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Some would argue GM got here mostly because the sales-killing recession came just as it was about to turn around.
"This has nothing to do with the management of the company over the years," says David Cole, chairman of the
Center for Automotive Research. "When you take sales down to Depression-era levels in a high-fixed-cost industry
like this, it's a killer."

Still, GM made some key missteps that hastened its decline. Here are seven of the biggest:




 

Momentum toward a bankruptcy filing accelerated since the auto market collapsed last fall. But as far back as
the North American International Auto Show in Detroit in 2005, then CEO, Rick Wagoner faced questions about
whether GM would be better off filing for bankruptcy reorganization to cope with its labor costs, debt load and excess
dealers.

Wagoner was then, and remained until his last days at GM, adamantly opposed to bankruptcy. He said it would drive
away buyers and irreparably harm workers and shareholders. He believed GM could turn around: He was CFO in
1992 when GM teetered on the brink of bankruptcy, only to make a strong rebound.

But a bankruptcy filing in 2005, when the company was stronger and the economy was chugging along well enough
to absorb job losses, could have been better for everyone, says Martin Weiss, president of Weiss Research. Weiss
predicted GM would file for bankruptcy in 2005 and still believes it should have. "They could've been leaner and
meaner to prepare for the tough times that were coming," Weiss says.

 
 

 

Following the 2001 terrorist attacks, GM was praised for responding quickly and decisively: It offered consumers 0%
financing on loans up to five years. When the newness of that deal wore off, the automaker piled on a $3,000 rebate.

And the deals kept coming. GM stuck with cash-back deals and low-rate financing for years, increasing rebates to
$6,000 to $8,000 in some cases. But to afford the rebates, GM kept sticker prices high. It took GM until 2006 to
realize it was damaging itself with the non-stop deals: Shoppers often wouldn't consider a GM vehicle because its
sticker price was so much higher than the competition.

Jesse Toprak, executive director of industry analysis at Edmunds.com, says once GM started offering heavy
incentives, it was stuck with them, because competitors weren't easing off on rebates, either.

"It was a function of the marketplace at the time," says Toprak. But rebates killed residual values, meaning new car
buyers would see the value of their GM car erode faster than foreign brands.

And GM's heavy incentives skewed its marketing into promotions for the deal, not the cars.

"If you're constantly advertising the deal, and the car is in the background, that's not a viable strategy," Toprak says.


   


Wagoner said his biggest mistake was killing the EV1, the company's pint-size electric car that was in test fleets in
the late 1990s. It was a public relations debacle when the test cars had to be reclaimed and GM then scrapped them.
But the real loss was scrapping the program behind them. GM abandoned a big lead in electric car technology and let
Toyota take the green mantle for its hybrid Prius.

Now, GM is scrambling to regain the lead, promising its plug-in electric Volt will be on sale at the end of next year.

Al Benchich, a retired union president, says with the failure of the EV1, GM squandered the opportunity to keep the
U.S. a dominant manufacturing force in a greener era.

"We have the people and the skills to do these things, and there's no reason we can't be doing it," says Benchich,
who watched membership in his local United Auto Workers shop shrink from 2,800 13 years ago to about 500 today.
"We could've been building this kind of stuff for a while now, keeping plants open and keeping people working."

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For years, the ongoing joke was that GM was a bank that happened to make cars. Quarter after quarter, year after
year, GM's financing arm, GMAC, pulled in way more revenue than its automotive operations.

In 2006, facing a cash crunch, GM sold off 51% of GMAC to private-equity fund Cerberus for $7.4 billion in cash and
another $6.6 billion in staggered payments.

"That was a huge mistake," says Pat O'Keefe, managing director of turnaround firm O'Keefe & Associates. "GMAC
was the financial strength of General Motors. « GMAC was a cash cow."

Although GMAC ran into problems with its mortgage unit in the housing crisis, keeping control could have helped GM
weather the slide in auto sales last fall, O'Keefe says.

During the credit crisis, dealers saw their GMAC financing for inventory revoked, and about 25% of potential buyers
couldn't get GMAC car loans.

In the past, GMAC could have extended loans with a "wink and a nod" to help keep dealers stocked with cars and
keep financing loans, O'Keefe says.

But once GM gave up control of GMAC, it lost that flexibility.

$%& '

In the fall of 2005, billionaire investor Kirk Kerkorian bought up 10% of GM's shares, making him the company's
largest shareholder. He then pressured GM to take his aide, Jerome York, as a board member, and tried to force GM
to partner with Nissan and Renault.

Although the Nissan/Renault marriage failed, York showed some foresight.

In an early 2006 speech, he spelled out what he thought GM needed to do to right itself: Be more realistic about
market share and revenue expectations, cut excess products and brands, sell or close business units that weren't
making money and take what he called a "clean sheet of paper approach to the business," looking at everything in
the company with fresh eyes.

Most important, all of it needed to be done fast.

"Time is of the essence," he said.

That list of fixes is eerily similar to the moves President Obama's automotive task force has forced GM to tackle in
recent months. It rejected GM's first restructuring plan, saying the automaker wasn't realistic enough about market
share and revenue projections. GM has been pressured to sell off Hummer, Saturn, Saab and its European unit,
Opel. It's closing Pontiac.

CEO Fritz Henderson has said the automaker is going over the entire company, questioning every plant, product and
personnel move. But Henderson's moves came after the company was essentially in free fall and operating on billions
in federal aid.

York didn't hang around long. He resigned from the board after eight months, sending directors a sharp letter
chastising them for not being critical enough of GM and saying he had grave reservations about GM's ability to
compete.

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When GM bought 20% of Italian automaker Fiat for $2.4 billion in GM shares, the deal seemed like a genius move.
With Opel/Vauxhall, it would've given GM dominance in the European market and made GM an even stronger global
player.

But then Fiat CEO Gianni Agnelli died, and problems with the automaker mushroomed.

As part of the deal for GM's stake, Fiat had the right to force GM to buy the remaining shares and take control. In
2005, GM decided, instead, to pay Fiat $2 billion to get out of the deal.

Fiat used that money to turn itself around, and it will be Chrysler's newest owner.

)* 



 
 

GM is often criticized for too many SUVs, but, as Wagoner has acknowledged, GM actually overlooked the start of
the high-profit truck boom kicked off by the launch of the Ford Explorer SUV in 1990.

"We always considered ourselves a 'car' company," he later explained to USA TODAY.

When GM realized how fast 1990s buyers were switching to trucks as personal transportation, it overreacted, pouring
time and money into SUVs and pickups at the expense of car development. The result: As long ago as 2000, Wall
Street was warning that GM could be overcommitted to trucks and wind up out of phase if the pendulum of buyer
preference swung back to cars. Once consumer tastes began changing, the market was awash in new truck models,
and profits were sapped by discounts needed to keep sales boiling.

The symbol of GM's swing too far toward trucks is the high-end Hummer. GM launched the big SUV in 2003, the
compact H3 in 2005. As buyers edged away from trucks, then fled as fuel prices hit records in 2008, GM wound up
with pricey models that not only didn't sell, but also gave it an environmental black eye. Some of the heftiest Hummer
H2s barely managed 10 miles per gallon.

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  ,  

GM loses $38.7 billion, including $39 billion third quarter charge for unused tax credits. It¶s the highest annual loss in
auto industry history. GM reaches historic contract with united auto workers that shifts billions in retiree health care
expenses to union administered trust. Company agrees to pay $33.7 billion into trust. Contract also lets company pay
some new hires $14 per hr. US market share is 23.7 percent.

-.Ò 



Gas prices hit $4 per gallon and truck sales plummet. GM announces plan to close four pickup and sport utility
vehicle factories, plans to shed 8350 jobs.
Ä
 

GM's bankruptcy filing is the fourth-largest in U.S. history and the largest for an industrial company. The
company said it has $172.81 billion in debt and $82.29 billion in assets. Such a bankruptcy in the history
of US was a really blow to the US and the world economy.

General Motors bankruptcy has taken over a series of failures in several arenas, series of ill decisions for
the health and the long run of the organization as mentioned in the above series of factors involved.

Toyota was the main competitor of General motors since decades, and they gained an edge over GM
after years of struggle. Toyota manufactured price conscious, cheap fuel consuming vehicles, whereas,
General Motors produced vehicles with a high sticker price, as well consumed far more fuel than Toyota¶s
vehicles, this lead to a decline in the GM sales over the last few years. GM reacted to the truck boom
more than required action to be invested. GM produced fuel consuming trucks on several leads. General
Motors produced Chevrolet Tahoe, Chevrolet Suburban, GMC Starcraft, GMC Yukon, Chevrolet
Avalanche, etc. plus produced Hummer H2 on a commercial basis. There SUVs were hit hard on the fuel
boost, when the per gallon price of gas raised to $4, whereas Hummer H2 was Toyota was paid off
better having an edge over GM, producing a limited line of trucks, i.e. Toyota Tundra, Land cruiser, and
the 4runner. Sales for Toyota¶s trucks increased during this time and GM lost the market which it reined
over decades.

Another reason adding to the GMs fall was its incentive plans. GM regarded its employees a lot, more
than it was required. Japanese manufacturers paid their hourly employees almost 50% less than GM
paid. This was a vast difference. It leads to huge expenses on behalf of the employee¶s incentive and
compensation plans. The retiree health expenses made a major impact on the increased cost of
employee benefit plans.

General Motors had a vast network of dealerships around the world which is need to cut short for more
profitability in sales.

General Motors was running at a normal pace in the economic boom, but could not handle the
consequences facing the economic recession when the consumer buying patterns changed to absolute
lack in buying of vehicles. At this tough time GM was not able to handle the situation and had to file for
bankruptcy, because any chances to back from the depression failures was beyond its reach.

General Motors had to lay a plan to revert its lost market; some of the facts planned by GM to carry this
out are mentioned as:

u Focusing on four core brands - Chevrolet, Cadillac, Buick and GMC. This will accelerate the
resolution of Saab, Saturn, and Hummer by the end of 2009, and phase out Pontiac by the end of
2010.
u Reducing the size of GM dealer network from 6,246 in 2008 to 3,605 by the end of 2010.
u Reducing the total number of assembly, power train, and stamping plants in the U.S. from 47 in 2008
to 34 by the end of 2010, and to 31 by 2012.
u Reducing U.S. hourly employment from about 61,000 in 2008 to 40,000 in 2010, and leveling off at
about 38,000 starting in 2011. This is a further reduction of 7,000 to 8,000 employees.

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