General Motors Corporation: Communicating a New Vision

for Survival

Mr. Wagoner Goes to Washington• November 19, 2008: General

Motors appears before House Financial Services Committee

• Presents arguments to receive loans to support operations through market crisis.

• “We do not expect operations to generate sufficient cash flow to fund our obligations as they come due.” – GM, Nov. 7▫ What were the causes of the

company’s liquidity crisis?

Economic Factors

• Housing Market Collapse▫ House prices enter 20

consecutive month decline beginning August 2006.

• Banking Crisis▫ 90% of new cars

purchased with financing.

• Surge in Fuel Prices▫ Crude Oil reaches $147

per barrel in June 2008.

• U.S. Consumer Confidence Decline▫ CCI falls 60% from

October 2006.

Auto-Industry Trends

• Sales Slump▫ World car sales drop 24%

from the previous year.

• Growth in Emerging Markets▫ Sales in China increase

from 2 million in 2001 to 8.9 million in 2007.

• Alternative-Fuel▫ Sales of Hybrid gas-

electric vehicles increases 35% in 2007.

• Dealership Reduction▫ NADA forecast: 900 of

20,770 U.S. dealers will go out of business in 2008.

The History of General Motors•Rise to Market Dominance

▫First Company to reach $1 billion annual income in 1955.

▫ Alfred Sloan Management.•Union Relations

▫Benefits add another $1,400 per vehicle.▫Union to take over health-care trust in 2010.

•Rick Wagoner Tenure: 1999 - Present▫Share Price drops from $75.75 to $2.79.▫Electric Vehicles; Expansion into China.

Compounding the Errors

•Late to the hybrid and fuel-efficient market;

•Unresponsive to consumer demand;•Over-emphasis on SUVs to circumvent

CAFÉ;•Illiquidity of GMAC;•Dissolution of core identity;•Historical concessions to union labor.

Government Bailout vs. Chapter 11

•GM insists Chapter 11 will destroy consumer confidence.▫Warranty issue▫Parts issue

•Loan will deter domino effect.

•Bailout will speed up turnaround process.

The Congressional Presentation

• Recitation of the audiences that GM represents.• Time-lagged perception of who GM is.• Production progress in terms of flex-fuel and

electric cars.• Successful restructuring that couldn’t foresee

the global downturn.• Further downsizing being implemented to

improve GM’s liquidity by $20 billion.• Implications of potential failure.

Unending Chain of Stakeholders

Reactions to General Motors Plea

•Generally hostile.

•Media played up the private jet issue.

•Initially, public was found to be anti-bailout. (Rasmussen poll showed 49% against, 38% for, with 13% undecided).

•Steve Harris: “For a couple of days you were afraid to turn on the TV or open up a newspaper.”

Delivering the Message

•How do you advertise when you’re broke?

•Utilization of third party support.

•GM facts and fiction sheet on Internet.

•Low tech, traditional approaches.

•Lack of blogging sites by company.

The Fallout: Rejection• Government Bridge-Loan

Proposal Rejected▫ “Until they show us the

plan, we cannot show them the money.” – Nancy Pelosi

• General Motors given two weeks to establish a plan for viability