GM History: General Motors (GM) was incorporated in 1916 and is primarily engaged in the development, production and marketing of cars, trucks and parts worldwide through its four automotive segments: GM North America (GMNA), GM Europe (GME), GM Latin America/Africa/Mid-East (GMLAAM) and GM Asia Pacific (GMAP). GM finance and insurance operations are primarily conducted by GMAC LLC (GMAC), which provides a large range of financial services.
GMNA primarily meets the demands of customers in North America with vehicles developed, manufactured and/or marketed under the brands, such as Chevrolet, Buick, Saab, GMC, Pontiac, Cadillac, HUMMER and Saturn. The demands of customers outside North America are primarily met with vehicles developed, manufactured and/or marketed under the brands, such as Opel, Saab, GMC, HUMMER, Vauxhall, Buick, Cadillac, Isuzu, Holden, Chevrolet, Daewoo and Suzuki. During the year 2008, GM total worldwide car and truck deliveries were 8. 4 million.
Substantially all of its cars, trucks and parts are marketed through retail dealers in North America, and through distributors and dealers outside of North America, the majority of which are independently owned. Mission: GM mission is to redefine themselves and to lead the reinvention of the global auto industry. Market risk: In general, market risk relates to the level of the risk within the industry. This risk can be linked to technology risk. The speed of change in technology continues to accelerate and will do so for the foreseeable future.
Market risk relates to failure to keep up with competitors in this area and cost that arise through production of technologies that do not enhance the experience in line with customers’ needs (ACCA Text, 2008/09) Exchange rate volatility will be important since operations are global. Fluctuations in exchange rates affect the values of contracts with customers as well as the cost of operations and the value of the products. Interest rate and commodity price risk also form part of market risk in GM. Recession Risk: Recession risk relates to financial market risk and economic risk.
Related financial risk includes problems with liquidity to support the huge cost of manufacturing, customer credit risk when dealing with government and companies around the world. Economic risk facing GM stems from changes in economic conditions such as economic growth or recession, government spending policy and taxation policy, unemployment level and international trading conditions (ACCA Text, 2008/09) Manufacturing cost risk: This is the risk that the manufacturing cost cannot be recovered by GM.
Change in technology to meet with current market demand will lead to increase cost of manufacturing vehicles that can be transferred to the product price. There might be situations where customers will not buy new products or that the sale demand for current products will decline unexpectedly. A new product launched onto the market might fail to achieve the expected volume of sale, or the take-up might be much slower than expected. Management risk: Management risk involves strategic and operational risk within the organization. Strategic risk is the risk arising from the possible consequences of strategic decisions taken by GM.
Strategic risks will also arise from the way that GM is strategically positioned within its environment. GM is exposed to higher risks as the business entails manufacturing of new products although the potential returns may also be much higher. Operational risk relates to the potential losses that might arise in business operations such as losses resulting from inadequate or failed internal processes, people and systems, poor quality or lack of production. This risk can be managed by GM’s internal control systems (Crouhy et al, 2006)
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