GENERAL MOTORS RESTRUCTURIZATION

LEAN OPERATIONS AND ORGANIZATION STRUCTURE

SYNDICATE 5 1

PROBLEMS

Huge losses in subsequent years $ 2 Billion in 1990 $4.5 Billion in 1991

2

CAUSES

• Inefficient work force and managerial problems• Low capacity utilization• Too many divisions and models• High-cost suppliers

3

COMPETITOR COMPARISON

Sales ($ Billion)

Employees (in $K)

Sales per Employee

(in $K)

GM 123.1 756 162.7Ford 88.3 333 265.4Chrysler 29.4 123 238.8

Sales

Employee

Sales per employee

0 100 200 300 400 500 600 700 800

123.1

756

162.7

88.3

333

265.4

29.4

123

238.8

US Automobile Industry

Chrysler Ford General Motors

4

RETURNS TO SCALE

Constant Returns to Scale Increasing Returns to Scale Decreasing Returns to Scale

5

THE FIRST RESTRUCTURIZATION (LATE 1991)Actions Taken

• Closed 21 plants

• Fired around 74.000 workers (white and blue collars combined)

Results

• New capacity declined into 5 – 5.5 million production/year (reduced around 2 million/year)

• Market share just reduced around 2%

• Before restructurization, market share was 35% - in 1991

• After restructurization, market share was 33%

6

LESSON TAKEN

The action of restructurization on late 1991 was not sufficient• Competitors also changed and improved• Lagged productivity compare the competitors

34 worker-days to produce average car Competitors can did it within 32 (Chrysler) and 30 (Ford)

• Market share down to 28% in 1998

7

THE SECOND RESTRUCTURIZATION (MID 1990’S)• Consolidation of North America and International Operations• Reduced further the number of produced models• Made more efficient manufacturing time per vehicle

Lean manufacturing system

Just-in-time inventory approach, etc.

• Stop the GM auto components group operations Delphi Automotive Systems (spare parts business production)

Made efficient in business operations and focus

• Outsourced more to cover the assembly task• Integration of Sales, Service and Marketing system into centralized

framework8

RESULTS

Surpassed Ford in 2002• Vehicle productivity• Quality ratings• Profitability

9

SUMMARY

• Increase the energy (bigger organization size, more worker for manufaturing resource, etc.) will not always better in term of the result – manufacturing industry case focus

• Efficiency through the company operations especially in the core production activities can be established by outsourcing some of the steps, automation technology optimization and proper inventory management

• Integrated management system for optimum, effective and efficient of business operations performance

10