General Motors

case study on its bankruptcy

By
Vasantha Gandi
Komal Jain
Bhawana Sharma
Sanjana Sen
Vignesh S
Shivam Dubey

Introduction
General Motors Company
(commonly known as GM) is one
of the biggest companies of
current automotive industry.
Was founded by William Durand
in 1908.
The head office is located in
Renaissance Center in Detroit,
Michigan.
It designs, manufactures, markets
and distributes vehicles and
vehicle parts.
General Motors employs 212,000
people and does business in 157
countries.




In 2009, General Motors shed several brands
History
Founded on September 16, 1908 in Flint, Michigan
Started as an holding company of BUCIK, then
controlled by William C. Durant
Later Charles Stewart Mott became largest single share
holder of GM
1908- GM acquired Oldsmobile
1908- Cadillac, Elmore, Oakland and several others
1909- Reliance Motor Truck Company and Rapid Motor
vehicle company
1910- Durant lost control over GM to bankers trust-
large amount of debt taken on acquisition






Contd.

1911- Durant started the Chevrolet Motor Company
1916- General Motor Company to General Motor
Corporation
1920- Alfred P. Sloan became the chairman of GM(long
time chairman)
1931-2007 GM led the global sales in automobile industry
2008-2010 GM ranked second largest automakers in sales
2009- Gm filed for Chapter 11 bankruptcy following the
recession of 2008-09
2011- regained the position as worlds largest automaker by
vehicle unit sales.
GM BANKRUPTCY TIMELINE
MAJOR DOWNTURN: Biggest ever quarterly loss
INCREASE IN GAS PRICES
HUMMER UP FOR SALE
GM CHRYSLER TALK
CASH CRISIS
BAILOUT REQUEST
ENTRY OF OBAMA ADMINISTRATION AND RESTRUTURING
DEADLINE
DEBT FOR EQUITY SWAP
LOSSES
CLOSING DEALERSHIP
9 UAW CONCESSIONS
LOOMING DEADLINE
BANKRUPTCY
Reasons that led to Bankruptcy

Improper Corporate Governance Rules Set
By GM like :

highly risk-averse, slow to change and
endlessly bureaucratic operations.

high labour costs and connected benefits .

very strong labour union.

lack of quality , innovation and efficiency .
Internal factors that caused GMs Bankruptcy
External influences that caused GMs bankruptcy:

Rising fuel prices.

Global Recession - collapse of the American economy .

Low sales and cash flows due to lack of demand.

Rising competition from foreign car makers.


Reasons that led to Bankruptcy
GOVERNMENT POLICIES FOR
RESTRUCTURING
March 30, 2009 Government released plans to provide working capital over
the next 60 days so that GM can restructure.

GM will restructure during the 60 days
allowed by the government:

1. Profitability Sustainability
2. Healthy Balance Sheet
3. More Aggressive Operating
Structure
4. Technology Leadership
On June 1, 2009 GM filed Chapter
11, declaring a debt of $172 bil.
while having assets only of $82 bil
INITIAL PUBLIC OFFERING
On November 18, 2010, the initial public offering of new GM was made.
GM stock price, 2010 - 2012
INTERVENTIONS BY THE US
GOVERNMENT
Governance Issues : During the process of
restructuring; 4 members of the board out
of 11 were named by U.S. government.

A Saab case, when GM vetoed selling the
brand and all connected licences and
technologies to Chinese counterpart. The
board decided not to finish the deal.
Future challenges
New products are introduced as per the expectation
of the customers
New more energy efficient models that must
compete with long established brands
Customers satisfaction and labor problem
Greatest challenge is changing the corporate culture
of the firm


Conclusion
GMs Current State:
Huge Operating Losses
Shrinking Market Share
Small Current Ratio
Huge Layoff Rates
Falling Stock Prices
Not only will the accountants be issuing a going-concern
for GM but they will be faced with bankruptcy and possible
closing down all together.
Their current performance is very poor and is in dire
need of reconstruction which is exactly the stage they
are at currently.