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Factors behind GM's failure


Factors behind GM's failure


It took a combination of bad management, bad timing and bad luck to bring the world’s mightiest industrial giant to its knees.

General Motors had been losing market share for years but alarm bells only started ringing last year. GM’s focus on gas-guzzling trucks rather than cars backfired when record high petrol prices made customers look for smaller, more efficient vehicles. Then came the credit crisis. GM could not borrow money to ride out the storm and the public could not find loans to buy new cars. That left vast numbers of vehicles undriven on the forecourts. In 2008, sales fell eleven percent. And while GM was struggling to shift its stock, its costs remained stubbornly high. Workers unions had cranked up the pressure in the 1990s and management caved. Healthcare and pension costs pushed up production pay to around 75 dollars an hour, compared to under 50 dollars for other companies. The company’s shift towards SUVs and small trucks paid dividends in the boom years of the 1990s but, by turning away from small, entry-level cars, GM alienated many would-be younger buyers. In this sense, GM lost the chance to attract returning customers. There were also growing doubts over quality and reliability. GM cars grew a reputation for breaking down and rusting and while efforts since have improved the mechanics, they have not yet changed the perception. All car-makers have been hit by the global slowdown, but GM’s sluggishness in responding to market demands has meant it bore the brunt. Meanwhile, sleeker, smaller, cheaper Asian models were able to avoid the worst.

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