G.M FINANCIAL ANALYSIS AND RECOMMENDATIONS
PRESENTED TO:
MR. MUHAMMAD ASIM
PRESENTED BY:
SAJID ALI 091169
UMAR FAROOQ 083258
TABLE OF CONTE
NTS
HISTORY ……….4
PEST ANALYSIS……… 5
COMPETITORS ANALYSIS ………6
SWOT ANALYSIS ………..7
STRATEGIC FACTOR ANALYSIS SUMMARY (SFAS) MATRIX ………….9
FINANCIAL RATIOS ………..………..10
FINANCIAL ASSUMPTIONS ………..12
EXECUTIVE SUMMARY:
GM is currently facing the most challenging time periods in its entire history. Nevertheless, there are a few potential avenues of growth and success still available to GM. Among the most promising of these is the Chinese automobile market. Here we present a course of action which GM could follow to ensure its continued leadership in China. GM’s future operations in China can be summarized by the following three premises:
1. The Chinese car market will continue to grow and The Chinese car market will continue to grow and remain profitable, eventually overtaking main profitable, the U.S as the largest car market.
2. GM is very well suited to lead the Chinese premium car market, as well as to effectively compete in the market for trucks.
3. GM will maintain long term leadership by investing in the four P’s: Product, price, place and promotion, this will ultimately improve GM’s brand, image and reputation.
MISSION STATEMENT:
GM is committed to be a leader in providing transportation products and services of such quality that our customers will receive superior value, our employees and business partner will share our success and our shareholder will receive a sustained superior return on their investment.
VISION STATEMENT:
GM’s vision is to be the world leader in transportation products and related services. GM will earn our customers’ enthusiasm through continuous improvement driven by the integrity, teamwork, and innovation of GM people. Becoming the best is an unending journey, a constantly changing destination. But that’s where we are determined to drive-one car, one truck, and one customer at a time.
HISTORY:
General Motors, one of the world’s largest automakers, traces its roots back to 1908. GM employs 209,000 people in every major region of the world and does business in more than 120 countries. GM and its strategic partners produce cars and trucks in 31 countries, with the following brands: Buick, Cadillac, Chevrolet, GMC, Daewoo, Holden, Isuzu, Jiefang, Opel, Vauxhall, and Wuling. GM’s largest national market is China, followed by the United States, Brazil, the United Kingdom, Germany, Canada, and Russia. GM’s OnStar subsidiary is the industry leader in vehicle safety, security and information services.
PEST ANALYSIS:
1.
POLITICAL
• Laws and Govt regulations for safer environment
• Low entry barrier for competitors to join U.S automobile industry
• United auto worker union contract with gm for health insurance with no premium
2.
ECONOMICAL
• Increasing prices of inputs, fuel and other costs (pension and health care)
• Big competition in U.S market
• 32.4% automobile share in U.S 2004
• Big contribution to GDP from its huge sales in 2004
3.
SOCIETAL
• environmental friendly which is according to customer needs
• its 1st annual corporate responsibility and sustainability report from
any automobile manufacturer industry
4.
TECHNOLOGICAL
• Slow to bring vehicle that utilize hybrid technology to market • OnStar technology for vehicle tracking
• GM has developed new car concepts like minicars with low fuel consumption
COMPETITORS ANALYSIS
The major competitors of General Motors are domestic companies like Ford Motor and foreign companies like Toyota Motor & Honda Motor.
Ford Motor Company
Ford Motor Company is a global company with two core businesses: Automotive and Financial Services. The Automotive business consists of the design, development, manufacture, sale and service of cars, trucks and service parts. Ford has been focusing on cutting costs to increase margins more than its competitors. It has used reverse engineering in the development of their products. Thus Ford has been an innovator in the auto industry.
Honda Motor Company
Honda motor company is not your average Japanese car manufacturer. Originally know for motorcycles, Honda has managed to elude the dominate keiretsu system in Japan and become one of the dominant automobile manufactures in the world. There is much strength to Honda. Honda has a reputation for producing high quality products from cars to motorcycles. Honda has won many awards for initial quality and customer satisfaction. Their automobiles are reliable and generally fuel efficient. Their research has afforded them competitiveness in innovative products.
Toyota Motor Corporation
The Toyota Motor Corporation was incorporated in 1937 and has many strengths being one of the industry leaders in the automotive industry. Toyota has three major brands underneath the company umbrella; Toyota, Lexus, and Scion. By having these three distinct brands, it lets the company reach many sectors of the globe in a choice of vehicle for customers. Toyota has traditionally also been the leader in Total Quality Management or TQM. By using the Kaizen theory of continuous improvement, Japan caught up the U.S. auto makers during the 1980s.
SWOT ANALYSIS:
A.
STRENGTH
1. large market share in U.S market with 32.4%
2. global experience with operations in 120 countries
3. variety of brands
4. GMAC customer financing program 5. OnStar satellite technology
6. employee discount for everyone program
B.
WEAKNESSES
1. Slow bringing of hybrid technology 2. Focus on increasing the size not sales 3. Rapid increase in health care costs in U.S
4. Shifting focus away from its lack of competitive and differentiated products
5. Poor organizational structure with vertical integrated 6. Overly dependent on GMAC financing operation 7. Overly dependent on U.S market
C. OPPURTUNITIES
1. Future in alternative energy movements 2. Continuing to expand globally market share
3. Low interest rates have the potential to generate an immediate Increase in sales
4. Introduce vehicle with new styles and models
D.THREATS
1. Rising the prices of inputs and fuel
2. Growth in market share of competitors in U.S 3. Pension obligation
STRATEGIC FACTOR ANALYSIS SUMMARY (SFAS)
MATRIX
STRATEGIC FACTORS WEIGHT RATING WEIGHTED
SCORE
large market share in U.S market(S1)
GMAC customer financing program(S4) Slow bringing of hybrid technology(W1)
Rapid increase in health care costs in U.S(W3)
Future in alternative energy movements(O1) Low interest rates have the potential to generate an immediate Increase in sales(O3) Rising the prices of inputs and fuel(T1)
Growth in market share of competitors in U.S(T2) TOTAL SCORES .1 .2 .05 .1 .05 .05 .2 .25 1 4.5 2 5.0 3.5 4.0 3.0 2.0 5.0 .45 .4 .25 .35 .2 .15 .4 1.25 3.45
FINANCIAL ASSUMPTIONS: Liquidity Ratios:
Current Ratio
The current ratio is one of the common cited financial ratios, measures
the firms ability to meet its short term obligations. The GM current ratio
of 2003 and 2004 are acceptable because of manufacturing in nature.
There is lightly increase in 2004 current ratio against 2003 which is 2.19
and 2.00 respectively.
Quick Ratio
As far as quick ratio is concerned, also better in the year of 2004. it is
important to calculate because some inventories are not convertible
quickly into cash.
Profitability Ratios:
Net Profit Ratio
GM net profit margin ratio shows the 32% decrease from 2003 to 2004. the higher the net profit ratio is better. It is better measure to firms success with respect to earning on sales.
GP Ratio
Gross profit ratio shows the difference between the company’s major sales and cost. GM is going down as far as sales is concerned. 2003 to 2004 5% decrease in the ratio.
Return on Investment
Return on investment is also in the critical position it shows us that GM is not investing its assets with efficiently and effectively.
GM return on equity ratios is also decreasing because of the net profit ratio. Net profit directly effects on the share holders that they invest or not.
EPS
EPS is the solution of equity shareholders and net profit of the company as far as shareholder is concerned there is a little bit increase in number of shares and on the other side net profit is more declining position. Activity Ratios:
Inventory Turnover
The major cause that GM is facing is declining in sales because of other strong competitors exist in the market with low cost, which is directly effects the production and inventory.
Asset Turnover
It indicates the efficiency with which the firm uses its assets to generate sales. The company is just maintaining their asset turnover ratio.
Leverage Ratio:
Debt to Asset Ratio
GM debt to asset ratio shows that they have reasonable assets to meet their obligations. This helps to eliminate the chances of bankruptcy.
Time interest Earned Ratio
The firms ability to make contractual interest payments the higher its value, the better able the firm is to fulfill its interest obligation. GM financing department is not going well in both years because the standard is 3-5 and company’s ratio of 2003 and 2004 is 0.30 and 0.23 respectively, which is much lower than standard.
RECOMMENDATIONS
• Company should improve their organizational structure with some vertically and horizontally
• If they focus on research and development, they can compete
• Company should change their health care strategy for their employees
• Currently company have a large share in CHINA, they should expand their business to Sub-Continent
• Company should focus on their low cost and differentiated strategy
• Low interest rates have the potential to generate an immediate Increase in sales
