The Decline and Collapse of General Motors

Topics: General Motors, Automotive industry, Profit margin Pages: 4 (1044 words) Published: September 17, 2010
The Decline and Collapse Of General Motors

General Motors (GM), who once dominated the automobile industry, has now plummeted, almost to the point of extinction. Throughout the 1940’s to the 1970’s General Motors (GM) had dominated the automobile industry. By the 1980’s, GM was suddenly facing a shift in the economy and consumer demands. GM’s Earlier Successes

In the 1950’s, GM agreed to pay their workers well, by signing groundbreaking long-term employment union contracts which included: •workers to be the highest paid in America
pay rates were automatically increased with the rate of inflation •workers were paid during shutdown periods
extensive health coverage
strong retirement benefits
substantial pension plans
full benefits for long time employees
This benefited GM because it ensured that workers returned to work after shutdowns for model year changes. In the business world, GM was known for its large distribution, multiple brands, product lines and designs. To consumers of GM cars, it was all about speed and comfort. GM quickly became the leader in the automotive industry, with a market share exceeding 50%. What Went Wrong

External Factors
Gas Prices
Unexpectedly oil prices skyrocketed, increasing from under $1.00 a barrel in the 1960’s, up to $18.00 per barrel in the 1970’s. In turn, gas prices had also risen from .12 cents to $1.00 per gallon during this same time period. That’s an 88% price hike. By 1973, consumers were looking for alternatives in saving money at the gas pumps; they started buying more fuel-efficient cars. During that time GM was still producing large vehicles with eight-cylinder engines, “gas guzzlers”, because they could earn much higher profits on these than on smaller vehicles. The cost to consumers to fill the gas tanks had caused sales to drop on these large trucks and SUV’s, and GM started losing its market share to foreign competitors. Foreign Competitors

Once thought of as a...
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