P1 Case Study: General Motors' Stakeholders - Powers at Play

-Relevant to ACCA P1 and P3.

Pic 01: Soon to be museum artefact.
Pic 02: Now that I am fired, I have the time the spend £19.5 million salaries earned (looted?) last 2 years. (Rick Wagoner, ex-CEO of GM)

CASE STUDY : GENERAL MOTORS CHANGE IN STAKEHOLDERS' INFLUENCE
1. Rick Wagoner, the chairman and chief executive of General Motors (GM) is to resign as part of an agreement with the White House to get more federal aid for the struggling carmaker. The Obama administration is believed to have asked Mr Wagoner, who has led GM since 2000, to give up his post.
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2. GM has received £9.38 billion from the US Government and has asked for a further £11.65 billion but warned that even with that aid it may still reamined near to bankruptcy status if car sales do not pick up by early 2010. GM, which is the world’s second largest car company by unit sales, has made £101.88billion in losses in the past four years. If not for the US Government stepping forward with the loan, it would promptly collapse leading to systemic economic damage to the world’s largest economy.
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3. Mr Wagoner said he would work for just £1 this year after being paid £5.4 million last year. This was down from £14.1 million in 2007.

4.President Barack Obama is due to announce that GM and its smaller rival Chrysler might be nursed back to health. The President told a television show yesterday that he intended to set out “a set of sacrifices for all parties involved — management, labour, shareholders, creditors, suppliers, dealers”.
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5.GM and Chrysler have until March 31 to submit new restructuring plans which include mass redundancies program to the Government’s automotive task force, which will determine whether they are capable of survival. Chrysler received $4 billion in taxpayer loans in December and wants £6.7 billion more.

Applications based on stakeholders interests
I) Instrumental stakeholders view are the profit & economic welfare of GM plus Chrysler and Ford. All 3 automakers account for roughly 7% of USA GNP. This is equal to the size of 7.5 times the size of Malaysian economic output!
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II)Normative view are the ethical stand to take on whether to cut minority jobs in favour of saving the majority jobs? Highly debatable since government does not want to risk unpopular actionof being seen as putting poor families on the street.
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III)Primary stakeholders are government as of now due to ‘national interests’ to keep major corporations afloat so as to protect jobs, industries that rely on automobiles and social stability by staving off unemployment. We can see that government has inserted their powers even demanding a once powerful CEO, Rick Wagoner, to step down. In other words, he was fired.
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IV)Secondary view are the top management here who in the view of government has failed in their stewardship to protect GM’s interests.
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V) Active stakeholders are trade union in addition to government busy setting up bail out plans and strategic management busy asking for hand outs. Trade unions which represent 64% of over 800,000 employees are once powerful demanding generaous pay package terms and unheard of retirement benefits. Their pay is at US$90 per hour compared to Japanese owned rivals with USA plants of US$55 per hour. Clearly unsustainable cost level. With the government presence, trade unions are unable to hold on to generous compensation programs. In fact already 80,000 employees are laid off. Passive view stakeholders are individual shareholders who sees their investment values fell, but feeling helpless to take any actions.
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VI) Voluntary stakeholders are the customers who have the choice. Clearly their choices are high in view that they can easily switch away with reliable Japanese cars or the Value For Money Koreans. Involuntary stakeholder here is applied to individual employees awaiting their fate which is not pretty. Facing either redundancy or pay cuts certainly are stressful to these ones.
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VII)Known stakeholders who take active interests in reviving GM includes the charismatic President Obama. He enjoys unprecendented support and popularity among USA voters who sees him doing what is necessary ie swift actions taken.
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VIII)Unknown stakeholders are families and dependents on the employees for their livelihood. Imagine a hard working single mother fending for her children, now is out of job. Who is to put food on the table, school pocket money for the young and medical care for the elderly dependents? What you read in the newspapers clearly failed to highlight the plights of innocent victims who are have hardworking parents.

DAVID CAMPBELL exam style:
questions:
a) Why the importance of stakeholders mapping? (8 marks)
Note: please be careful here. He is ‘not’ asking what it stakhlders, rather why or the reasons to conduct it.
b) Evaluate stakeholders interests and powers matrix on the case study. (12 marks)
Note: another major trap, as David will not put the obvious stakeholders in the case study for you to pick. How can he if you have to call it unknown stakeholders. Candidates have to read enough case studies to sharpen their perspectives.
c) What is the normative and ethical views that President Obama should take? Obviously he cannot allow too much job cuts as this makes him politically unpopular for not caring for Americans while he also cannot impose conditions on business firms who have to watch their profits. Please write a highly confidential paper to the White House. (10 marks)
d) 4 professional marks for the above. Please do not explain in details to assert your arguments. All points made are in numbered short paragraph formats.
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PS: please obtain the answers from me in class.
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Related Link:
http://marcusong88.blogspot.com/2008/08/mission-analysis-cultural-perspective.html

References:
Christine Seib, 2009, Rick Wagoner To Step Down From GM In Return For More Aid,
Http://Business.Timesonline.Co.Uk/Tol/Business/Industry_Sectors/Engineering/Article5999604.Ece, Visited On 30th March
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Bill Vlasic and Sheryl Gay Stolberg, 2009, G.M. Chief Is Said To Be Resigning In Deal With U.S. Http://Www.Nytimes.Com/2009/03/30/Business/30auto.Html, Visited On 30th March