Corporate Strategy of Downsizing of General Motors

Full text: https://firmstrategy.net/the-downsizing-strategy-of-general-motors/
At the end of 2018, General Motors (GM) announced the layoffs of 14,000 employees in North America. Staff cuts are sometimes misunderstood that the firm fail into poor financial results. However, in recent years, GM’s business has been very good, by reaching a revenue of 20.7 billion USD in 2017; more than 10.6 billion USD in 2016; and 7.9 billion USD in 2015. Its cash flow in 2017 reached 17 billion USD. So, why did GM cut staff? Let’s analyze the market context.
In fact, the car market has been volatile in term of rivalry and advanced technologies during recent decade. Concerning customer taste, electric cars firstly were launched by Tesla Company in 2012 created a trend of new car consumption. Sales of electric cars are forecasted to increase from a record 1.1 million USD worldwide in 2017 to 11 million USD in 2025 and 30 million USD in 2030. Over time, electric cars become more popular with cheaper prices compared with those of internal combustion engine cars. It is estimated that in 2040, electric cars will account for 55% of total new car sales in the world. On the other hand, driverless cars, despite of actual technological limits, start to become a real threat to the actual car market.
Concerning competition, not only car manufacturers have competed directly with each other; providers of technology car rental services such as Uber, Lyft and Grab influence also directly car sales revenue. Now, customers do not need to own a car; wherever, they can easterly find a nearby Uber and Grab car for rent, both with driver or driverless.
These two potential risks lead the car market to radically change towards the direction of “software and batteries” that will gradually replace internal combustion engines.
In that context, car manufacturers like GM stopped producing small cars like sedans by prioritizing models such as electric cars, SUVs and CUVs. It means that they had to change technology by closing old technology factories that manufacture outdated cars. On the other hand, in order to increase productivity, GM focuses on factories achieving full manufacturing capacity; the other, including also strategic ones may be closed. GM oriented its human resources not only to high quality, but also to be consistent with its strategic products. And, layoffs are part of GM’s strategic repositioning strategy.

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