My last and final blog for Accounting 12.
General Motors and Chrysler, the two large automakers in the U.S., is given a second chance by the U.S. and the Canadian government to develop a much better restructuring plan for their company. U.S. President Barack Obama is willing to lend $6 million to Chrysler, as they have requested, only if a transfer agreement with European automaker Fiat be agreed upon within 30 days, and GM is given enough working capital if they come up with a reasonable proposal within two months period to sustain their company. Barack Obama thinks U.S. needs a change, as well as saying that the U.S. needs to “confront our (U.S.) problems head-on and do what’s necessary to solve them”. This restructuring plan of the two automakers applies with the Canadian government but we would be lending smaller amounts of money with the same dead line. For Chrysler, they also need to deal with the Canadian Auto Workers union along with their agreement with Fiat. The purpose of Canada investing in the two companies is so that we can maintain a 20 per cent production share within the auto making industry.
As a wrap up of everything I learned this year in Accounting 12, I realise this article relates to how companies need sufficient working capitals to maintain their company, how companies need to sell their merchandise so that they don’t accumulate inventory (making it hard to make a profit), as well as, how investors should be very careful in investing into companies like GM and Chrysler. Careful investors should be comparing financial data between 2 companies or even all the companies within that industry. By comparing financial data of 2 companies, it would allow a better decision to be made. Also, the inventory cycle should be on going from year to year, but it seems like GM and Chrysler aren’t selling their vehicles like what they should be doing. This will cause them to decrease in production of new models and even need to pay more storage space to store all the unsold cars.
Not long ago, GM and Chrysler had their chance to restructure their companies, but they still haven’t figured out a proper plan to save it. To me, GM and Chrysler cars aren’t as fuel efficient compared to other countries automaker, as well as, not having an up-to-date model coming out each year. They are lacking and are falling behind other countries automakers. The automaker Ford was also one of the companies who needed restructuring within their company, but they managed to survive their crucial period. It seems like GM and Chrysler needs some proper management skills within their company and should stop slacking off. This should be a valuable lesson for the two companies who think they can rely on the government support, but actually they now have to suffer for their actions.
http://www.cbc.ca/money/story/2009/03/30/auto-restructuring.html
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Hi Joanna, I agree with your points on how GM and Chrysler needs to do A LOT more in order to operate independently without the over-reliance on the government to bail them out. The agreements proposed by the two national leaders are good start offs for the two corporate to consider and follow suit, because as you have mentioned in your blog, both GM and Chrysler are accumulating way too many inventories, which in turn increase costs and reducing the research development fund for themselves to further develop and innovate their products. Consumers are not blind, as a result, buyers will choose to purchase the better and more efficient automobiles instead of theirs. It is a hard market out there, especially during times like these. In addition, the management team within a company is as equally important, because they are the ones who make major, important, and final decisions as to how the company will operate successfully to earn what all companies need - PROFIT $$$ !!!
- Christy Leung
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