Although problems remain in some international markets, General Motors has otherwise made a full recovery from the unprecedented crisis which almost brought about the complete collapse of America's biggest car company in 2009. Until recently, the group was the undisputed global leader in the automobile market, with an extensive portfolio housing eight of America's most celebrated automobile marques, including Cadillac, Chevrolet, Pontiac, Saturn and Buick. As recently as 1980 almost one out of every two new cars sold in America were made by General Motors, and it enjoyed a similarly dominant position in other countries as well. Yet in the harsh automotive environment of the 21st century, GM struggled to maintain its lead in the face of brutal competition, especially in the US, from manufacturers offering more flexible, less gas-hungry cars. A catastrophic fall in sales across the whole market during 2008 left GM poised on the brink of bankruptcy by the end of the year, and it was overtaken for the first time in its history as the global #1 by rival Toyota. The following year, GM finally accepted defeat and filed for Chapter 11 protection. Just 40 days later the new GM emerged from bankruptcy with the US and Canadian governments as controlling shareholders. In that process, the group shed the bulk of its huge debt burden as well as half of its car brands. That transformation appears to have given GM a new lease of life, although it has yet to resolve fully its continuing problems in Europe. See also international subsidiaries Vauxhall in the UK, Opel in Germany and Holden in Australia.
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Adbrands Weekly Update 28th Jul 2016: GM reported exceptional figures for 2Q, beating all expectations. Profits more than doubled to $2.9bn, far beyond analysts' predictions, on revenues up 11% to $42.4bn. The bulk of the uplift came from North America, when the group enjoyed the benefits of a strategic decision to ramp up production of high-margin trucks and SUVs over passenger cars. That resulted in record operating profits for the region. However, the biggest surprise was the group's return to profit in Europe for the first time in five years. That long-struggling region generated operating profits equivalent to $137m, a spectacular turnaround after long years wrestling with ageing and unglamorous models, especially at German subsidiary Opel. "This was an outstanding quarter," said chairman and CEO Mary Barra. "Our results were generated by strong retail sales in the US, record sales in China and a continued emphasis on improving the performance of our operations worldwide." Yet GM warned that the upturn might not last. "The Brexit vote has created a potentially significant headwind," said CFO Chuck Stevens.
Adbrands Weekly Update 4th Feb 2016: GM's results for 2015 matched Ford for operating profit but beat it net. GM too delivered EBIT of $10.8bn, but fewer special items resulted in net income of $9.7bn, more than three times the year before, which had included multiple one-off items including a large litigation provision against the ignition switch recall. The bulk of 2015's profits were generated in North America, with a solid additional contribution from Asia & Africa. However, GM's European business is still showing red ink, and like Ford it reported losses in South America. Revenues slipped 2% to $152.4bn as a result of exchange rates.
Adbrands Weekly Update 28th Jan 2016: A continuing slowdown in the final quarter lost Volkswagen the top spot it had seized earlier in the year as the world's biggest carmaker. Total volumes were 9.93m cars and LCVs for the year, but 2014 leader Toyota regained the lead with a final tally of 10.15m. It had fallen to 2nd place at the half year. Toyota is almost certain to retain pole position for 2016 because of the repercussions from VW's Dieselgate scandal. GM held third place with 9.84m, ahead of Renault-Nissan with 8.22m. Toyota and Volkswagen both reported a slight decline from 2014, but GM's total was up 0.2% to a new record high, while Renault-Nissan rose 2%. Separately, Toyota is considering taking full control of part-subsidiary Daihatsu, in which it currently has a 51% stake, in order to boost its position in the domestic market, where sales have been under pressure.
Despite its end of year troubles, the Volkswagen brand's top models put in a good showing in terms of individual sales. According to figures compiled by researcher Focus2move, the VW Golf overtook Ford's Focus to become the world's second best-selling car for the first time, with sales up almost 9% to a personal best of 1.04m units. It was one of only two models to shift more than 1m units. The Toyota Corolla held onto the top spot with sales of almost 1.4m units. The VW Polo also did well, taking 7th place (up from 10th in 2014). Ford held the #3 and #4 positions with the F-Series and Focus respectively. Toyota's Camry and Hyundai's Elantra were 5th and 6th. The Honda CR-V, Chevrolet Silverado and Toyota RAV-4 rounded out the Top Ten.
Adbrands Weekly Update 7th Jan 2016: Auto sales set a new record in the US in 2015, rising almost 6% to a total of 17.5m cars and light trucks, breaking the previous record of 17.4m vehicles, set 15 years ago in 2000. General Motors retained pole position, with sales returning above the 3m level to almost 3.1m, well ahead of Ford on 2.6m. Toyota, Fiat Chrysler, Honda and Nissan held the next four places, and the rest of the top 15 ranking remained unchanged with one exception: Volkswagen slipped back from 10th to 11th place, ceding its position to Mercedes-Benz. VW was the only one of the leading manufacturers to suffer a year-on-year decline, with sales down by almost 5%.
Adbrands Weekly Update 7th Jan 2016: GM threw a lifeline to car-hailing app Lyft, engaged in a life-and-death battle with larger arch-rival Uber. The Detroit motor giant agreed to invest $500m for around 10% of Lyft's equity to secure a wide-ranging strategic alliance. Among other areas, the two companies will work on the development of what they called "an autonomous on-demand network of self-driving cars". Another potential goal would be hubs across the US where people who don't already own a car can rent one on-demand to drive for Lyft (as if you weren't already worried enough about the integrity and safety of some drivers).
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Free for all users | see full profile for current activities: The bankruptcy of General Motors in 2009 brought to a close just over 100 years of prominence as an icon of American business. Indeed, at its peak in the post-war period, the company was in effect a symbol of America itself, a leader in technology, design, innovation and consumer choice. As GM's president in the early 1950s, Charles E Wilson, was reported to have said: "What's good for General Motors is good for the country". Yet by the 1990s, and even occasionally in the two decades before then, the company had increasingly became an emblem of everything that was wrong about the country. Inflexible, tied to inflated ideas of its past glory, unwilling to accept new ideas, and unable to integrate its multiple competing brands.
Sitting right at the heart of the General Motors monolith is Buick, founded in 1903, and the first company to manufacture automobiles in quantity. In the early years of the century, numerous manufacturers set up to cash in on the public's fascination with horseless vehicles, but most businesses struggled to stay afloat. William Durant, who had taken control of the small Buick car company in 1904, realised that the best way for manufacturers to ensure survival was to band together. He formed General Motors in 1908 in order to acquire the best of his competitors, starting with Oldsmobile, Pontiac (then known as Oakland) and Cadillac. Over the next two years he bought 17 other brands. But while a few of these purchases have become legendary brands, others were of no value at all, and Durant brought the company close to collapse through his reckless expansion. In 1909, with GM already $7m in debt, Durant's bankers refused to loan him a further $9.5m to buy Ford. Soon afterwards he was unceremoniously ousted from the company, although he was allowed to remain a director.
It didn't curb his enthusiasm for automobiles. In 1915, Durant set up a new manufacturing company, Chevrolet, followed by United Motors Service to make industrial components and car parts. Chevrolet became so successful that investors soon began to sell off their shares in General Motors to buy the new competitor instead. Durant bought the GM shares, and in 1916 he found himself back in control of the business he had founded eight years earlier. In 1919 he bolted on fridge maker Frigidaire (sold in 1979), and began to pick up enormously valuable government defence contracts when America entered the First World War in 1917. A year later Durant mounted one deal too many. Having merged Chevrolet and United Motors Service into GM in 1918, he then attempted to take the business private, buying up all of the huge new group's stock. The deal was unsuccessful, and Durant was again ousted by GM's shareholders, and replaced with new president Alfred Sloan. (As a result of subsequent reckless speculations, Durant was bankrupted in the Great Depression of the 1930s. Later granted a modest pension by General Motors, he spent his remaining years as the manager of a bowling alley until his death in 1947).
Durant may have been the visionary who conceived GM, but it was Alfred Sloan who made it great. His biggest challenge initially was to make sense of the jumble of different brands under his control. As a result he introduced a program of brand differentiation, primarily through pricing, promising "a car for every purse and purpose". He also laid down a policy of what he called "continuous improvement" (designer Harley Earl later called it "dynamic obsolescence"), changing the designs of the company's cars on a regular basis to avoid inertia, and to persuade customers to trade up to new models. In 1924, GM ventured abroad, building its first overseas assembly plant in Denmark. To grow its presence, the company adopted the same acquisitive strategy that had worked so well in the US, buying up the UK's Vauxhall Motors in 1925 (although the business operated more or less independently until the late 1980s), and Germany's Opel in 1929. Two years later the fledgling General Motors Australia operation merged with local business Holden's to form General Motors Holden's, (now Holden) makers of the first all-Australian car.
At the time, the group concentrated all of its marketing through one advertising agency, Campbell-Ewald. However, the Depression caused car sales to plummet, and GM struggled to protect its business. One way was to establish very distinct identities for each brand. As a result, in 1933, GM decentralised all of its advertising. Campbell-Ewald kept Chevrolet as well as the various non-car manufacturing businesses such as GMAC and Delco. Oldsmobile was placed with offshoot agency DP Brother. (The account was later inherited by Leo Burnett, when it acquired Bother in 1967). Pontiac and Cadillac went to MacManus, John & Adams. Meanwhile, General Motors also expanded into other fields of engineering, establishing substantial interests in aerospace, and developing weapons systems for the government during World War II. In the 1960s and 1970s it played a significant role in America's Apollo space program, and acquired IT services company EDS, as well as Howard Hughes' aerospace and defence business in 1985 to form Hughes Electronics. (Both were later sold).
In the 1980s and 1990s, GM developed a reputation for industrial labour problems. These began with a massive restructuring programme initiated in 1984, when thousands of workers were laid off and several factories closed down. (Roger & Me was Michael Moore's memorable 1989 documentary about his attempt to secure an interview with then-CEO Roger Smith to protest against the devastating effects of GM's closure of a factory in Flint, Michigan factory where 40,000 people lost their jobs.) Disputes have rumbled on ever since, reaching a new climax in 1998 when a national strike brought production in North America to a halt for eight weeks, at a cost of almost $3bn.
During the 1990s, the company increased its focus on automobiles by spinning off subsidiary businesses. National Car Rental was sold off in 1995; EDS in 1996; automotive parts maker Delphi Systems in 1999. In 2001, the group agreed to sell what was then its third-biggest division, Hughes Electronics, to rival broadcaster EchoStar. However this deal was later blocked by regulators. It was acquired by News Corporation instead in 2003. GM Defence, which made light armoured vehicles and turret systems, was sold to larger rival General Dynamics in 2002 for $1.1bn.
In the mean time GM also expanded its portfolio of brands. Perhaps the most ambitious attempt was through the creation of a brand new car designed to deflect intense competition from Japanese imports. Saturn Corporation was founded in 1985 as a separate operating unit, working outside the main GM structure, and a different working contract was agreed with its workforce to allow greater input from them into the decision-making process. The first S-series subcompact sedans, stationwagons and coupes went on sale towards the end of 1990, supported by a quirky, folksy campaign from ad agency Hal Riney & Publicis which placed particular emphasis on customer service, promising friendly dealers and transparent no-haggle pricing. The initial response from customers was positive, and sales peaked at 284,000 units in 1994, but sales gradually declined over the next few years as GM turned its attention elsewhere.
It had acquired an initial 50% share in Swedish carmaker Saab in 1989, and purchased the remaining shares a decade later, as well as holdings in a variety of Japanese manufacturers. Later came long-running negotiations with failing Korean group Daewoo over some sort of rescue package for its Daewoo Motors subsidiary. In 2000, GM announced a wide-ranging strategic alliance with Italian carmaker Fiat after almost a year in secret negotiations. The two groups established the framework for the creation of several jointly owned production and development facilities in Europe and swapped shareholdings, with GM getting a 20% stake in Fiat in return for 5% of its own shares. In addition GM negotiated the right of first refusal to buy the rest of Fiat, but in return conceded a "put" option which would allow the Italian group to force GM to acquire all its shares at a future date. This was later to prove an expensive mistake on GM's part.
At the end of 2000, GM added to the growing pessimism in global industry, saying it would cut around 10,000 jobs in North America and Europe in response to increasingly difficult market conditions, especially in Europe. The carmaker also said it would gradually phase out its oldest brand, the Oldsmobile. It was obliged to spend more than $1bn to compensate Oldsmobile dealers for their loss of future earnings. Reacting to a poor record for reliability, the company also began a high-profile campaign to improve quality across all its models by introducing new systems for control and monitoring during the production process. GM's finances took another hit in 2002 when it wrote off $2.2bn of value relating to its stake in the now struggling Fiat. Soon after the cementing of their alliance in 2000, performance had slumped dramatically at Fiat's car manufacturing business, making GM increasingly unhappy about the prospect of being forced to buy out the business. GM's 20% shareholding in Fiat was reduced to 10% in 2003 when it declined to take part in Fiat's recapitalization. Also that year GM was able to persuade Fiat to postpone the potentially devastating "put" option by a year to January 2005. But in December 2004, with that deadline now looming, the two sides went to court after GM attempted to argue that the original deal had been invalidated by contract violations. Finally in 2005, GM agreed to pay Fiat E1.55bn to be released its obligations. The two companies' joint ventures were subsequently unwound.
In the mean time, GM launched an aggressive marketing push in the US which helped the company build market share at the expense of traditional domestic rivals Ford and Chrysler, both now wrestling with production problems and disappointing sales. But in early 2004 GM's long-running campaign to publicize the improved quality of its own vehicles suffered a blow when the group was forced to recall 1.8m vehicles in North America as a result of a potential safety defect that could cause fires. A dramatic fall in sales for many of its brands towards the end of 2004 and in the first months of 2005 led to a major restructuring in May and June. The group announced plans to cut around 14% of its North American workforce over three years. It also ramped up promotional marketing in the US, offering substantial discounts on all models, equivalent to those offered to its own staff. The Employee Discounts for Everyone campaign was introduced in June 2005, and led to sharp rise in sales, although the scheme created substantial dents in profitability. The scheme was quickly copied in July by Ford and DaimlerChrysler.
Despite its best attempts, comparatively little progress was made over the following months by GM, although it did secure a landmark agreement with US unions to increase job cuts to 35,000 workers, and bring forward the timing of those cuts by two years to the end of 2006. The sharp rise in fuel costs in 2006 kicked off a steep decline in sales of these models, just as it had in the original oil crisis of the 1980s which first gave Japanese manufacturers a toehold in the US. GM countered by slashing prices of all its cars, but although this served to shift inventory it also eviscerated profits. In summer 2006, the company was presented with an even more daring proposal by its biggest shareholder, activist investor Kirk Kerkorian, to become part of the global manufacturing alliance between Renault and Nissan. Kerkorian was convinced that Renault-Nissan chief Carlos Ghosn could work the same magic he employed at Nissan to rescue GM. The US group agreed reluctantly to consider the plan, and several discussions took place with Renault. Talks eventually ended in October 2006 when it became clear that no satisfactory agreement could be reached.
In September 2007, negotiations with the main United Auto Workers union over a restructuring of GM's healthcare and pension liabilities broke down, leading to a strike by around 74,000 workers. It was the first such action at GM since 1998. Ironically the strike was caused not by the main topic of healthcare payments, but a side issue of job security for UAW workers in future restructurings. The walk-out successfully focused both sides' attention, and a truce and agreement was reached after two days.
By 2008, the worsening economy replaced oil prices as the principal negative factor affecting new car sales. GM announced plans to cut several factories where it mad trucks and SUVs and also said it would attempt to sell the Hummer business. The latter brand, a poster child for the gas guzzler segment, has been the hardest hit of the group's brands since 2006, with sales halving in just two years. In December the company also announced that it would sell or close Saturn, Pontiac and Saab. In February 2009, the group effectively cut loose Saab, forcing the Swedish corporate entity to file for protection from its creditors while it attempted to restructure or sell itself. In May it also announced plans to kill off its Pontiac brand.
Meanwhile Rick Wagoner had been ordered by the government to resign as chairman & CEO of GM. He was replaced as CEO in February 2009 by Fritz Henderson, previously COO, and before that president of GM Europe. Henderson presided over the group's descent into Chapter 11 restructuring a few months later. Kent Kresa was appointed as interim chairman supervising the bankruptcy process, and was then replaced by former AT&T CEO Edward Whitacre.
A deal was agreed to sell family brand Saturn to US dealership group Penske Automotive for an undisclosed sum. However, that arrangement collapsed in October 2009 and Saturn was shut down. A similar arrangement was struck to transfer Hummer to a Chinese company which specialises in construction equipment, Sichuan Tengzhong Heavy Industrial Machinery Co. That too collapsed in February 2010. Saab was a little more fortunate, though it too came close to liquidation. GM initially struck a deal to sell that business to Swedish company Koenigsegg, which specialises in ultra-luxury supercars priced at around E1m per vehicle. However that deal fell through at the end of November 2009. One of the Chinese backers, Beijing Automotive, acquired some of Saab's technology and vehicle designs, but not the brand name. At the very last minute, however, the Saab name and factory in Sweden were finally sold in January 2010 to Dutch manufacturer Spyker for around E74m. The Swedish government agreed to underwrite a E400m loan from the European Investment Bank to support the business. That deal closed in February 2010.
The group's entire management structure began a rolling overhaul in July 2009 following emergence from Chapter 11. A key goal of the slimmed-down company was to reduce senior manager numbers. As a result, several posts were eliminated or combined. At the end of the summer, GM's new board asked Henderson to step down, feeling he was too closely associated with the company's old ways. Chairman Ed Whitacre stepped in, initially as interim CEO. That title was made "permanent" in early 2010, but only a few months later Whitacre himself announced plans to step down in preparation for GM's IPO. He was replaced as CEO by Daniel Akerson, who took on the role of chairman as well to Akerson at the end of the year. Stephen Girsky is group vice chairman.
There were similar changes elsewhere in the C-suite. Former Microsoft executive Chris Liddell was initially named as the group's new CFO and vice chairman, but resigned in 2011 and was replaced by Dan Ammann. Following the decision to keep hold of Opel and Vauxhall, David "Nick" Reilly was named as president of GM Europe. However, Reilly too retired in Spring 2012, and was replaced by Opel boss Karl-Friedrich Stracke. Only months later, Stracke was himself dismissed, to be replaced by Thomas Sedran.
Marketing too has suffered a series of different heads. Bob Lutz, a GM lifer who had already spent 46 years at the company, shifted in early 2009 to the role of vice chairman, sales & marketing. However that appointment proved controversial, not least because of Lutz's age. He relinquished the sales & marketing role in December 2009 although he remained vice chairman with responsibility for design. He eventually announced his retirement in May 2010. Susan Docherty was named as GM's new VP, global sales, service & marketing at the end of 2009, but her brief was reduced in March 2010 to VP, US marketing. Two months later, she was replaced by Joel Ewanick, previously head of marketing for Hyundai. (Docherty moved to Europe as regional managing director of Chevrolet & Cadillac but will retire towards the end of 2013). Ewanick took over responsibility for worldwide marketing as well at the end of the year, with the new title global chief marketing officer. He launched a massive review of both media and creative worldwide responsibilities. The most controversial change was the creation of Commonwealth, an unprecedented joint venture between Omnicom and Interpublic, to take charge of Chevrolet's global creative account. Yet before that bizarre hybrid could be implemented, Ewanick too was out, dismissed from the group in July 2012, and replaced on an interim basis by Alan Batey, previously VP, US sales & service. In summer 2013, Batey was confirmed as SVP, US sales, service & marketing as well as president of the global Chevrolet brand. See full profile for current activities
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