Case_In_Point_7th_Edition_Page001_183_2

CS6 GIoYaI MZtor Cars
Summarize the case and verif y the o bective.The j o[jective in this case is to determine how to make
the company profitable by reducing costs. While you might think that this is a P&L case, I’d approach it a
little differently.
A sk industry and company questions.How is the industry doing? Has our market share been falling or
are we unprofitable because our costs are too high? Do we make parts for other automakers? Do other
companies make parts that we can use in our cars?
lay out y our structure.This is a cost reduction case. I’d lay it out in four main buckets: costs, strategic
value, alternatives and exit strategy.
’ osts.I’d look at both external costs such as interest rates, fuel costs, transportation, etc., and internal
costs such as union wages, suppliers, and raw material costs. Ask for a breakdown of costs. Have the
costs changed over time? Does any cost seem out of line? How do our costs match up to our
competitors’ costs? Are there any new technologies that could reduce those costs?
Strate?ic vaLue. What is the true strategic value of making our own parts? It might have been cost
savings initially, but that might have changed. Is there a patented technology that only our cars have?
A ternatives.This L
could mean reducing the number of individual parts per car, by having models use as
many common parts as possible. This is tricky; some believe this is what got GM in trouble because all
their cars seemed the same. Would it be cheaper to buy our parts from another vendor?
E xit strate? y . Do we sell to a private equity firm, to management? Do we spin the parts division off from
the automaker and make it its own company? What could we get for it and what would we do with the
money?