GM Closes 5 Plants, Lays Off Thousands: Critical Analysis

Company Profile

General Motors (GM) is an American multinational company that designs, manufactures, markets, and distributes vehicles and vehicle parts, and sells financial services to the public. Their mission is, “to earn customers for life by building brands that inspire passion and loyalty through not only breakthrough technologies but also by serving and improving the communities in which we live and work around the world” (Kissinger 2017). Their mission statement is very possible to achieve whereas their vision statement is more widespread. According to General Motors, their vision statement is, “to create a future of zero crashes, zero emissions, and zero congestion and we have committed ourselves to lead the way toward this future” (GM, 2019). With the use of General Motors’ knowledgeable team members and their understanding of the business, they offer products to dealers that meet their needs. General Motors Company provides all-around auto finance options to assist Chevrolet, Buick, GMC and Cadillac dealers to increase sales such as Prime Auto Loans, Non-Prime Auto Loans, and Commercial Vehicle Lending to name a few. There is also a Training & Development Program, Dealer Training, available for employees of the dealerships to develop their comprehension and victoriously offer the appropriate leasing or non-prime auto solutions for their customers. Existing competitors of General Motors include any car company but the most prominent ones include Toyota, Honda, and Ford. Their strategy includes Porter’s model that gives them a competitive advantage over all other car manufacturers. General Motors generates its competitive advantage through a low-cost strategy, and cost leadership is the main strategy used (Kissinger 2017). Corporate leaders within General Motors include Chairman and Chief Executive Officer Mary T. Barra and Senior Vice President & President and Chief Executive Officer Daniel E. Berce. They strive to make the best decisions for the company that helps their workers as well as their public customers.

Identifying the issue

General Motors plans to make its largest downsize since its bankruptcy in June of 2009 in New York which made General Motors the largest industrial bankruptcy in history. As of November 2018, there were plans of cutting 14,800 jobs in the United States and Canada along with ending production in several North American factories (Colias 2018). The “callous” decision was made by General Motors Chief Executive Mary Barra who says that she wants to act now in order to prepare for unforeseen changes in the United States car market. General Motors Company is not the only one to take effect from the changes in the automobile industry, but the automobile sales are declining in general. These changes are happening in the car market because of electric cars, no need for a vehicle due to uber, and fines against companies that don’t cut carbon monoxide emissions (Ewing 2019). She stated that 'This is what we're doing to transform the company. The industry is changing very rapidly” (Colias 2018). She justifies her decision by stating that acting now while the United States economy is strong and the company is in good health will help General Motors sustain their profits. In response to backlash from Trump, a Detroit auto-maker of GM claimed to have spent well around $6.6 billion on their United States plants over the course of 4 years and that this investment has ultimately created and preserved 17,600 jobs (Colias 2018). The cuts would affect the more educated portion of GM’s workforce such as the engineers, designers, and others within GM’s product-development operations (Colias 2018). GM is having to cut back on some models such as the ”Cruze compact car, the Volt and large sedans like the Impala, Buick LaCrosse and Cadillac CT6” (Colias 2018). GM’s Lordstown factory was working around the clock and even with all this production, GM hit this factory with layoffs to decrease some of GM’s expenses. Tommy Wolikow one of the employees laid off had been working for GM for nearly a decade and expressed that he hoped he could get his job back because his father retired with GM after working with the company for 46 years and he is so proud of this (Colias 2018). With U.S. vehicle sales on a strong run, surpassing $17 million GM still had to make these cuts, which should shed light on how much debt GM got themselves into (Colias 2018). The CEO Ms. Barra said, “the company wants to be more efficient in its core business of engineering and building cars while plowing more money into potential game-changing innovations” (Colias 2018). Giving some of the GM employees a boost that the company was not necessarily in a bad place but trying to reallocate their resources more efficiently. This could be so GM is ready to compete with any new technology that pops up for electric cars within the next couple of years. GM may be trying to get a head start in R&D for the future of their company (Colias 2018). This can be seen by GM spending around $1 billion a year on the autonomous-vehicle development program (Colias 2018). GM also hired 1,000 employees in San Francisco to work on the driverless-car they are working on (Colias 2018). Even though they are changing towards this type of vehicle, it comes with severe risks and consequences. Michael Wayland of Automotive News states, “Business cases for electrified and autonomous vehicles remain unproven, and nearly a decade after GM's federally backed bankruptcy, the company again is becoming a political football” (Wayland 2018). Since they had to lay off so many people, GM reported receiving calls from dozens of large corporations expressing their interest in hiring the workers that were laid off (LaReau 2019). Because of this, they are outplacement services to help those affected gain a job. Gm is losing very good, well-educated employees just because they want an increase in a new and very specific technology, and this will hurt them in the long run. They must continue to plan their decisions in a strategic manner unless they want to end up where they were back in 2009.

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Analysis and recommendation

The decision from General Motors CEO, Mary Barra, to change the production line has not only affected the company financially, but also their employees, lawmakers, and consumers. As of November 15, 2019, strikes at General Motors have decreased industrial production by 0.8% in October. Factories in the United States were using about 74.7% of their capacity in October; it has been down 4.1% since October of 2018 (Wiseman 2019). “Nearly 50,000 members of the United Auto Workers had walked off the job across the United States on Sept. 16, the first time a union had declared a nationwide strike against one of the Detroit automakers since 2007, and workers outside the General Motors factory in Flint, Michigan, seemed poised for a fight” (Kirkland 2019). They wanted what was right for not only the company but for themselves and their future.

In response to this issue, I would urge top-level management of General Motors to acknowledge their Corporate Social Responsibility, engaging in the empowerment of existing employees that are on strike due to alluded closings. It is important that they know and understand that the reason for their potential departure is not due to their inability or incapability to do their jobs; but, is due to the new products, markets and new production techniques that would ultimately make their current jobs obsolete within this particular organization. A notable con may be that workers will not be satisfied with just words of consolation. Some actions may need to be taken for them to feel a genuine sense of care from General Motors. In fact, it may be most beneficial for the greater good with the implementation of a Training & Development course that would teach the new techniques to existing workers. The con is that on average, an employer may spend anywhere between $900-$1,200 per employee on training & development (Freifield 2018). However, the investment in the Training & Development program should lead to a decrease in the need for external recruitment since they would be hiring from a pool of applicants within the firm, should the building stay up and running. However, if the end result is indeed the closing of the plant, the skills developed in the courses implemented should definitely position the workers well for new job opportunities outside of General Motors Company.

General Motors Company may increase the satisfaction of the company by having another program set up for the workers they are letting go. The program could be concluded of being able to write recommendation letters and a source to help the employees they are laying off to have another job. This action could lead consumers to believe the company cares for its own workers and even interest people to work for General Motors Company. If potential candidates realize that General Motors will lay off their workers in mass numbers it could easily reject the candidate from putting an application. This could also potentially set ease to the employees that are or could potentially be terminated because they do not have others putting in applications to add to their mass numbers being laid off. They do not want more employees entering their workforce at this exact moment to try and save their own jobs.

The conclusion for General Motors to end production in six of their cars is because they are trying to keep their customer base coming back. They came to realize that the models that they were going to end were Buick, Chevrolet, and Cadillac brands. North American customers wanted different types of styles of cars that were not popular anymore (Valdes-Dapena, 2018). Data are shown only the Cadillac XTS had sales that went up 15.9% and the models like Buick LaCrosse, Cadillac CT6, Chevrolet Cruze, Chevrolet Impala, and Chevrolet Volt were down 10.6%-26.5% (Valdes-Dapena, 2018).

Instead of closing five of their North American facilities and having many employees laid off, they should have the employees move with the changes within the company. This will allow General Motors to see within its company if they have any technicians for environmentally friendly cars that they are going to be producing in the future.

Another demand from consumers are environment friendly actions. In reference to Jackson Ewings findings, the change of the type of cars is also coming from an environmental standpoint. This being that pollution is rising and causing harm to planet earth. Research has shown that cars are at the top of the list for having an impact on global warming by releasing carbon dioxide. Although General Motors is considering what the customers want, they should consider the effect they are having on the people they have employed within the company.

General Motors should also consider the idea that the demand for cars has shrunk due to the companies that are floating around that provide rides and food delivery (Wayfast, Lift, Uber/Uber Eats). These companies are creating jobs and also decreasing the needs of other people to have their own cars. Maybe General Motors company could decide to find a way to partner with the companies that are creating a lesser need for vehicles. Ideas that if the company influences their employees to buy a car from general motors said employees could receive benefits such as free oil changes, free car inspections, discount on car being bought, and things of that nature. It could cost a lot of money, but may drive the demand for wanting a new car and it being from general motors. The employee will have to have a car to be employed at the said employer so the partnership could drive a high demand from its own employers.

Relationship to Course

General Motors has faced many issues within the last decade, and most of the major ones deal with key management concepts. Our issue focuses on the closing of several General Motors plants to focus on improving technology and driverless cars. As we learned in chapter one, they are trying to get a head start on competitive advantage in this side of the automobile industry (pg. 18-22). A competitive advantage in this specific area will help them be rare, valuable, inimitable, and non-substitutable. Innovation is the introduction of new goods and services, and they are trying to adapt to new technology before their competitors do. This directly related to the CEO, Mary Barra’s, business strategy. As we learned in chapter five a business strategy is the major actions by which an organization competes in a particular market or industry (pg 107). The business strategy helps achieve a competitive advantage because they think into the future about what will be the most effective and efficient in making the most profits in the long run. While trying to beat their competitors in this market comes at a large cost, it also costs thousands of loyal employees their jobs. GM laid off almost everyone in those five plants. In chapter eight we learned about employees being let go, whether it was fired or terminated (pg 187-188). For the most part, they temporarily laid off these employees until they can get their new and technologically advanced plants up and running. The problem is that this leaves these people without a job at the moment. And as stated above, many large corporations want these employees because they already have a hand in this kind of business. As we also learned about in chapter eight, outplacement is the process of helping dismissed people regain employment, and GM is trying to do just that (pg 188). Laying off thousands of people has its impacts on GM, and it is also helping its competitors by giving them their old employees for the time remaining. This decision to lay off thousands and close factories comes at a very large risk which we discussed in class during chapter five. Risk is defined as the state that exists when the probability of success is less than one hundred percent and losses may occur (pg 111). They are taking a very large risk by implementing this decision and it may backfire and prove to be worthless. The top-level managers discussed this issue for a long time before putting it into place, but there is a risk involved in any major decision. If a large loss does occur, then the blame will be taken out on those higher-level officials of the company. We discussed how they have a major role in decision making in chapter one of our textbook (pg 8). These top-level managers typically include the Chief Executive Office, Chief Financial Officer, president, and vice president. The decisions that these few people make influence the entire company as a whole, and they usually do not consult with any lower or middle-level officials before implementing these plans. They always hope for the best, but sometimes it ends up in a loss instead of a gain. Hopefully, the company will be able to turn around and be back in the market place like this event never occurred and they will not incur any major losses in years to follow. The decisions made by this company factor in many other topics discussed in our management textbook, but these few are the most prominently seen in our day to day lives.

Conclusion

In conclusion, General Motors made some very tough management decisions when implementing their plans to close several plants and lay off thousands. When making big decisions for a well-known company it is important for them to have indicating factors of what will put them near the top of demand. General Motors’s decision could cause them a high success rate in the long run if their driverless car technology takes off, but a large risk is involved in whether or not that will happen. Taking such a steep step could potentially harm their position in the market. However, Mary Barra, Chief Executive Officer, made some decisions that were risky and tough but does hope this will expand General Motors as a company. This being that they create a differentiated market for their consumers to choose from compared to their tough competitors. Even though thousands of people lost their jobs, they hope to turn the company around and regain success in just a few years. Time will tell whether or not this decision will make them millions or cause them to go into another major loss as they incurred back in 2009 with their large bankruptcy. Families across the globe hope that General Motors will get back on its own two feet as soon as possible and produce the best cars possible.

References

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