Transcript General Motors: Communicating for Survival

General Motors Corporation:
Communicating a New Vision for
Survival
Mr. Wagoner Goes to Washington
• November 19, 2008: General
Motors appears before House
Financial Services Committee
• Presents arguments to receive
loans to support operations
through market crisis.
• “We do not expect operations
to generate sufficient cash flow
to fund our obligations as they
come due.” – GM, Nov. 7
▫ What were the causes of the
company’s liquidity crisis?
Economic Factors
• Housing Market Collapse
▫ House prices enter 20
consecutive month decline
beginning August 2006.
• Banking Crisis
▫ 90% of new cars purchased
with financing.
• Surge in Fuel Prices
▫ Crude Oil reaches $147 per
barrel in June 2008.
• U.S. Consumer Confidence
Decline
▫ CCI falls 60% from October
2006.
Auto-Industry Trends
• Sales Slump
▫ World car sales drop 24%
from the previous year.
• Alternative-Fuel
▫ Sales of Hybrid gas-electric
vehicles increases 35% in
2007.
• Growth in Emerging Markets
▫ Sales in China increase from
2 million in 2001 to 8.9
million in 2007.
• Dealership Reduction
▫ NADA forecast: 900 of
20,770 U.S. dealers will go
out of business in 2008.
The History of General Motors
• Rise to Market Dominance
▫ First Company to reach $1 billion annual income
in 1955.
▫ Alfred Sloan Management.
• Union Relations
▫ Benefits add another $1,400 per vehicle.
▫ Union to take over health-care trust in 2010.
• Rick Wagoner Tenure: 1999 - Present
▫ Share Price drops from $75.75 to $2.79.
▫ Electric Vehicles; Expansion into China.
Compounding the Errors
•
•
•
•
•
•
Late to the hybrid and fuel-efficient market;
Unresponsive to consumer demand;
Over-emphasis on SUVs to circumvent CAFÉ;
Illiquidity of GMAC;
Dissolution of core identity;
Historical concessions to union labor.
Government Bailout vs. Chapter 11
• GM insists Chapter 11 will destroy consumer
confidence.
▫ Warranty issue
▫ Parts issue
• Loan will deter domino effect.
• Bailout will speed up turnaround process.
The Congressional Presentation
• Recitation of the audiences that GM represents.
• Time-lagged perception of who GM is.
• Production progress in terms of flex-fuel and electric
cars.
• Successful restructuring that couldn’t foresee the global
downturn.
• Further downsizing being implemented to improve GM’s
liquidity by $20 billion.
• Implications of potential failure.
Unending Chain of Stakeholders
Internal
•
•
•
•
•
Management
UAW
GMAC
Non-Union Workers
Car Companies, both
domestic and abroad
• Retail Dealers
• Rental Fleets
External
•
•
•
•
•
•
•
•
GM Retirees
Customers
News Media
Government Officials
Environmentalists
Investors
Taxpayers
Suppliers
Reactions to General Motors Plea
• Generally hostile.
• Media played up the private jet issue.
• Initially, public was found to be anti-bailout.
(Rasmussen poll showed 49% against, 38% for,
with 13% undecided).
• Steve Harris: “For a couple of days you
were afraid to turn on the TV or open up
a newspaper.”
Delivering the Message
• How do you advertise when you’re broke?
• Utilization of third party support.
• GM facts and fiction sheet on Internet.
• Low tech, traditional approaches.
• Lack of blogging sites by company.
The Fallout: Rejection
• Government Bridge-Loan
Proposal Rejected
▫ “Until they show us the plan,
we cannot show them the
money.” – Nancy Pelosi
• General Motors given two
weeks to establish a plan for
viability