GM

 

Assignment 7 : After reading Chapter 11, do some research on General Motors (GM), the most dramatic restructuring in bankruptcy case in recent business history. Write a brief commentary (400 – 600 words) on the most critical Mergers and Acquisitions conceptrevealed in the GM situation. Look at issues discussed in Chapter 11 as well as lecture notes from all weeks. State how the facts in the case of General Motors relate to the concept.

A few perameters for your paper:

• Keep the focus on finance not on politics or marketing

• Do not describe the history of General Motors – when it was founded, who founded it, etc.

 

First, it’s good for us to explain GM from the government’s point of view. President Obama nationalized them to render their stocks go private and protected them from hostile takeover in 2008. From 2010, it started to go public, but the stock price usually went down to $20 per share in spite of $36 as the IPO price. Reelection of Mr. Obama is fortunate for GM but government have to take a responsibility for their distressed security. It usually regards as good opportunity for investors to invest into distressed security such as stakes of financial failure but the economic failure prevented this kind of incentives at that time.

Secondly, it is strongly related in term of subprime crisis. People can’t afford to buy a car due to insolvents of their housing. There are also other competitors who formed strategic alliance such as Nissan-Renault and Chrysler-Fiat. Nissan and Renault are actually failed to form alliance but they could at least change the situation and share their perspective of each business. However there is no innovative action on GM.

Thirdly, from the customer’s point of view, there is a huge marketing issue on GM. GM tried to sell their between $3000 and $10000 less than Toyota’s car. GM was proud of their brand equity but there are no more differentiations between Toyota’s strategies.

Finally, I would like to talk this in term of Mergers and Acquisitions. As I mentioned, there is no Crown Jewel to attract investor and hedge fund and it is already too serious to implement spin-off for redemptions because it is including branding issues. Mainly, it was already nationalized. If we want to take over it, we would go thorough government. They are reorganizing themselves but it is too burdensome for common hedge fund managers or turnaround managers to save them from their serious situation.

In conclusion, there are a lot of strategies for hostile takeover bid such as poison pill, packman defense, white knight and Shark repellents but in this case, nobody wants to buy GM in this situation. They have to consider how their stake will be attractive and take back their brand equity.