General Motors Case Study
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This paper provides a case study of General Motors' relationship with Cerberus Management. The paper describes a problem facing GM; its finance company, General Motors Acceptance Corporation (GMAC), which is 51% owned by Cerberus, is tightening its extension of credit to consumers to bolster the long-term interests of Cerberus and is thus acting against the desires of GM. The paper explains that the financial insolvency of consumers has forced many individuals to default on their automotive loans, making banks wary of extending lines of credit to all but the least risky of borrowers. In an industry that is uniquely dependant on lines of credit, as consumers usually do not have the ability to buy cars with cash 'up front,' this presents a substantial threat. The paper concludes that if it does acquire Chrysler and sheds GMAC's real estate-related debt, GM must engage in a rigorous program of cost-cutting and consolidation of both its operations and Chrysler, and be willing to weather a more painful period of cutbacks and layoffs than it has experienced before.
From the Paper:"Conventional wisdom holds that mergers are a bad idea. In fact, a common business adage is that if you predict that a merger is likely to 'go south' without even looking at the financial statements of either companies, you prognostication is likely to be correct. Merging two failing companies with similar problems outdated models and underperforming factories would seem to be a recipe for disaster, but GM may have to do so simply to keep lines of credit flowing between itself and GMAC. Desperate times call for desperate measures and GM is desperate. However, if it does acquire Chrysler and sheds GMAC's real estate-related debt, GM must engage in a rigorous program of cost-cutting and consolidation of both its operations and Chrysler, and be willing to weather an even more painful period of cutbacks and layoffs than it has experienced before."
Sample of Sources Used:
- Snell, Robert and Christine Tierney (2008, Oct 11). Cerberus eyes full ownership of GMAC; analysts skeptical. The Detroit News. Retrieved 5 Nov 2008 at http://www.detnews.com/apps/pbcs.dll/article?AID=/20081011/AUTO01/810110426/1148/rss25
- Vlasic, Bill. (2008, Oct 14). Cerberus's role crucial as GM-Chrysler merger talks continueInternational Herald Tribune. Retrieved 5 Nov 2008 athttp://www.iht.com/articles/2008/10/14/business/14auto.php
- Welch, David. (2008, Oct). GMAC tightens the auto-finance screws. Business Week. Retrieved 5 Nov 2008 at http://www.businessweek.com/bwdaily/dnflash/content/oct2008/db20081013_422132.htm
- Wurtzel, Matthew. (2008, Oct 16). "Is Cerberus forcing GM's hand?" Dealscape Retrieved 5 Nov 2008 at http://www.thedeal.com/dealscape/2008/10/is_cerberus_forcing_gms_hand.php
Cite this Case Study:
General Motors Case Study (2010, July 22) Retrieved October 14, 2019, from https://www.academon.com/case-study/general-motors-case-study-128439/
"General Motors Case Study" 22 July 2010. Web. 14 October. 2019. <https://www.academon.com/case-study/general-motors-case-study-128439/>