stricter emission standards in California, stronger bargaining position with unions)

Strengths

  • financial resources, investments in new technologies

Weaknesses

  • inflexible facilities and equipment

This is not an exhaustive list, but it is a discussion starter.

2. Could better forecasting have eased the transition from the production of sedans to that of trucks and SUVs? What about self-driving and electric cars?

Guidance: Review the various forecasting methods. Sales trends (based on historical data) for sedans, trucks, SUVs, and electric cars should have signaled demand shifts over the past few years. As for self-driving cars (for which historical data are not available), demand is probably forecast qualitatively. The judgments and opinions underlying the qualitative forecasts may reflect the need to anticipate future demand and expand capacity early.

3. What type of process is used to assemble cars? What are its advantages and disadvantages? Could GM repurpose the plants currently used to make sedans and produce SUVs or electric vehicles?

Guidance: Car assembly is a repetitive process. Advantages include high rates of output, low unit cost, specialized resources, high utilization, less supervision, and routine administration.

Disadvantages include repetitiveness, susceptibility to shutdowns, extra capacity needed for quick repairs, and inflexibility. Because of the inflexibility of dedicated resources and fixed routings, repurposing a plant would be very costly.

4. Following its plans to close factories, GM has received some bad publicity in the press. If you were GM’s CEO, how would you try to preserve GM’s image in such circumstances?

Guidance: Suggestions include severance packages, offer to hire and relocate workers in other GM factories, help them find jobs in other manufacturing companies, and work with the community to repurpose the facility.

Those are costly endeavors, but they would help restore GM employees’ trust and commitment and position the company as one “with a heart,” a characteristic that has benefited Subaru.

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