Running head: GENERAL MOTORS CORPERATION.

General Motors Corporation.

Dr. Chee Piong,
Accounting for Decision Makers
ACG5075E1-109022019
Everglades University
October 5, 2019.
GENERAL MOTORS CORPERATION. 2

General Motors Corporation.

General Motors Corporation often referred as General Motors or GM was founded by
William C. Durant in Flint, Michigan in 1908. It began as a holding company for Buick, but
grew rapidly from there. General motors began by bringing together a few companies into
one umbrella: including: Buick; Cadillac; Oakland, which became Pontiac; Oldsmobile; and
other small automotive companies. GM was always into the business of buying other
companies to incorporate. It believed that by bringing in companies with different attributes,
only then they would be able to reach a broader market. (Harrison, 2012)
In 1971, GM again pursued growth through acquisition by purchasing a 34.2% interest in
Isuzu. GM began to get into the defense contracting market during World War I. GM had
purchased 30 automotive companies by 1920. (General-Motors, 2012)
General Motors Company was incorporated in Delaware in 2009. The company has the
object clause of designing, building and selling cars, trucks, crossovers and automobile parts
worldwide. The company also provides automotive financing services through General
Motors Financial Company, Inc. also called GM Financial. (General-Motors, 2012)
The company is an American multinational corporation that has its headquarters in Detroit,
Michigan, and currently employs 207,000 people all over the six continents, of whom
140,000 are hourly employees and 67,000 are salaried. GM operates over 158 facilities
worldwide, and its employees speak more than 50 languages and live in 23 different time
zones, this shows how large GM is. Furthermore, The Company produces brands to satisfy
customers in more than 120 countries around the world. General Motors has two most
important markets in which its products are sold, its two most important markets is the U.S.
and China. (Datamonitor, 2011)
Today, General Motors Company is a brand new company with 100 years of history. They
remain one of the world’s largest automotive companies in the world with its products
outstandingly automobile, automobile parts and commercial vehicles, its services being
vehicle financing. In 2010, they sold 8.39 million vehicles, out of which more than three-
quarters were sold outside the U.S. (UK-Essays., 2018)
GM product range includes a global vehicle portfolio of cars, crossovers and trucks. GM is
committed to leadership in vehicle design, quality, reliability, and safety, as well as to
develop key energy efficiency, energy diversity and advanced propulsion technologies,
including electric vehicles with wide range extending capabilities like the Chevrolet Volt.
GENERAL MOTORS CORPERATION. 3

GM has various segments in which it operates, each of these segments can be considered as
Strategic Business Units (SBUs), below are brief description of these Strategic Business
Units (SBUs):
General Motors have diversified their business is across products and geographic markets.
They are committed to meet the local sales and service needs of their retail and fleet
customers with a global network of independent dealers. Their automotive business is
organized into four geographically-based segments GM North America (GMNA), GM
Europe (GME), GM International Operations (GMIO), GM South America (GMSA)
(Harrison, 2012)
GM North America (GMNA) makes sales, manufacturing and distribution operations in the
U.S., Canada and Mexico, and sales and distribution operations in Central America and the
Caribbean. (General Motors, 2012)
GM Europe (GME) focuses their sales, manufacturing and distribution operations across
Western and Central Europe. (Harrison, 2012)
GMIO performs GM sales, manufacturing and distribution operations in Asia-Pacific, Eastern
Europe, Africa and the Middle East. Vehicle sales volume, which includes Asia-Pacific,
Africa and the Middle East,
Out of all other segments, the GMIO is their largest segment by vehicle sales volume.
(General Motors, 2012).
The GMSA makes sales, manufacturing and distribution operations in Brazil, Argentina,
Colombia, Ecuador and Venezuela as well as sales and distribution operations in Bolivia,
Chile, Paraguay, Peru and Uruguay. (Harrison, 2012)
GM Financial Company was acquired by GM in 2010 for $3.5 billion in cash. It originally
had been operated since 1992 as AmeriCredit Corp.
The Services rendered by GM Financial include credit or lease financing, vehicle insurance
and extended service contracts. (General-Motors, 2012)
GM Financial specializes in purchasing retail automobile installment sales contracts
originated by GM and non-GM franchised and selected independent dealers in sale of used
and new automobiles. GM Financial also offers lease products through GM dealings in
connection with the sale of used and new automobiles to specific customers.
GM Financial primarily generates revenue and cash flows through the purchase, retention,
subsequent securitization and servicing of finance receivables. GM Financial earns finance
charge income on finance receivables and pays interest expense on borrowings under its
credit facilities. Periodically it transfers receivables to securitization trusts that issue asset-
GENERAL MOTORS CORPERATION. 4

backed securities to investors. The securitization trusts are special purpose entities (SPEs)
that are also variable interest entities that meet the requirements to be consolidated in the
financial statements. Approximately, about 3,000 people work for GM Financial. (General
Motors, 2012)
Competition
The global automobile industry has outstandingly three primary product segments: cars, vans,
and pickup trucks and Sport Utility Vehicles (SUVs). The car segment includes small,
medium, large, luxury and all other cars such as hybrid electric and flexible-fuel cars. Market
share of small and hybrid electric vehicles has steadily grew due to the increased demand for
improved fuel efficiency and lower emissions resulting from worldwide attention on issues
such as pollution and limited global oil supply. Also, consumer preference has moved away
from SUVs and pickup trucks. With the dynamic economy, Emerging economies tend to
produce smaller vehicles and much of the growth in the industry particularly in unit sales is
occurring in these economies. (Ashkenas, 2015)
Analysts through the research believes that the key success factors for the global automobile
industry going forward are cost flexibility, establishment of export markets, the development
and utilization of efficient work practices, effective control systems, access to the latest
technology, and the ability to maximize capacity utilization. (Harrison, 2012)
The auto manufacturing industry is fiercely competitive at the global and domestic levels.
The five largest competitors in which General Motors are in competition with include:
Toyota Motor Corporation
Toyota was founded in 1937, and its major brands include Toyota, Lexus, and Daihatsu. The
company is based in Japan, it has a sales volume market share of 10.3% in the global
automobile market and a U.S. market share of 12.6%. (Harrison, 2012)
GM regained the top spot in global unit production in 2011, although it still lags in revenues
because its cars are less expensive. The company has consolidated its production in North
America into Toyota Motor Manufacturing North America, based in Cincinnati. Toyota
controls approximately three quarters of the United States hybrid car market, and unlike GM,
Toyota was also hit particularly hard by the recession, due to aggressive expansion that led to
excess capacity. (Harrison, 2012)
Volkswagen AG
Volkswagen AG, is a Germany based company, it has a 7.5% global market share based on
sales volume, although it holds less than a 3% market share in the United States. Founded in
1937, its brands include Volkswagen, Audi, Bentley, Lamborghini, and Bugatti. The
GENERAL MOTORS CORPERATION. 5

European Union is Volkswagen’s core market, although the company now has a strong
market share in China as well. In December 2009, Volkswagen formed a long-term
partnership with Suzuki. In the same month, it bought a 49.9% stake in Porsche AG, a jointly
owned subsidiary, and announced a plan to formally merge with Porsche SE (the parent
company) in 2011. However; the plan was called off in September 2011 due to financial
risks. Instead of a full-scale merger, Volkswagen decided to only take over Porsche’s car
factories. This decision was a major setback in Volkswagen’s ambitious plan to become the
largest automobile group in the world. (Harrison, 2012)
Ford Motor Company
Ford Motor Company began in 1987, Ford pursued a global strategy focusing on luxury
European brands. It acquired Aston Martin, Jaguar, Volvo, and then Land Rover. After
being hit by the global recession. (Datamonitor, 2011)
The Ford Motor Company is GM’s largest domestic competitor; with 16.6% of the United
States market and 6.1% globally its brands include Ford, Lincoln, and Mercury. Ford also
holds a minority interest in Mazda. Ford was the only one of the three United States
automakers to neither receive bailout money from the government nor enter bankruptcy.
(Harrison, 2012)
Honda Motor Company, Ltd.
Honda, based in Japan, holds a 9.1% share of the U.S. market and 5.5% globally. Honda is
also the world’s largest motorcycle manufacturer. The company was formed in 1937, and it
specializes in small vehicles and engines. Honda manufactures vehicles under the Honda and
Acura brands, along with motorcycle brands Gold Wing, Shadow, and Valkyrie. In 2000,
Honda developed the Insight, the first hybrid car commercially available in the United States,
but it was not intended for mass-market appeal, and it was not as successful as the Toyota
Prius, which was brought to the United States shortly after. However, Honda has had global
success with other innovative platforms and designs that focus on simplicity and frugality.
Like Toyota, Honda was negatively affected by the 2011 Japan earthquake. Honda was also
hurt by fluctuating currency rates. (Harrison, 2012)
Chrysler Group LLC
The Chrysler Group is GM’s second largest domestic competitor. It currently holds 10.6% of
market share in the U.S., but only an estimated 2.0% globally. Chrysler manufactures
vehicles using the Chrysler, Dodge, and Jeep brands.109 Chrysler was founded in 1925 and
operated independently until 1998, when it was purchased by Daimler-Benz.
GENERAL MOTORS CORPERATION. 6

Other Competitors
Since the global automobile industry is very large, there are several other global players in
the automotive industry like the Nissan Motors, based in Japan, holding 8.2% of the United
States market share and 4.7% globally.
The company manufactures vehicles under the Nissan and Infiniti brand names. The core
business for Nissan is its small cars, including the low cost, high gas mileage Versa.
Nissan went through bankruptcy proceedings in 1999, and it was saved by a partnership with
Renault, which now owns 45% of the company. Nissan’s current growth strategy is focused
on emerging markets, including China, Russia, and India. (Harrison, 2012)
Organizational Structure and Size
General Motors Company has a regional divisional organizational structure; this type of
organizational structure involves the segmentation of business activities into geographical
segments with divisional managers for each division. The company’s corporate structure has
corporate functional groups like the office of the CEO, North America, GM Financial, GM
Human Resources, Finance and Treasury, Accounting Services, Global Manufacturing, GM
International, Tax and Audit Services. Etc. (Ashkenas, 2015)
General Motors Company as at 2018 has a net income of US$8.014 Billion, Total Assets of
US$227.339 Billion and Total Equity of US$42.777 Billion. (UK-Essays., 2018)
GENERAL MOTORS CORPERATION. 7

Budgeted Financial Statements

General Motors Co.
Budgeted Income Statement
12 months ended Dec 31, 2018 Dec 31, 2017
US$ in US$ in
millions millions
Automotive net sales and revenue 350,500 200,860
Automotive and other cost of sales (215,500) (110,100)
Automotive and other gross margin 135,000 90,760
GM Financial net sales and revenue 16,500 12,100
GM Financial interest, operating and other expenses (10,200) (9,200)
Automotive and other selling, general and administrative
expense (8,650) (7,575)
Operating income 132,650 86,085
Automotive interest expense (655) (575)
Non-service pension and OPEB income 1,665 1,200
Interest income 330 266
Licensing agreements income 290 150
Revaluation of investments 255 155
Other 42 24
Interest income and other non-operating income, net 134,577 87,305
Equity income 2,160 2,130
Income before income taxes 136,737 89,435
Income tax (expense) benefit 41,021 26,831
Income from continuing operations 95,716 62,605
Loss from discontinued operations, net of tax (700) (1,230)
Net income (loss) 95,016 61,375
GENERAL MOTORS CORPERATION. 8

General Motors Co.

Budgeted Balance Sheet:
Dec 31, 2018 Dec 31, 2017
US$ in US$ in
millions millions
Assets
Cash and cash equivalents 20,800 16,200
Marketable securities 5,905 8,200
Accounts and notes receivable, net of allowance 6,540 8,115
GM Financial receivables, net 26,850 20,520
Inventories 34,990 10,660
Other current assets 5,020 4,460
Current assets 100,105 68,155
GM Financial receivables, net 25,083 21,208
Property, net 28,758 26,253
Goodwill and intangible assets, net 5,570 5,849
Equipment on operating leases, net 43,560 42,882
Non-current assets 102,971 96,192
Total assets 203,076 164,347

Liabilities and Stockholders’ Equity

Accounts payable – Automotive 18,930 19,510
Accounts payable - GM Financial 21,256 23,795
Short-term debt and current portion of long-term debt 40,186 43,305
Dealer and customer allowances, claims and discounts 9,610 8,523
Deposits primarily from rental car companies 2,405 2,115
Accrued liabilities 12,015 10,638
Current liabilities 52,201 53,943
Automotive 13,525 10,980
GM Financial 22,400 20,200
Long-term debt, excluding current portion 35,925 31,180
Postretirement benefits other than pensions 5,670 5,995
Pensions 11,750 9,640
Other liabilities 17,420 15,635
Non-current liabilities 53,345 46,815
Total liabilities 105,546 100,758
Common stock, $0.01 par value 14 14
Additional paid-in capital 2,500 2,200
Retained earnings 95,016 61,375
Stockholders’ equity 97,530 63,589
Total liabilities and equity 203,076 164,347
GENERAL MOTORS CORPERATION. 9

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