General Motors Co. Group 26

Dylan Hudson, Aaron Johnson, Nathan Katzaman, Caroline Miller, Hongping Song

General Motors: Core Competencies

Strong domestic and international presence

Numerous brands, including GMC, Chevrolet, Buick, Cadillac, etc.

Innovation including more fuel efficient and hybrid vehicles

Well known truck models of Silverado and Sierra

What General Motors Needs

  • Establish itself is the undisputed leader and innovative car and truck wholesaler in the U.S.
  • Repair Brand image and quality perception after 30 million vehicle ignition switch recall in 2014
  • Strengthen its brands, improve customer loyalty, and grow retail and commercial sales internationally and domestically

Strategic Plan

Free Service and Service Checks with New Vehicle Lease or Purchase in the United States, Strategic Advertising

  1. Free oil changes, tire rotations, and service checks with the purchase of lease of a new General Motors vehicle for first 2 years or 25,000 miles
  2. Shift Advertising specifically for New truck styles coming out in 2018, and why they are better than competitors
  • U.S. Market accounts for 70% of General Motors total revenue as of 2016
  • Profitability is dependent upon the success of full-size pickup trucks and SUVs (GM Annual Report, 2016)

Advertising new 2018 truck line

We want to slowly start changing advertising to advertise the new 2018 line of Trucks.

These adds will include new features of the trucks such as; weight decrease, fuel efficiency, and technology.

There will also be new power-train options, the most exciting being the turbocharged V6 diesel giving more Horse power and Torque while increasing MPG.

We believe that starting to advertise now will increase interest and create anticipation and put us one step ahead of our competitors.

Cost of Strategy

Average consumer drives 15,000 miles a year, oil change every 3,000 miles = 5 oil changes year. Valued at $30 each =$150 per car per year

Estimated simple service checks and tire rotations $30 per car per year

Estimated 80% of new car buyers taking advantage of free services provided by GM

Estimated U.S. New Car Sales for GM: 3.073 million in 2017, 3.103 million in 2018, and 3.134 million in 2019, based on current market trends

Oil Changes x service checks x U.S. New car sales per year = Yearly Cost of Strategy

  • 2017: $258 million
  • 2018: $261 million
  • 2019: $263 million

3 Year Cost of Strategy: $782 million

Advertising Cost

  • 2017: $150 million
  • 2018: $152 million
  • 2019: $155 million

3 Year Cost of Strategy: $457 million

Total Strategy Cost: $1.239 billion

NPV/IRR

Financial Implications

Net profit Margin increase from 5.57% in 2016 to 5.86% in 2019

Return on Assets increase higher with strategy than without 2017-19

Return on Equity 22.94% in 2019 vs. 21.55% without strategy

Conclusion

Initiate a free service plan with new vehicle purchase for first 2 years or 25,000 miles

Strategic Advertising for new Trucks and SUV styles expected in 2018

Thank You!

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