Opening Case

According to Rick Wagoner (GM's CEO), the company is in a crucial period in its 100-year history.1 In a CBS 60 Minutes interview in 2006, Steve Kroft described GM as a company "limping" along in the breakdown lane in need of a lot more than a minor tuneup. David Cole, an automotive expert, describes the situation facing GM as a real crisis, "not a phantom or fake crisis." GM's problems are compounded by competition from Japanese and Korean brands, higher gasoline prices, the bankruptcy of its largest parts supplier (Delphi), and perhaps, most critically, an overstock of SUVs and sedans. GM has a cost disadvantage when it comes to its health and labor costs. GM provides pension and health insurance to its 1.1 million employees and their dependents at a cost of $6 billion a year. It's a cost that most of GM's foreign competitors don't have because their workers are usually covered by some form of government health insurance in their own countries.2 Another area where GM is losing ground is with its product mix. GM is playing catch-up in the hot market for hybrids because it has been losing sales to Toyota and Honda. The Japanese companies began developing hybrids in the 1990s while U.S. manufacturers scoffed at the technology as not being economically viable. With SUVs and trucks bringing in good profits, GM and its leaders saw no need to change--buying into the cliché, "If it's not broken, why fix it." Today, both GM and Ford are coming to the market with their first hybrid models, while Toyota and Honda are already selling second generations.3,4 Today, GM's shares are trading at historic lows. In 2006 and 2007, GM posted $10 billion and $39 billion losses, respectively. GM is on the verge of losing its number one status to Toyota. As a sign of the urgency of the crisis, Rick Wagoner offered to cut his base salary by 50 percent in 2006 and 25 percent in 2007. Many of Rick Wagoner's critics accuse him of being clueless and lacking the urgency that GM's crisis demands. The flood of bad news has brought increasing speculation that Rick Wagoner will lose his job. Opening Case Questions:

1. Would you describe the situation facing GM as a crisis?

2. What are some of the contributing factors to GM's crisis that pre-crisis planning would have revealed?

3. How effective has GM's leadership been under Rick Wagoner so far in addressing the company's crisis?

4. Several rumors are circulating that GM is on the verge of bankruptcy. How can GM's leadership address these rumors to avoid further panic among shareholders and employees?

5. Describe the threats facing GM in its external environment.

6. In your opinion, does GM represent the traditional organization or the learning organization?

7. What actions can GM's leadership take to make it more of a learning organization?