Case Study:
For General Motors, 2009 was a year to remember. A global recession—triggering massive layoffs, widespread unemployment, and faltering consumer confidence—sent car sales plummeting. Recognizing that GM’s demise would create a catastrophic ripple effect in the American economy, the federal government provided a $50 billion bailout to keep the giant automaker afloat. But 2009 also had one bright spot: GM’s performance in China. GM China is on a tear. The world’s largest and mostly untapped market for automobiles, China saw continued economic growth despite a worldwide recession—a claim few nations can make. GM has had operations in China for decades. Over time, the business grew to comprise nine joint ventures, two wholly owned firms, and 32,000 employees making automobiles, trucks, and vans for a burgeoning Chinese middle class. In addition to its Chinese brands Wuling and Jiefang, GM markets some names familiar to American consumers: Buick, Cadillac, and Chevrolet. But a number of its best-selling models are currently made and sold only in Asia, including a group of fuel-efficient Chevys: the Spark, a mini-car; the Cruze, a small sedan; the Epica, a mid-size sedan; and the Aveo hatchback. The Cruze and the Spark are to be introduced in the United States later. GM sales in China have expanded in high double digits year over year. Recently the company reported 67 percent growth in sales overall, with Chevy and Cadillac brands enjoying triple-digit sales increases from the prior year. The Buick line also did well, reporting a 60 percent increase in sales from the previous year— more than triple the U.S. figure. GM China’s sales were aided by a Chinese government stimulus program, now ended. Nonetheless, the company predicts continued double-digit revenue as demand remains strong. For years, GM has invested heavily in China, to the tune of about $1 billion annually. Today, it holds a 13 percent market share, trailing Volkswagen, Changan, Shanghai Automotive, and Hyundai. Most recently, the company entered into a $300 million joint venture with state-owned FAW Group to build light-duty trucks and vans. An estimated 200,000 vehicles are expected to roll off the assembly line after the first year of production, with future plans to export from the Chinese assembly plants In some respects, GM’s success in China helped blunt the pain of the near-collapse of the U.S. auto market that same year. However, with the cars GM sells in China priced considerably less— pickups and vans range from $4,000 to $7,000—revenues from U.S. sales remain higher.
Q1. Through overseas expansion, General Motors takes advantage of untapped markets. But that strategy came under criticism after the company received bailout money from the U.S. government. Do you think the criticism was warranted? Why?
Q2. GM plans to introduce the Chevy Spark and the Chevy Cruze, two fuel-efficient models made in China, in the United States.
Your answer must be typed, double-spaced, Times New Roman font (size 12), one-inch margins on all sides, APA format and also include references.