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Once hailed as the icon of American industrial strength,General Motors (GM) is now a troubled giant crumbling under its own weight. The unbeatable product range, model organization structure, employee- and investor-friendly practices which were believed to give strength to GM are the same ones which are causing it to be in the doldrums.
Even though GM sold a record 9.17
million vehicles in the year 2005, being outclassed by the
more efficient and cleaner foreign cars - especially the Japanese
cars, GM's high legacy costs of production, sales and employee
benefits with a poor mix of gas guzzling models have resulted
in a huge loss of $8.6 bn for the company in 2005 - its first
since 1992. Further, manufacturing a $1300 liability (pension
and healthcare benefits for 1.1 million people) per vehicle
at the last count, a shrunk market share, junk bond rating
for its stock, troubled subsidiaries and clouds of bankruptcy
hovering over its future, the cracks in GM are more visible
now.
However,
despite all its woes, GM has made some bold decisions although
a few years late. It plans to cut nearly 30,000 jobs, close
a dozen assembly plants, halve its dividend payout to shareholders,
and reduce the management pay scales. Contrary to the apprehensions
about any successful negotiations with its workers union UAW,
GM's recent talks with UAW have resulted in savings of around
$1 bn in annual costs. Also, its strong determination on setting
right its loss-making promotions and uncompetitive pricing
techniques along with an enhanced focus to improve its poorly
rated car and truck models, GM's actions send a strong messagethat
it still has what it takes to make a comeback, only if everything
goes according to its plan. |
