GMC - General Motors Corporation

THE HISTORY OF GMC

GENERAL MOTORS General Motors Corporation (NYSE: GM), also known as GM, is a United States-based automobile maker with worldwide operations and brands including Buick, Cadillac, Chevrolet, GMC, Holden, Hummer, Opel, Pontiac, Saturn, Saab and Vauxhall. Chevrolet and GMC divisions produce trucks, as well as passenger vehicles. Other brands include AC Delco and Allison Transmission. GM also has a 8% stake in Isuzu and a 3% stake in Suzuki in Japan and a joint venture with AvtoVAZ in Russia. In December 2003, it acquired Delta in South Africa, in which it had taken a 45 % stake in 1997, and which is now a fully-owned subsidiary, General Motors South Africa. General Motors is also a majority shareholder (50.9%) in GM Daewoo. GM's headquarters are in the Renaissance Center in Detroit, Michigan. The company is the world's largest vehicle manufacturer and employs over 340,000 people. In 2001, GM sold 8.5 million vehicles through all its branches; in 2002, GM sold 15 % of all cars and trucks in the world. They also owned Electronic Data Systems from 1984 to 1996 and, prior to selling it to News Corporation, DirecTV. GM owned Frigidaire from 1918 to 1979. HISTORY General Motors (GM) was founded in 1908 in Flint, Michigan as a holding company for Buick, then controlled by William C. Durant, and acquired Oldsmobile later that year. The next year, Durant brought in Cadillac, Elmore, and Oakland. In 1909, General Motors acquired the Rapid Motor Vehicle Company of Pontiac, Michigan, the predecessor of GMC Truck. A Rapid became the first truck to conquer Pikes Peak in 1909. During the 1920s and 1930s, General Motors bought out the bus company Yellow Coach, helped create Greyhound bus lines, replaced intercity train transport with buses, and established subsidiary companies to buy out streetcar companies and replace the rail-based services with buses. GM formed United Cities Motor Transit in 1932 (see General Motors streetcar conspiracy for additional details). General Motors bought the internal combustion engined railcar builder Electro-Motive Corporation and its engine supplier Winton Engine in 1930, renaming both as the General Motors Electro-Motive Division. Over the next twenty years, diesel-powered locomotives and trains – the majority built by GM – largely replaced other forms of traction on American railroads. (During World War II, these engines were also important in American submarines and destroyer escorts.) Electro-Motive was sold in early 2005. On December 31, 1955, General Motors became the first American corporation to make over one billion dollars in a year. After GM's massive lay-offs hit Flint, Michigan a strike began at the General Motors parts factory in Flint on June 5, 1998, which quickly spread to five other assembly plants and lasted seven weeks. At one point GM was the largest corporation ever in the United States, in terms of its revenues as a percent of GDP. In 1953 Charles Erwin Wilson, then GM president, was named by Eisenhower as Secretary of Defense. When he was asked during the hearings before the Senate Armed Services Committee if as secretary of defense he could make a decision adverse to the interests of General Motors, Wilson answered affirmatively but added that he could not conceive of such a situation "because for years I thought what was good for the country was good for General Motors and vice versa". Later this statement was often garbled when quoted, suggesting that Wilson had said simply, "What's good for General Motors is good for the country." At the time, GM was the one of the largest employers in the world – only Soviet state industries employed more people. General Motors Hughes Electronics Hughes Electronics was formed in 1985 when Hughes Aircraft was sold by the Howard Hughes Medical Institute to General Motors for $5 billion. General Motors merged Hughes Aircraft with its Delco Electronics unit to form GM Hughes Electronics (GMHE). The group then consisted of: Hughes Aircraft Delco Electronics Hughes Space and Communications Hughes Network Systems Hughes Training In August 1992 GM Hughes Electronics purchased General Dynamics' Missile Systems business. In 1994 Hughes Electronics introduced DirecTV, the world's first high-powered direct broadcast satellite service. In 1995 Hughes Electronic's Hughes Space and Communications division became the largest supplier of commercial satellites. Also in 1995 the group purchased Magnavox Electronic Systems from the Carlyle Group. In 1996 Hughes Electronics and PanAmSat agree to merge their fixed satellite services into a new publicly held company, also called PanAmSat with GM Hughes Electronics as majority shareholder. In 1997 GM transferred Delco Electronics to its Delphi Automotive Systems business. Late in the year the defense operations of Hughes Electronics (Hughes Aircraft and missile business) were merged with Raytheon. Hughes Space and Communications remained independent until 2000, when it was purchased by Boeing and became Boeing Satellite Systems. In 2000, the remaining parts of Hughes Electronics: DirecTV, DirecTV Latin America, PanAmSat and Hughes Network Systems, were purchased by NewsCorp and renamed The DirecTV Group. NewsCorp sold PanAmSat to Kohlberg Kravis Roberts & Co. (KKR) in August 2004. CORPORATE STRUCTURE AND ISSUES Current members of the board of directors of General Motors are: Percy Barnevik, Erskine Bowles, John Bryan, Armando Codina, George Fisher, Karen Katen, Kent Kresa, Ellen Kullman, Philip Laskawy, Jerome York, Eckhard Pfeiffer, and Rick Wagoner (chairman). York was elected to the board on February 6, 2006 to represent Kirk Kerkorian, as E. Stanley O'Neal stepped down. Rick Wagoner is also the chief executive officer of the company (since June 1, 2000), succeeding John F. Smith, Jr. Social policies General Motors was named one of the 100 Best Companies for Working Mothers in 2004 by Working Mothers magazine. Due to its highly compensated workforce GM has the highest health care and labor costs in the industry, and some analysts have criticized the company for this. Subsidies In March 2005, the Government of Canada "gave C$200 million to General Motors for its Ontario plants, and last fall it awarded C$100 million to Ford Motor Co. to expand their Canadian auto production, provide jobs and contribute to the economy," according to Jim Harris. With additional subsidies promised to non-North American auto companies like Toyota, Premier Dalton McGuinty said the money the province and Ottawa are pledging for the project is well-spent. His government has committed C$400 million, including the latest Toyota package of C$125 million, to the province's automobile sector, which helped finance $5 billion worth of industry projects. Marketing problems GM corporate management has since 1955 allowed the gradual blurring of the distinctions between its own divisions. These divisions were once each targeted to specific market segments and, despite some shared components, each vehicle distinguished itself from comparable GM stablemates with unique styling and (to some extent) bespoke technology. The shared components and common corporate management created substantial economies of scale while the distinctions between the divisions created an orderly upgrade path, with an entry-level buyer starting out with a practical and economical Chevrolet and, (assuming progressive prosperity of the buyer), moving through offerings of the several divisions until the purchase of a Cadillac. The divisions were not competing with each other so much but rather they were passing along the same customer, who would thus always be buying a GM product, with the profits flowing to this single corporation. Before 1955: GMC Truck - produced strictly utilitarian commercial vehicles over a wide range of capacities Chevrolet - an entry-level brand offering high utility at low price, with some light trucks and panel vans Pontiac - a brand that sold solid, extremely quiet vehicles (these used a side valve straight eight), attractive to a modest and reserved lower middle class Oldsmobile - a leading technical innovator with the first production automatic transmission, this eventually became GM's first "performance" division, introducing the industry's first short-stroke, high-compression overhead-valve V8 (the "Oldsmobile Rocket") in 1949 Buick - a more expensive and luxurious brand for the upper middle class (often called the "doctor's car") with four models - the small body/engine Special and Super and the larger Century and Roadmaster, each emphasizing a soft ride, upscale interior, and in the late 1940's an available "shiftless" automatic transmission and hydraulic power windows Cadillac - the self styled "standard of luxury", with large production competition only from rival Packard The postwar industry became enamored with the concept of "planned obsolescence", implemented by both technical and styling innovations, with a three year product cycle typical within the industry. In this cycle, a new basic body shell is introduced and then modified for the next two years by minor styling changes. GM, Ford, and Chrysler competed vigorously in this new environment. By 1957, with a "horsepower race" active in the U.S. industry, Pontiac became somewhat performance-minded, rivaled by some specific Buick models (the Century for example), completing the evolution in the early and mid 1960's with the Bonneville and the GTO, with Oldsmobiles mostly later becoming soft, comfortable, and (for larger families) practical vehicles. High performance vehicles were available from all of the divisions, peaking in 1970 and ending with the imposition of anti-smog technologies that severely impacted performance, drivability, and efficiency across the industry in the early 1970's. By the late 1960s, most of GM's vehicles were built upon a few common platforms and in the 1970s, began to use nearly identical body panel stampings, differing only in internal and external trim items. This was seen especially in the compact passenger vehicles offered by the divisions. Beginning in the 1980's, GM frequently "rebadged" one division's successful vehicle into several models across the divisions, all positioned close to one another in the market place. Thus, a new GM model's main competition might be another model spawned off the same platform. This led to so-called market "cannibalization", where GM's respective divisions spent time stealing sales from one another, while other more co-ordinated efforts (notably from the Japanese manufacturers) were allowed to increase their market penetration. For instance, the company's GMT360 midsized light truck platform has, since its inception in 2002, spawned the basic Chevrolet Trailblazer, an extended version of the Trailblazer, the Oldsmobile Bravada, the GMC Envoy, the Envoy XL (an extended Envoy with a reconfigurable tailgate) and later, the Isuzu Ascender, Buick Rainier, and Saab 9-7X. Though each model had a more or less unique mission, without bespoke engine choices or radically different suspension settings and trim choices, the cars can hardly be told apart. Critics have suggested that this progressive blurring of well-defined brands has been a large contributor the late 20th and early 21st century market failures of GM. During the 1980's and later GM divisions had market issues concerning quality - not that the vehicles produced were especially bad but rather that they did not compare well to foreign competition in matters of fit and finish, durability of sheet metal, paint (which was not at all durable for several years after a formulation change), and plastic components. In 2004, GM redirected resources from the development of new sedans to an accelerated refurbishment of their light trucks and SUVs for introduction as 2007 models in early 2006. Shortly after this decision, fuel prices increased by over 50 % and this in turn affected both the trade-in value of used vehicles and the perceived desirability of new offerings in these market segments. The current marketing plan is currently to extensively tout these revised vehicles as offering the best fuel economies in their class (of vehicle), although such advantages are expected to be minor until the introduction of new hybrid light trucks in 2007, with projected 25% mileage improvements. In contrast, Ford, GM's primary domestic competitor, has emphasized building more and better passenger cars with attractive styling, features, and quality, with profitability flowing from lower production costs through reduction of excess plant capacity and firm consumer demand, which enables avoidance of marketing incentives (such as low or zero interest, cash back, or free or low cost added accessory, appearance, and other packages). Financial woes As is the case with other U. S. automobile manufacturers, international exchange rates tend to favor Japanese and Korean competitors. The expected future entry of China into the U. S. automotive market is likely to be advantaged by unrealistic currency exchange ratios that have become a structural problem owing to the Chinese government's extensive purchase of U. S. government debt in the form of bonds. European manufactures are somewhat disadvantaged by over-regulation. Irrespective of these various manufacturing conditions, various foreign manufacturers have demonstrated an ability to compete in the U.S. market with vehicles assembled in various U.S. states and using a substantial portion of domestic content. Such plants are advantaged over GM and Ford through the employment of a younger, nonunion, and more generally healthy workforce. General Motors has extensive "legacy" costs in pensions and health care costs from retirees, some of these obligations taken at a time when GM had a much larger share of the domestic U.S. market. GM has also committed itself (through union agreements) to pay ongoing wages to non-working employees displaced by automation (the so-called Jobs Bank). The subsequent loss of market share due to marketing and quality problems has severely impacted GM's ability to carry these obligations. In April 2005, General Motors posted a US$1.1-billion loss, for the first quarter of that year. Its debt was also downgraded to junk bond status. GM announced plans to cut 25,000 jobs in the United States, and included plans to shut down one of the Oshawa, Ontario, plants by 2008. By November 2005, within the first nine months of the year, GM had posted a near $4 billion loss. On November 21, 2005, GM had announced a revised plan of increased cuts. These cuts went from 25,000 to 30,000 employees, or 9% of its labor force. GM also increased the number of plant closings. Originally, the company planned eight plant closings; the new plan calls for the closing of twelve facilities. In December, 2005, Standard and Poor's further downgraded GM bonds to "B", with the observation that it is "now dubious" whether the new line of SUVs and trucks would return GM's North American auto business to profitability (WSJ US edition, 13 December 2005, p. A3). On December 21, 2005 Toyota Motor Corp announced that it would produce 9.06 million vehicles for 2006. Analysts estimate that GM will only produce around 8.825 million cars for 2006, giving up the title of the world's largest auto producer. GM has held the title for 74 consecutive years without a doubt. However, GM's Wagoner is confident that GM will remain #1. In February 2006, GM decided to slash its annual dividend to $1.00 per share. GM had resisted the move for some time. However, the reduction will save GM about $565 million in cash each year. GM invested in Suzuki in the early 1980s, with their share of the company rising to 20.4%, but in March 2006 the company sold 92.36 million shares (reducing their stake to 3%) in order to raise $2.3 billion. Plant locations The plants scheduled to be closed include (source: General Motors Corporation): For the first time ever, in 2004 the total number of cars produced by all makers in Ontario exceeded those produced in Michigan. GM officials cited profitability of their Oshawa, Ontario, plant in refusing to distribute the job losses. Alternative vehicles General Motors has long worked on alternative-technology vehicles, but has repeatedly failed to deliver them in a profitable way. The company was the first to use turbochargers and was an early proponent of V6 engines in the 1960s, but quickly lost interest as the muscle car race took hold. They demonstrated gas turbine vehicles powered by kerosene, an area of interest throughout the industry in the late 1950's, but despite extensive thermal recycling (developed by Chrysler) the fuel consumption was too high and starting torque too low for everyday use. They were also an early licensee of Wankel engine technology, even developing the Chevrolet Monza around the powerplant, but abandoned the alternative engine configuration in view of the 1973 oil crisis. In the 1970s and 1980s, GM pushed Diesel engines and cylinder deactivation technologies to disastrous results due to poor durability in the Oldsmobile diesels (this was a modified gasoline engine) and drivability issues in the Cadillac 4-6-8 variable cylinder engines. In 1996, GM introduced the EV1, the first modern mass-produced electric car. Despite the positive publicity generated by this vehicle, the company never spread the technology beyond California and Arizona, and pulled the plug on the program in 2003. GM was also an early innovator in hybrid vehicle development, building Diesel-electric trains since the 1930s and buses since the 1990s (but without stored energy recovery), but did not introduce a true hybrid passenger car until 2004. Their earlier hybrid pickup truck was such a mild application of the technology that many criticized it for being not a hybrid at all. The 2006 Saturn VUE Green Line will be the first hybrid passenger vehicle from GM, but it too is a mild design. GM has hinted at new hybrid technologies to be employed that will be optimized for higher speeds such as are encountered in freeway driving. As a great bulk of GM's fleet fuel consumption is by high fuel consuming light trucks and SUVs, a modest improvement in their mileage applied across this large fleet (say twelve to fifteen percent) would in fact conserve a significant amount of refined fuel. Rather than effectively deliver hybrid and electric vehicles at the present time, GM has extensively touted its research and prototype development of hydrogen powered vehicles, to be produced at some unspecified future time and using a support infrastructure yet to be built. Since production and use of hydrogen from fossil fuels is at present about 1/6 as efficient as direct use of the fuel (e.g, compressed natural gas), this is a future dependent upon the availability of extremely low cost electricity - as might be produced at some indefinite future time by speculative power sources such as nuclear fusion. GM in China General Motors is the top-selling foreign auto maker in China, with 11.2% of the total market there. The Buick brand is especially strong, led by the Buick Excelle subcompact. Cadillac initiated sales in China in 2004, starting with imports. GM pushed the Chevrolet brand there in 2005 as well, transferring the formerly-Buick Sail to that marque. The company manufactures most of its China-market vehicles locally, through its Shanghai GM joint venture. The SAIC-GM-Wuling Automobile joint-venture is also successful selling trucks and vans under the Wuling marque.

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