MG 495 Park University SWOT Analysis of General Motors Case Study

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MG 495

Park University



Need. a 2-3 page SWOT analysis of GM. 12-pt font, times new roman. Attached is a previous paper that may be used to pull some information but please feel free to use more recent data.

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C) Provide an overview of the company’s Strengths, Weaknesses, Opportunities, and Threats. Please note that Strengths and Weakness are internal, Threats are external, and Opportunities tend to be a combination of internal Strengths combined with favorable industry/economy factors. There is a difference between Opportunities and Options.

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UNIT 2: Course Project Page |1 FI415 COURSE PROCJECT GENERAL MOTORS - COMPANY HISTORY AND BACKROUND Park University 06/29/2020 EXECUTIVE SUMMARY FI415 Course Project Page |2 This report will be discussing the history and background of one of the top automotive manufactures in the United States which is General Motors also known as GM. GM is considered to be one of the top automotive manufactures in the world. GM has operations in 37 different countries with 13 brands. The 4 of these brands we know as GMC, Cadillac, Chevrolet and Buick. Other brands include Holden (Australia and New Zealand), Opel (Africa, Asia, Europe), Vauxhall (United Kingdom), Wuling, Baojun, Jie Fang (China), and Alpheon (South Korea). GM also operates with many cooperative operations within other countries throughout the world (McFarlane, G., para 3, 2020) HISTORY OF GENERAL MOTORS General Motors was founded by a man named William Durant that went by Billy in 1908 who was relieved from the board in 1911 and again in 1920. Even with the change of leadership GM has made it through 2 World Wars, The Great Depression and many other historical events. At the time of GM’s inception, it was competition with Ford. GM created the first electric starter and by the 1920’s started expanding worldwide with Opel and Vauxhall. By the year 1929 GM had become larger than Ford. January 1940 after GM celebrated its 25th millionth automobile, GM shifted 100% of its production to the war effort during World War II. (Butler D. 2020) The 1950s and 1960s the United States economy was booming and so was GM. The following 5 decades, GM created many iconic vehicles such as The Cadillac, Corvette, El Camino, Malibu, and Camaro. Those were just a few of the iconic vehicles in the GM lineup. GM also created a Lunar Roving Vehicle which allowed astronauts of Apollo 15 to have humankinds first vehicle drive on the moon. (Butler D. 2020) FI415 Course Project Page |3 1990’s GM started having trouble. The company started losing customers to competition and the cost of modernizing caught up. In 2000 there was a strong demand for Sport Utility Vehicles (SUV) that allowed for an influx in the 2000s, but the cost of high fuel and high debt pushed GM to the brink of bankruptcy. At this point GM sold assets in its finance services to keep capital and remove liabilities. 2008 GM lost its status as the world’s largest auto manufacture to Toyota. During the financial crisis the government issued emergency funds to save GM, Chrysler and Ford. In 2009 GM failed to stabilize and filed for bankruptcy. GM would come back restructured and a smaller overall business, but continued operations. 2020 Currently like many other American companies GM is heavily reliant on sales derived from trucks and SUV’s. With the electric vehicle sector emerging fast and heavily it puts many auto makers at a confusing crossroad. INDUSTRY AND MAJOR COMPETITORS GM is in the automotive manufacturing industry. GM has been around since the early 1900’s and is still one of the largest auto manufactures to date. With the automotive sector being so vast with competition in today’s times we must look at competition individually to assess GM’s future strength in the automotive industry. The major competitors to GM are Ford, Toyota, Chrysler and Telsa. Currently GM, Ford and Chrysler essentially mimic one another and try to advance and update against one another. Many times, you hear Ford, GM, Chrysler you hear those companies over and over again against one another. For example, with the diesel engines you hear Duramax (GM), Cummins (Chrysler), Powerstroke (Ford) the public is always debating on which engine is superior. The last piece of competition I think is going to break waves is Tesla. With all the technology Tesla FI415 Course Project Page |4 is producing it is becoming more and more innovative. Telsa is constantly forward thinking instead of thinking in the current day. I truly believe in the next 5-10 years Tesla will be right there with GM, Ford, and Chrysler as American automotive titans. QUANTITATIVE ANALYSIS OF GENERAL MOTORS Using the quantitative analysis strategy, it is one that investigates an understanding and evaluation of performance or behavior by utilizing mathematical and statistical modeling, measurement, and research (Kenton, W., 2019). I use horizontal, vertical, and cross-sectional analysis to better understand General Motors overall performance. Net present value (NPV) was also calculated to determine the projected earnings produced by General Motors. NPV is the distinction from the current value of inflows and present amount of cash outflows over the course of time which is utilized in capital budgeting and asset planning to evaluate the profitability of the forecast investment (Kenton, W., 2019). In the article, “Net present value (NPV)”, the author Kenton (2019) stated that an investment with a positive NPV will be lucrative whereas an investment with a negative NPV will outcome in a net loss. GENERAL MOTORS NET INCOME CHART FI415 Course Project Page |5 General Motors in figure 1 we can see over the last 5 years has an average net income of 6,121 in millions. Net Income is stated to be the total sales minus cost of goods sold, , selling, general and administrative expenses, operating expenses, depreciation, interest, taxes, and other costs where it helps investors in estimating how much earnings exceeds the organization’s costs (Kenton, 2020) This is very crucial to understand when analyzing statistical data. When we look at figure 1, we can also see that net incomes had been decreasing every year with 2017 being the worst with a loss of 3,864 in millions. 2015 to 2016 the company’s net income dropped 260 million then 2018 the net income increased 8,014 in millions then 2019 faced another drop of 1,282 in millions. This model accurately depicts the net income over the last 5 years. GENERAL MOTORS CONSOLIDATED CASH FLOW Figure 2, GM’s Consolidated Cash Flow is shown above from 2015 to 2019 where it shows net cash provided by operating activities, used in investing activities, and financing activities. Cash flow is the net amount of cash and cash-equivalents that is being moved within and outside of the business where a statement of cash flow allow the determination of the company operating cash flow, investing cash flow, and financing cash flow which is significant FI415 Course Project Page |6 for evaluating the company’s liquidity, flexibility, and comprehensive financial performance (Kenton, W., 2019). GENERAL MOTORS FREE CASH FLOW In Figure 6 above, General Motors Company free cash flow for 2019 was $4.327B with a 597.54% increase for 2018. Around 2018, the company annual free cash flow was $0.623B with a 117.12% decline from 2017. Lastly in 2017, its annual free cash flow for $-3.638B with a 58.27% decline from 2016 (General Motors Free Cash Flow, n.d.). In table 1 shown below, General Motor Company Financial Balance Sheet summarizes the company’s net income, cash flow from operating, investing, and financial activities from 2014 to 2019. GENERAL MOTORS HORIZONTAL ANALYSIS In Table 5 below is the horizontal analysis of General Motors Company using 2019 and 2018 financial data of Net Income, Cash Flow from Operating, Investing, and Financial Activities. Horizontal analysis is generally accepted accounting principles (GAAP) that provides FI415 Course Project Page |7 investors and analysts to observe the company’s financial performance over a number of years in order to analyze the trends, growth and forecast the future changes that can drive the company’s success (Tuovila, A., 2019). FI415 Course Project Page |8 When we look from 2018 to 2019 overall net income is lower, but as we analyze the data we can see where the losses occurred. Cash from operations was slightly lower, cash from investing activities was substantially higher in 2019, the 2 most major losses are due to cash from financing and new dept issued/repaid. GENERAL MOTORS VERTICAL ANALYSIS In Table 6 below illustrates the vertical analysis of General Motors Company common size statement for net income, asset, and liabilities and equity. In 2015, gross margin was 12.06 % and it increased by 1.02% in 2016 at 13.08%. By 2017, the gross margin slightly went up to 13.92% and dropped at 9.31% by 4.61% in 2018. Last year in 2019, gross margin slightly increased by 0.51% at 9.82%. Overall, the average gross margin is around 11.64% where this is the net’s sales revenue after subtracting the cost of goods sold (COGS) with an average of 4.22% net income loss. It is also determined that the company’s operating income is averaging at 4.95% and its total liabilities is averaging at 80.68% for the last five years. In addition, its total assets are determined to be at an average of 34.57%. FI415 Course Project Page |9 FI415 Course Project P a g e | 10 FI415 Course Project GENERAL MOTORS FINANCIAL BALANCE SHEET P a g e | 11 FI415 Course Project P a g e | 12 FI415 Course Project P a g e | 13 GENERAL MOTORS NET PRESENT VALUATION In table 7 it indicates that General Motors net present value is -15.48 billion USD. KEY RATIO ANALYSIS PROFITABILITY 2016 2017 2018 2019 GROSS PROFIT MARGIN 13.08 13.92 9.31 9.82 OPERATING PROFIT MARGIN 6.09 7.51 3.34 4.74 NET PROFIT MARGIN 6.01 -2.90 6.02 5.59 When looking at GPM, OPM and NPM we can see that GM had higher margins in 2016 and 2017. Analyzing what was going on at the time during 2018 and 2019 to cause the drop in profitability was due to GM having down facilities in North America causing a relatively high downturn since GM vehicle brands in North America have higher price tags with higher margins the rest of the world market for GM could not hold the same margins that the North American facilities provide. Also, like other big automakers GM started putting more emphasis on the truck lineup which tend to yield higher margins than cars. Looking at 2016 to 2019 we can see a clear FI415 Course Project P a g e | 14 picture of what transpired 2018 and 2019. After the lower margins GM has made some decisions with long-term investments to set the industry standard with battery operated automobiles as well as self-driving. These investments will set GM apart with only Tesla to rival. 2020 has promised to be a more productive year with GM’s profitability margins. We can see that while GPM dropped from 13.08 in 2016 to 9.82 in 2019 we can clearly see there is room to increase margins with production. When we assess the NPM from 2016 which held a 6.01 to 2019 which held a 5.59 those numbers are not substantially lower, besides 2017 which had a -2.90 NPM. ASSET UTILIZATION 2016 2017 2018 2019 NET FIXED ASSET TURNOVER 4.38 3.68 3.43 3.17 TOTAL ASSET TURNOVER .71 .63 .59 .54 NET ASSET TURNOVER 4.63 4.35 4.28 4.09 After assessing profitability, we move to asset utilization we can see from 2016 to 2019 net fixed asset turnover was higher in 2016 at 4.38 opposed to 2019 with 3.17 that is over an entire point higher. We can also see the same pattern when we look at total asset turnover from 2016 being .71 and 2019 being .54. Year to year we are seeing a drop. We also see the same pattern with net asset turnover to a lesser degree from 2016 having a 4.63 to 2019 having a slightly lower 4.09 over a 4-year period of drops. The drops are not substantial but is enough to cause some concern with potential investors of why GM assets are having a slower turnover. This is telling us that with every dollar earned it is resulting in slightly lower revenues. This could be a bad sign for shareholders and potential shareholders especially if there would be another risk of economic downturn. FI415 Course Project P a g e | 15 LIQUIDITY 2016 2017 2018 2019 CURRENT RATION .89 .89 .92 .88 QUICK RATIO .66 .68 .73 .67 CASH RATIO .29 .31 .33 .27 Looking at pretty simple ratios of liquidity we find out a few more variables. Within the current ratio we find that GM has more in liabilities than it does assets. So, paying off short term liabilities would be difficult at this time. The number is closer to 1 which having 1.2 to 2 is healthy to a shareholder. 2018 had a rise with the current ratio with a .92 then it fell again in 2019 below 2016 with a .88. The quick ratio is essentially telling us the same story as the current ratio. The difference between the current ratio and quick ratio is the quick ratio is all about paying short term debts with liquid assets. Looking at 2016 to 2019 we see it increased with in the 4 years by .01 but it lost .06 from 2018 to 2019. GM had a higher quick ratio 2017 and 2018 than it did 2019. A preferred ratio with the cash ratio is between .5 and 1. We see GM has taken gains from 2016 to 2018, but 2019 is lower than 2016. GM has had its best liquidity overall in 2018. 2019 GM has suffered a little. DEBT UTILIZATION 2016 2017 2018 2019 DEBT TO EQUITY 1.93 2.69 2.70 2.47 DEBT TO CAPITAL .66 .73 .73 .71 DEBT TO ASSETS .38 .44 .46 .45 FI415 Course Project P a g e | 16 Assessing debt utilization, we can see the debt to equity has been increasing over the 4year period. Knowing that GM has a higher debt to equity ratio means that it has more debt to lenders but is typically ok to be above 2 when it comes to manufacturing industries since overhead is substantially higher in the automotive industry. The D/E ratio hit its peak at 2.7 in 2018 and since has fallen back to 2.47 in 2019. 2016 it had the lowest D/E ratio being 1.93. When looking at the D/C ratio we can see for it being the automotive sector the D/C is relatively low .66 in 2016 and raising to .71 in 2019. This is a good indicator that GM is utilizing its equity relatively well than just pulling out debt to run its operations. 2019 GM had a little higher D/C ratio than 2016, but nothing to the point to cause alarm. It shows GM is financing activities with equity. Now, we can look at the D/A ratio which in 2016 again lowest year with a .38 and 2019 being a .45. This ratio is very important because it gives us an indicator of how high the liabilities to assets are. This ratio tells us that GM maintains pretty good financial leverage when operating. When looking at financial statements GM is a very large company in a very completive industry. Constantly debt needs to be taken out to advance the latest and greatest technologies for automobiles in the future. Understanding that ratios and financial reports will look different from industry to industry is a good way to keep an open mind as a finance manager. FUTURE OPPORTUNITY ASSESSMENT A short-term financial goal of GM is to decrease operating expenses to decrease the total loss from the operations. This will allow cash flows to be increased in operating activities of the business. This essentially will convert operating cashflows to positive cashflows to GM. This will improve the liquidity position for GM. This a short-term financial goal for management of FI415 Course Project P a g e | 17 GM. GM is focused on strengthening the cash generation and creating efficiencies that lead to position to take advantage of opportunities within the cycle. Long-term goals are GM is aiming to sell 1 million electric vehicles to the United States and China over the next 5 years. That will make GM one of the electric vehicle giants. The comprehensive strategy has a wide variety of affordable electric vehicles that will be released ranging from compact cars to full size pickup trucks. GM has made the claim that it is right behind Tesla when the time is right to buy in. Many of the EV’s will be showcased and released in 2022 and 2023 with a lower price tag to entice mainstream buyers. With GM restructuring operational cost and increasing cashflow, then with GM also ready to get into the electric vehicle market by having a 1million EV sales goal by 2025 could make GM a very good investment over the next 5 years. GM is increasing liquidity and focusing on futures with the EV line up. GM should be promoting technology with to put against Tesla since Tesla is now talking about the “1 Million Mile” battery. GM has much opportunity in the EV sector due to Tesla breaking into the top 15 United States biggest companies with no real competition. There is defiantly room in this market for another major EV player. FI415 Course Project P a g e | 18 References About GM. (n.d.). Retrieved from General Motors Corporation. (n.d.). Retrieved from Butler, D. (2020, January 02). History of General Motors: Timeline and Facts. Retrieved from Kenton, W. (2020). Acquisition Frenzy Is Alive and Well. Retrieved from Kenton, W. (2019). How Quantitative Analysis (QA) Works. Retrieved from Kenton, W. (2019). Net Present Value (NPV). Retrieved from General Motors Free Cash Flow 2009-2019. Retrieved from Tuovila, A. (2019). Horizontal Analysis Definition. Retrieved from
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Explanation & Answer


Running Head: SWOT Analysis


General Motors SWOT
[Professor Name]
[Your Name]
6 September 2020

General Motors Company

General Motors Company

The General Motors Company poses as global cooperation that styles, mass produces,
and disseminates different vehicles and ancillaries. The company is one of the farthest-reaching
and excellent performing businesses in the United States, thus being rated among the three most
extensive businesses in this area. The founder of the organization was William Durant, and the
company was created back in 1908. As it is the norm in every company, General Motors has also
faced challenges in competitiveness and inadequate productivity. It also faces a reduced rate in
its profit margins over the years. Due to that, the purpose of this paper is to present a SWOT
analysis of the chosen company. (Soderberg,2019)).
The company takes part in several motorsports, thus making it their most substantial
element. This enables the organization to merchandise its various car models. Further, the
company holds a global recognition for its prestigious value in its products. Some of their
vendors are located in the United States, China, Europe, and India. The company also gives a
hand in charity works and programs entailing sponsorship. It is also rated as a prime company in
the vending of automobiles, vehicles, and auto spares (Soderberg,2019)
The figure below shows the market share among the most prime companies in the United States.
As estimated in the graph, General Motors is the foremost-selling company when compared to
the others/

General Motors Company


Another upper hand that General Motors possess is its knowledge in the human resource
attributed to the company's long-lasting past of extension and manufacturing of the automobile.
This stronghold of the company promotes the development of products that can directly contest

Goes above and beyond expectations!


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