Business Case Studies, Managing in Troubled Times Case Study, GM's Growing Troubles, Labour Driven or Market Driven

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Managing in Troubled Times Case Study

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Case Title:

GM's Growing Troubles: Labour Driven or Market Driven?

Publication Year : 2005

Authors: Thoraya and Chaitanya, T. Phani Madhav

Industry: Automobiles

Region:USA

Case Code: TRT0032

Teaching Note: Not Available

Structured Assignment: Not Available

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Abstract:
General Motors (GM), which maintained its number one position in Fortune magazine's annual 500 list over the years, is into losses worth $1.6 billion in third quarter of 2005 mainly due to losses at its North American operations. The GM management cited rising healthcare and labour costs as major reasons for losses. But, the United Auto Workers (UAW) feels that vehicle design, product development and foreign competition are the major reasons for company's losses. The opposing positions between the two (GM and UAM) had hindered negotiations concerning reduction of healthcare costs, job cuts, outsourcing and sub-contracting. Finally on October 17 th 2005, GM announced its deal with the UAW, which agreed to reduce its healthcare costs for retirees by $15 billion and its annual employee healthcare expenses by $3 billion a year. Other than reducing costs, GM has also planned to increase revenue by refocusing on sales, marketing and development of new models.

Pedagogical Objectives:

  • To highlight the reasons for the recent losses at the North American operations of GM
  • To discuss the deal entered into by GM and UAM and the effects of the deal.

Keywords :  General Motors; Rick Wagoner; Labour cost; Legacy cost; Global auto motor industry; American auto motor industry; United Auto Workers (UAW); Healthcare costs; Competition; Car models; Managing in Troubled Times Case Study; Sports utility vehicles (SUVs); Ron Gettelfinger; Delphi; Detroit; Low cost manufacturers

Contents:

  • Introduction
  • Global Automobile Industry
  • US Automobile Industry

  • Entry of Competitors
  • Labour Costs – The Legacy
  • The Negotiations

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