General Motors was founded at the beginning of the twentieth century and initially they were the manufacturer of Buick- a motorcar with an internal combustion of engine and horse-driven vehicles. They gradually developed more auto cars and in 1916, Alfred P. Sloan who led the company to an unprecedented growth over the years owned it. GM grew up into a huge global corporation despite all the tribulations it went through.
As GM is a gigantic conglomerate, it has several branches. GM has four organs for administration and reporting while GM North America (GMNA) had the largest sales. The GM maintained an overall percentage of 26 % to 28 % of all industries in this region.
However, its profits fell in 2005, which was due to lesser quantity of products and an unfavorable product mix and it was the result of plant closures, changes in product liability and other major impacts on net income. In Europe, GM (GME) faced continuous losses amounting to US$ 1.0 bn by 2004 due to continued negative price pressures and unfavorable exchange rates. GM in Asia Pacific (GMAP) had good sales, here with a very good position in China.
India and Thailand also yielded good earnings. GMAP showed very high net margin with about 10% in 2003 & 2004. GM in Latin America, Africa, and the Mid-east (GMLAAM) was unpredictable with losses in 2002 & 2003, mounting to profits in 2004. The net margin was higher in 2002, which fell to 0.4 % in 2003, which increased to 0.9% in 2004.
The GMAC was the financial subsidiary of GM, initially introduced to finance GM operations. This section had continuous profits and gradually it grew up into a global financial company, offering mortgages and insurances. The total revenues from the financing & insurance operations showed a gradual increase, which was 31000 million in 2004 and a net income of 2800 million in both 2003 & 2004 but however, there were also some losses in some other sectors.
The shares of GM and other American companies declined from 1990 to 2004, whereas shares of foreign companies rose and these led to restructuring. There was high competition and GM faced new challenges.
The internal strengths of GM are market share, sales volume, performance of subsidiaries, labor force, financial strength, restructuring process and long experience, brand awareness in the US market, application of technology, and many other features. On the other hand, the external threats are Reduction of market share in the US market from 1990 to 2004, provision of North American Free Tread Agreement, operating expenses, excessive investment, and model of the cars, political factors, strategic decision, and stock performance.
Market Share: According to the annual report 2010 of GM, it has business operation in more than 157 countries and still has a significant share in global market. In addition, its current market position in North America zone is outstanding in terms of market share and volume of sales;
Sales Volume: Wall Street Journal forecasted that General Motor is in the highest position considering the number of car sales because it has been sold 232,538 cars in the fiscal year 2010/11 while Ford Motor Company sold only 189,284 cars and Toyota Motor Sales USA Inc. sold 159,540 cars in this zone (WSJ, 2011). However, the following figure demonstrates the position of car manufactures in terms of car sales –
Figure 1: Position of GM in the US market
Source: WSJ (2011)
Performance of Subsidiaries: It has many regional subsidiaries like GM Daewoo Auto & Technology, Shanghai General Motors, SAIC-GM-Wuling Automobile Co and many others subsidiaries those performance help to increase profit in consolidated financial statements.
Labor force: GM has more than 209,000 efficient employees to operate the business in adverse economic condition and save the company from such position. However, most of the employees are higher educated in particular subject and their own field and they have innovative new idea to offer better services for the customers;
Internal control: the management team follow local rules and regulations where it operates and it has own controlling system. However, it follows listing rules and other provisions of Sarbanes-Oxley Act of 2002 to control the business and avoid mismanagement and internal conflicts;
Financial strength: GM Corporation is one of main player in the automobile industry, which has financial capabilities to compete with other car manufactures in national and international market by implementing its new business strategies in the present market place. According to the annual report 2010 of GM, its present key financial variables are –
Key variables 2010 ($ million)2009 ($ million)2008 ($ million)2007 ($ million) 2006 ($ million)
Total Sales Revenue13559257474148979179984204467
Net income (loss)6503(3786)109003(31051)(38136)
Total GM Company equity (d)3715921957(85076)(35152 )(4,076 )
Diluted earnings (loss) per share:$ 2.89$(3.58)$(53.47)$(76.16)$(4.39)