Gyanendera Kashyap of 4Ps B&M analyses the ifs and buts of the deal...

IIPM Programme :- SUPERIOR COURSE CONTENTS

Is it the futuristic upturn in the auto industry or merely a ploy to eliminate competitors that is guiding the merger negotiation between GM and Chrysler? Gyanendera Kashyap of 4Ps B&M analyses the ifs and buts of the deal...

Centenary celebrations for General Motors, indeed glorious for the long-heritage American carmaker; but what did it receive as its 100th birthday gift? An accumulated jaw-dropping $58.41 billion in net losses for the bygone quarters! And then there was the uninvited Wall Street devil, doing all in its might to break the backbone of all Detroit four-wheeled giants. So what’s it like for GM today? The firm, arguably is currently in the leanest phase in its history, so much so that some critics believe that filing for bankruptcy would be the best hope pill to cure the fatal disease of extinction.

Over the last five years, it has invariably been in the red and on a cumulative basis has suffered losses to the tune of a pathetic $44.57 billion. The reasons: sales and profits have declined in the past many quarters for all three; manufacturing units are being closed down, again by all three; and most importantly, while the entire American auto industry is reeling under pressure, two of them (GM & Chrysler) are discussing a possible merger (Christ!!!). David Wyss, Chief Economist, Standard & Poor, attempts an explanation of the turbulent environment as he points out, “Sales of new vehicles are hurt by the recessionary economic environment and the increasing difficulty of financing for US buyers.” Very true for US, but the current situation as a result of the ongoing dislocation in the credit markets and deteriorating economies in Asia and Europe are no different for global automakers alike. Amid this turbulence, consolidation cannot be ruled out. And this is exactly what GM and Chrysler are talking about. Negotiations in the power corridors of Detroit are reflective of the competition from Japanese automakers and the need for restructuring. But what is worth pondering over is the fact that a year earlier, GM (which had lost out the bid to merge Chrysler with itself to Cerberus Capital Management) had concluded Chrysler wasn’t a good fit. A year later, and suddenly so, it thinks that it has found a saviour and is discussing a possible merger?!

Usually mergers account for more job losses rather than additions, and this is what is the worrying fact. At a time when behemoths are filing for bankruptcies and seeking for Fed assistance, downsizing in the name of corporate restructuring would amount to an absolute catastrophe. Skepticism prevails over the merger or a tie-up between GM and privately-held Chrysler, as it would not do much to address either company’s financial issues in terms of reducing structural costs. As a matter of fact, over the bygone four quarters, GM has posted terrifying losses and its sales of $38.1 billion during Q2, 2008 represent a fall of 18.2% as compared to the same period a year back. On the other hand, Chrysler lost $510 million during the first quarter of 2008 and its sales declined by over 25% as compared to the previous quarter. (This also raises questions over the logic behind the valuation of Chrysler at $7.4 billion which was bought by the PE firm Cerberus Capital Management last year.) Moreover, given the fact that GM is trying to free up $15 billion by 2009 and Chrysler’s admittance that it won’t be in a position to post profit in 2008, the merger is clearly not a ‘natural and healthy’ fit for the two ailing bigwigs! Instead a partnership or expanding existing ties would be more financially viable.

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.
IIPM Admission Detail
Now IIPM's World-Class Education... for everybody!!
IIPM INTERNATIONAL - NEW DELHI, GURGAON & NOIDA
IIPM - Admission Procedure
IIPM, GURGAON
IIPM : EXECUTIVE EDUCATION
IIPM’s 36th Glorious Year of Academic Excellence
4Ps Power Brand Awards 2007
When IIPM comes to education, never compromise
Why Study Abroad When IIPM Gives You 3 global Advantages!
IIPM Ranked No. 1 B-School In Global Exposre - Zee...

The scramble is on in Africa

Now IIPM's World-Class Education... for everybody!!

Africa has certainly captured the world’s at­tention. In fact, global leaders – both business and political – are making regular and long stopovers at a land once called ‘The Dark Continent.’ Raison d’être: Africa is on the verge of an economic rebirth. Statistically, many of the fastest growing economies in the world are in Africa, providing global brands an opportunity to invest and reap returns. “After Africa there will be no ‘there’. The landscape has its challenges but there are large returns to be made,” agrees Dr. Aditya Dev Sood, Founder, Center for Knowledge Societies, which recently came up with a report on the Tata-fication of Africa. And that’s the reason why every sane country or brand in the world is busy making plans for its Africa sojourn, if not already there. The most desperate of the lot seem to be the two Asian giants – China and India – who not only have flooded the continent with their wares but are also gearing up for a war which will result in the next colonisation of Africa, but this time in terms of brands. Jindal Steel, Kirloskar, TCS, Tata Motors, Aptech, Satyam, SBI, Bank of Baroda, Exim Bank, Ranbaxy, Cipla, HCL, NIIT, Dabur, Tata Coffee, BHEL, Tata Power, Suzlon, Essar, OVL, Havells India, Videocon, UB group… the brand list from India goes on and on! Even those who seemed to have lost their past glory in the continent because of the colonial preeminence are once again making strategic investments across the continent. For instance, Tata Motors was a well known truck brand in Africa well into the 1960s, when it was finally supplanted by European competitors (once the colonial powers in the continent). Now, the resurgent Tata Group has been making strategic investments in Africa to regain its supremacy. In fact, the Group wants to launch its much hyped people’s car – Nano – in Africa much before its official launch in India.

And that’s the case with every other Indian brand. While FMCG major Dabur has recently set up a new manufacturing facility in Nigeria with an investment of about $4 million, the $5-billion durables-to-oil Videocon Group is gung-ho over its African investment plans ranging from telecom to consumer durables to oil. The Exim Bank of India has recently (in March 2008) signed a MoU with African Export-Import Bank (Afreximbank) to extend a $30 million line of credit to finance Indian exports to Africa.

Says Pawan Goenka, President, Mahindra & Mahindra, “There are a couple of important markets like Africa on our radar. Though 95% of our sales come from India at present, but we will have a separate renewed strategy for these markets soon.” There are more examples of such Africa-fication by Indian brands. In fact, CII expects India’s exports to reach $500 billion by 2013, if the past growth trend continues.

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.
IIPM Programme :- SUPERIOR COURSE CONTENTS
IIPM INTERNATIONAL - NEW DELHI, GURGAON & NOIDA
IIPM - Admission Procedure
IIPM, GURGAON
IIPM : EXECUTIVE EDUCATION
IIPM’s 36th Glorious Year of Academic Excellence
4Ps Power Brand Awards 2007
When IIPM comes to education, never compromise
Why Study Abroad When IIPM Gives You 3 global Advantages!
IIPM Ranked No. 1 B-School In Global Exposre - Zee...