GM’s Financial Crisis

General Motors was once one of the greatest producers of American owned cars, now they are only brought by a quarter of Americans each year. In 2008, GM reported a loss of 1.1 billion dollars in the first three months. Many issues have been blamed for the downturn of the company. One is the overall recession that the US has found themselves in. Another main problem was found within the structure of General Motors. The chief executive, G. Richard Wagoner Jr., resisted in the pursuit of going into the market for gas-electric hybrid vehicles and choice to insist that the sales would improve if they focused on a new line of pickups and sport-utility vehicles.
As time progresses the company is seeing declining sales and even more declining profit. To help balance this inevitable downfall it is focusing on trying to decrease its fixed and variable costs. The fixed costs, which do not vary with the level of output that the company would have in a month, include their plants and factories that they have around the country. To reduce these, company has shut down several factories and in turn had to lay off many of their hard workers. Their variable cost, which would vary directly with the level of output, includes labor wages, warranties and inventory. With the shutdown of factories the company has lowered this factor by the layoffs that were created, but they have also worked on lowering their inventories and cutting down their warranties on their sold products.
General Motors has become one of the main outsources of ICT operations and employees of management of information technology. This outsourcing has become common place in many companies as they hope to increase their economies of scale. As it is now, GM and other car companies like Ford and Chrysler are trying to make it in the business long enough for the US to make it out of the recession. The bailout they have been asking for will make this dream more possible to reach for the near bankrupt company that was once one of America’s most profitable car company.