The Teachings Of Gm Case

The teachings of the GM event June 3, 2009 The fall of General Motors (NYSE: GM) is the result of having ignored the many signs warning of the need for a profound change in the structure of the automotive business. GM could survive in the recent years, thanks to good economic environment enjoyed by the U.S. economy in particular and world in general. Only the strong fragility of the company was clearly exposed by the advent of the crisis. At 75 cents, GM shares are still overvalued. Remember when his actions had reached U.S. $ 93.62 by the end of April 2000? How did the company to destroy its value in less than ten years? Surely what happened to GM is a case study in business careers. The GM debacle is one of the largest industrial bankruptcy in U.S. history. The immensity of the giant that has fallen is evident when one notes that the debt is greater than the entire public debt of Argentina. The company has liabilities of U.S. $ 172,810 million, only U.S. $ 82,290 million in assets. And as in accounting, assets minus liabilities equals equity, the latter component is negative in the balance of GM and several billion dollars.

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The huge liabilities that GM must face makes all efforts to recover the company, appear inadequate. During the weekend, GM won the support of holders of 54% of its bond debt of U.S. $ 27,000 million, which in turn offered their support to plans by the U.S. government. Despite this exchange of debt and the new contribution the U.S. government, no one can say that GM does not need more dollars to survive. And in my opinion, it is very likely to require new funds. GM inefficiency is evidenced by the restructuring measures will be taken forward: removing brands with little power, reduction in the number of licensees (a cut of about 2,600 dealers), who were in an excessive number, reduced number of staff (with the elimination of about 21,000 people-a third of the total and pension cuts) and the transformation in production toward specialization in other market segments also incorporate cars more fuel efficient and use renewable energy. For Obama, GM will emerge from Chapter 11 "stronger and more competitive?.

Now, achieved a strong and competitive enough to return to profitability? Since 2004 the company has a balance with no positive results. The recovery of profitability in the company's balance sheet will be an arduous task that demands a long time probably. Is that there are many factors that threaten future benefits expected from the company. Several factors that hit GM's future prospects are linked to the expected demand. It is a fact that the crisis will mean a shift inward curve of U.S. consumer demand. Our American family representative (which may well be the Simpsons), how long ago could not bear to have the same car for more than five years, now consider that it is not so bad after all. And even the emotional factor may be a good excuse to extend for longer use. On the view of GM as a brand to be seen how the failure impact on consumers, it may mean that from now on is not so well seen and lose posts between the preferences of Americans. The U.S. demand for vehicles not only shrink but also could see a change in its composition with greater involvement of economic segments.

The impact of the crisis on household wealth may be important in this type of consumption. With a less extended in time, also the global automotive market will be located well below pre-crisis volumes. Another bad news for the expected demand for GM cars, is linked to the potential loss of market GM experience in the hands of competitors both in the U.S. and worldwide. The crisis being experienced by the company has taken responsiveness (which adds to GM was behind in the development of the new generation of vehicles). Already, automakers such as Toyota, Honda, Nissan and Hyundai have chopped pointed in the new international automotive market and advance on the market share of the U.S. giant. Fiat worldwide strategic repositioning after the takeover of Chrysler, while Ford (NYSE: F), the least affected of the three giants of Detroit and plans to increase production in an aggressive action. The bankruptcy of General Motors, at first seems an event away from the Latin American reality, but clearly this is not so. The announced closure of 14 plants by the company in various U.S. states, led to a principle of unrest in the countries of the region, where the company is an important part of their operations.

All Latin American news media echoed the bankruptcy of GM, but focused their attention on how this event affected the giant investments in their respective countries. So relieved were breathing in Argentina, Brazil, Chile, Peru, and particularly Mexico, on receipt of confirmation that everything remains the same for those lands. Risk or opportunity? Any bankruptcy generates fear. But in the crisis, the opportunities arise and one of the countries that benefit may be Mexico is. The Mexican economy has broad benefits for the company to analyze the possibility of increasing its operations in that country. This decision may involve risks because it would increase production in a country that is still not adequately stable in macroeconomic terms. This instability does not adequately estimate the returns to investment in the country. Would you will like the GM crisis to Mexico or must settle for business as usual?