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DaimlerChrysler and GM Organization Technology and Business.
DaimlerChrysler and GM Organization Technology and Business.
DaimlerChrysler and GM Organization Technology and Business.
This case illustrates how two GENERAL MOTORS urn workers and managers share
giant automobile cor-' General Motors is still the world's largest information, authority, and decision making.
porations, DaimlerChrysler auto maker, with employees in 35 countries. The Saturn car was a market triumph. But
and General Motors, have In the early 1990s, GM's U.S. auto business Saturn took seven years to roll out the first
tried to use information accounted for about 1.5 percent of the U.S. model and drained $5 billion from other car
technology to combat foreign and domestic economy, down from 5 percent in the 1950s. projects. GM had been selling Saturn at a loss
competitors. The case explores the Its sheer size has proved to be one of GM's to build up market share. In 1992, GM's
relationship between each firm's management greatest burdens. For 70 years, GM operated labor costs were $2358 per car, compared
strategy, organizational characteristics, along the lines laid down by CEO Alfred with $1872 for Chrysler and $1563 for Ford.
business processes, and information systems. Sloan, who rescued the firm from That made GM 40 percent less productive
It poses the following question: How has bankruptcy in the 1920s. Sloan separated than Ford. These figures do not begin to ap-
information technology addressed the the firm into five separate operating groups proach those of the Japanese, whose au-
problems confronting the U.S. automobile and divisions (Chevrolet, Pontiac, tomotive productivity surpasses all U.S.
industry? Oldsmobile, Buick, and Cadillac). Each corporations.
On October 26,1992 Robert C. Stempel division functioned as a semiautonomous
resigned as chairman and CEO of the company with its own marketing operations. CHRYSLER
General Motors Corporation because he had GM's management was a welter of
not moved quickly enough to make the bureaucracies. In auto industry downturns, Chrysler was
changes required to ensure the automotive always the weakest of Detroit's Big Three auto
GM covered the market with low-end
giant's survival. To counter massive financial Chevys and high-end Caddies. At the outset, makers (GM, Ford, and Chrysler). Founded in
losses and plummeting market share, this amalgam of top-down control and the 1930s by Walter P/ Chrysler through a series
Stempel had announced 10 months earlier decentralized execution enabled GM to build of mergers with smaller companies such as
that GM would have to close 21 of its North cars at lower cost than its rivals; but it could Dodge, and DeSoto, Chrysler prided itself on
American plants and cut 74,000 of its also charge more for the quality and superior engineering, especially in engines and
370,000 employees over three years. popularity of its models. By the 1960s, GM suspensions. In the 1940s and 1950s, Chrysler
Stempel was replaced by a more youthful started having trouble building smaller cars grew into a small, highly centralized firm with
and determined management team headed to compete with imports and started very little vertical integration. Unlike Ford and
by Jack Smith. GM, Chrysler relied on external suppliers for 70
eliminating differences among divisions. By
GM's plight reflected the depths of the the mid-1980s, GM had reduced differences percent of its major components and
decline of the once vigorous American au- among the divisions to the point that subassemblies, becoming more an auto
tomobile industry in the late 1980s. Year customers could not tell a Cadillac from a assembler than a huge vertically integrated
after year, as Americans came to view Chevrolet; the engines in low-end Chevys manufacturer such as GM. Although Chrysler
American-made cars as low in quality or were also found in high-end Oldsmobiles. Its did not develop a global market for its cars to
not stylish, car buyers purchased fewer and own brands started to compete with each cushion domestic downturns, its centralized and
fewer American cars, replacing them mostly other. Under Roger Smith, CEO from 1981 smaller firm could potentially move faster and
with Japanese models. be more innovative than its larger competitors.
to 1990, GM moved boldly, but often in the
During the late 1980s, Chrysler lost several
Ironically, at about the same time, the wrong direction. GM remained a far-flung
Chrysler Corporation announced strong vertically integrated corporation that at one hundred thousand units of sales annually
because it did not make improvements in engine
earnings and looked forward to a new period time manufactured up to 70 percent of its
development and in its mass-market cars—the
of strength and prosperity. During the own parts. Its costs were much higher than
small subcompacts and large rear-wheel drive
1980s, Chrysler had struggled with rising either its U.S. or Japanese competitors.
costs and declining sales of mass-market Like many large manufacturing firms, its vehicles. There was no new family of mid-priced,
mid-sized cars to rival Ford's Taurus or Honda's
cars. However, demand was strong for its organizational culture resisted change. GM
Accord. Customers could not distinguish
minivans and the hot Jeep Grand Cherokee. has made steady improvements in car quality,
Chrysler's key car models and brands from each
A stringent cost-cutting crusade eliminated but its selection and styling have lagged
$4 billion in operating costs in only three behind its U.S. and Japanese rivals. GM's other, and thus migrated to other brands. By the
early 1990s, fierce price cutting had upped
years. market share plunged from a peak of 52
Chrysler's breakeven point (the number of cars
Ten years before, Chrysler had been percent in the early 1960s to just 33 percent
the firm had to sell to start making a profit) to
battling bankruptcy and GM was flush with today. In 1979, GM's market share was 46
1.9 million units, up from 1.4 million.
cash. Had Chrysler finally turned itself percent.
around? Was this the beginning of the end GM created an entirely new Saturn au-
for the world's largest automobile maker? tomobile with a totally new division, labor
What is the role of information systems in force, and production system based on the
this tale of two auto makers and in the Japanese "lean production" model. Sat-
future of the U.S. automobile industry?