Abstract

This research looks at the General Motors Company and what led to company failure and filing of bankruptcy in 2009. The American automotive industry was poorly managed for years and was almost eliminated when the economy crashed in 2008. Without the help of the U.S. government, General Motors and Chrysler would not have been able to survive. How did GM, as the number one auto manufacturer and seller, go from being at the top to almost ceasing to exist? This kind of financial mess usually takes years of poor decisions and does not happen to a large company overnight. To come to my conclusion I analyzed four books written by people with inside knowledge of the company, as well as magazine articles and a couple of online websites.
Wagoner hired John Devine, the former financial officer of Ford, to be GM’s new CFO, and in August of 2001 he hired Bob Lutz, who had redesigned Chrysler’s product line in the 1990s. To help the economy and sales after the 9/11 terrorist attacks, Wagoner offered interest-free financing on every GM vehicle. Naturally, people flocked to the dealership showrooms to take advantage of this deal. Because of this, GM’s factories remained open, and money flowed to parts suppliers, dealerships, and ad agencies. Wagoner received praise from media throughout the country. However, an internal audit in mid-2001 showed that the company was not in as good of shape as the general public was led to believe. The analysis decided that GM had too many brands, too many dealers, too many factories, and too many workers. The report recommended that GM make cutbacks while times were good, but when this was presented to Wagoner he made a poor business decision and ignored the findings. In 2004, National Geographic magazine wrote an article titled “The End of Cheap Oil.” When Wagoner saw this, he once again ignored the facts. He was under the assumption that profits from SUVs and pickup trucks would continue to be strong- they probably would have if gas had stayed under $2 a gallon like it was in 2003 and 2004. Wagoner made several poor business decisions during his tenure as CEO of GM which led to the company