Tuesday, July 24, 2012

Can GM Revive Its Old Dominance in Auto Industry?

General Motors Corporation (GM) (NYSE: GM), is a global automaker founded in 1908 with headquarters in Detroit, Michigan. It is the world's second-largest automaker after Toyota, ranked by 2008 global unit sales. GM was the global sales leader for 77 consecutive calendar years from 1931 to 2007. It manufactures cars and trucks in 34 countries. GM employs 244,500 people around the world, and sells and services vehicles in some 140 countries. In 2008, 8.35 million GM cars and trucks were sold globally under the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, Hummer, Opel, Pontiac, Saab, Saturn, Vauxhall and Wuling.

General Motors executive Fritz Henderson has been hard with Obama administration to restructure GM and bring it out of the recession. However all the steps being taken by the two would only help in survival.

They are not building a company that is innovative. To be successful in auto industry as soon you loose the top position you should be ready to completely change all the wheels. Ford accomplished it in 1930's through Model T and assembly line. This enabled manufacturing at ultra low cost. GM accomplished it in 1960's through outsourcing to vendors in US and not manufacturing every component by themselves. This helped in introducing large variety of models at low cost. Toyota used lean principles in 1980's to enable manufacturing high quality cars at low cost and finally 2000's was the year when Toyota and Honda introduced fuel efficient and hybrid cars to leave competition behind.

The Obama administration is just trying to reduce GM cost structure making it lean and also helping it introduce cost efficient models.

This might help it survive but not make it number 1. So what will be next frontier which can make GM number 1? The answer lies in fulfilling the last human dream, the dream to fly. The government should sponsor a 3-5 years project similar to what Kennedy did for launching man to moon. GM and Chrysler should be merged into one entity maybe even Ford can join. They should be provided with all the resources of NASA, US army, and Lockheed Martin to device a car that can fly.

Why would flying cars concept be successful?

I am going to assume the bright scientists of our country will make the flying cars idea feasible in real life. Assuming that lets examine the benefits of such an innovation:

Commute times: in the current world an average person wastes around 1 hr a day in traffic. Introducing flying cars would solve the traffic problems and bring efficiency to the system.

Redefine American auto sector: American cars are currently tagged as gas guzzlers which anyone can replicate compared to German cars which are are known for performance and Japanese for Quality at low cost. A car that fly can supersede all three human needs of: Quality, Cost and performance.

Environment friendly: By moving cars to air more land would be available on ground to plant trees. Also the current coal tar, asphalt and concrete that is required for building roads which cause lot of pollution will not be required any more.

The Obama administration needs to rethink their strategy whether they want to continue keeping US the number one country by its unique innovation and taking lead in ground breaking technologies or just another dying country with nothing great in hand.

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