“GM’s OnStar subsidiary is the industry leader in vehicle safety, security and information services” (Company Q2 report, 2009). I would now begin this report by giving an in-depth and thorough internal and external analysis of General Motors that led it to its decision to withdraw from its European Operations.
General Motors’ automobile production and sales business was greatly affected by global economic downturn. The economic meltdown across the world and the financial crunch adversely affected the business and sales volume of most of the corporate entities and businesses across the globe. General Motors also felt the pinch of this turmoil and observed a decline in sales and profits because of falling demand of its brands. The increasing levels of unemployment, subsequent reduction in incomes and purchasing power because of higher energy and oil prices increased the inflation that forced consumers to reduce their spending and increase saving. In short, sales decreased considerably and GM with high overheads found it difficult to assimilate the shock. Higher costs of production in European countries where company’s plants are located, weak British pound and “unfavorable mark-to-market commodity hedging” (company Q1 financial report, 2009) are others reasons that added to the miseries of GM. In short, the General Motor’s financial position became so weak which compelled It to announce its Bankruptcy on June 1 (2009).
The money losing units of General Motors in Europe are Opel and Vauxhall. These units observed a drastic reduction in sales (from around 2.2 mn in 2007 to 2.04 in 2008) and profits which tumbled from positive 0.357$ bn (EBT) in 2006 to negative 2$ bn in 2009 (company Q1 financial report, 2009). The sharp reduction in sales and resulting mammoth losses forced GM to sell off its European Operations (Opel and Vauxhall) to an Austrian-Canadian automotive group Magna and its Russian partner