A Broken Supply and Social Chain: Anatomy of the Downfall of an Industrial Icon

A Broken Supply and Social Chain: Anatomy of the Downfall of an Industrial Icon

Yanli Zhang (Montclair State University, USA), Ruben Xing (Montclair State University, USA) and Zhongxian Wang (Montclair State University, USA)
DOI: 10.4018/978-1-4666-2922-6.ch009

Abstract

There was a time in the history of GM when it was the largest corporation in the US. The history of GM also shows that it was the single largest employer in the world. The announcement of GM’s bankruptcy on June 1, 2009 shocked the world and had a tremendous impact on the United States economy. Looking back at the history of GM, there were many indicators which suggested the fate of the company. There were several internal factors that answer the question, what went wrong with GM. These internal factors are management arrogance, not meeting customer demands, the costs and demands of unions, poor forecasting, and internal controls on accounting standards. Similarly, there were several external factors that answer the same question, which include increased competition and loss of market share, rising gas prices and environmental friendliness, and the costs and burdens of meeting government regulations and restrictions. This paper will explore and answer the following questions: What are the fundamental causes of GM’s problems? What can be learned from GM’s mistakes and experiences? How and why an industrial icon came to ruin?
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Setting The Stage

In the early twentieth century, GM grew at an incredible rate as well as created a powerful union and steadily had a growth of employment. Union workers were paid handsome wages, often viewed as overpaid for a line worker. Post World War II, GM has had an uphill battle to stay in the automobile industry as a company that produces quality products and steadily claimed its place as the leader in the industry. Conversely, GM has run aground and has been financially bailed out by the Obama administration.

GM filed for Chapter 11 bankruptcy in 2009. They are the largest industrial company to ever file for bankruptcy as well as the fourth largest company to ever file for bankruptcy in the United States. The federal government has a majority stake in GM since the bailout has been completed. In addition, GM has close to 80 billion dollars in assets and double that amount of debt.

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