General Motors: A Perfect Storm Term Paper

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After years of unquestioned industry dominance, GM was not prepared to shift its approach to making cars to cope with the competitive edge possessed by Japanese automotive manufactures such as Toyota since the 1980s. "To be sure, GM has seen sales jump from time to time, but always because of costly incentives, like zero-interest financing after the Sept. 11 attacks, or the 'employee pricing' last summer. Ford and Chrysler have been forced to follow GM's lead on incentives, though the Asian automakers have largely avoided them by offering more attractive vehicles." (Isidore, "Many problems dog the No. 1 automaker," 2005) More attractive vehicles do not necessarily mean more luxurious vehicles -- far from it. Rather by offering inexpensive, reliable and mid-sized cars tailored to the average consumer desiring fuel efficiency, Toyota has gained an industry edge. It anticipated the desires of the public, and also deploys a largely non-union workforce, unlike GM.

In contrast to Toyota's strategy GM has been unable to ensire that its long run average costs are minimized.

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It has lost funds by paying retired unionized employees costly benefits pensions which does little to help the company gain a competitive edge and turn an eye upon the future. Long ago, GM could afford such generous offerings to its workers. Now, GM remains mired in the past -- still producing highly gas-inefficent vehicles in an age of Toyota hybrids and rising gas prices, and struggling to negotiate a settlment its powerful unionized workforce.

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