GM In China Harvard Case Solution & Analysis

Summary

General Motors was founded in 1908. General motors’ has been the largest vehicle manufacturing firm in the world. General Motors has 15% of market share all over the world in automobile industry. In United States, General Motors has ranked 1st in the largest 500 companies and 2nd rank in the world biggest industrial enterprises. General Motors has 80 million employees in United States and all over the world, operating business in 40 countries and regions of the world. General Motors manufactures cars, with the typical requirement of the United States for a car to be auto luxurious, spacious, comfortable and fast internal reserve power. General Motors has joint ventures with Fiat, Suzuki, Isuzu and Fuji Heavy Industries.

In the beginning of 1992 General Motors have made many joint ventures with enterprises owned by the Chinese government. There has been some challenges faced by General Motors in China.

By 2004 in China, General Motors had 10,000 employees and operated in six join ventures. Out of the six, two joint ventures had been owned by foreign enterprises. SAIC had been a major joint venture partner of General Motors and SAIC was founded in 1956, by 1997 SAIC started to become a largest manufacturing plant of China. According to the report of General Motors there are following joint ventures of General Motors in China Shanghai General Motors Co. Ltd., SAIC-GM-Wuling Automobile Co. Ltd., Shangai GM Dong Yue Motors Co.Ltd, Shangai GM Dong Yue Automotive Powertrain Co. Ltd, Jinbel General Motors Automotive Co. Ltd.

The sales of automobile in China had increased about 2 million units in 2000, 3 million units in 2002 and 4.4 million units in 2003.The growing economy of Chinese had shown positive signs for General Motors. The growing economy of China eventually increased the number of buyers of cars.

In China, as compared to 2003, sales of automobiles have decreased about 50 percent in 2004. According to analyst the reasons for a decrease in the sales of automobiles are loss of customer confidence, expectations of further vehicle price decreases, threat of oil shortage and higher the prices of gasoline. Some long term issues are also included. In China there is a very poor national highway system in fact one specialist said that there is no national highway system in China. The driving was not allowed from one city to another city.

Pollution is also one of the biggest issues in China, and pollution could also bound the sales of automobile. In 2004 General Motor profits declined by 44% i.e. US$80 million in China.

In 2004, the four state banks held more than 80% of China’s outstanding automobile loans but automobile manufacturer had been restricted to prolonging loans. General Motors allowed to sale their cars on loan in China to its purchasers. General Motor had the first automobile maker in China who was allowed to sale automobiles on loans. According to analysts this opportunity of providing loans to General Motors customers would increase the sales for the company. Other automakers had also followed the same strategy of giving loans through banks. Now General Motors enjoys a limited competition from industry players.

Before joining the World Trade Organization (WTO), China had the large tariff on automobile and components of automobile. Some analyst predicted that this WTO provided the best and new opportunities for overseas companies.

In June 2004, China had made new rules and regulations for foreign investors of automobile industry in China. These rules have totally changed in recent past; however some of the rules were not changed.....................

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