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The General Motors and Fisher Body Case Study The first paper referring to the case study was written by Benjamin Klein, Robert Crawford, and Arman Alchian, "Vertical integration, appropriable rents and the competitive contracting process." (Klein et al, 1978). It discusses "possibility of post contractual opportunistic behaviour" (Klein et al., 1978 p297) and is a great example of vertical integration used to relieve a hold up in the face of assets specificity, as occurred between GM & Fisher body. The paper has gone on to be considered the “Prevailing view” of the case study, and is supported by other papers. In 1998, Klein refers again to the Fisher body (FB) - General Motors (GM) Case, in his paper "Vertical Integration as organised ownership: the Fisher body - General motors Relationship Revisited". From the opportunistic behaviour perspective, Trachtman (1996) mentions the case of FB - GM. Others also specify that the case has been turned into a famous example such as Che & Hausch, (1999), Zingales, (2000); Itoh & Morita (2006) and described as "the paradigm example of Vertical integration" (Baird, 2003, p24) and has been widely used, (Williamson, 2002). During the beginning of the 20th century car production consisted of individually built open wooden cars. In 1919, production methods had developed to closed bodies, mostly metal cars and specific equipment was required. (Klein et al., 1978). So by 1919 GM & FB entered into a 10year contract for closed auto bodies (Coase, 2000). In conjunction with the contract, GM obtained 60% of Fisher Body, however, the Fisher brothers maintained control of their company for 5 years. Klein et al (1978) describes how GM agreed to buy all closed auto bodies from Fisher Body to help ... ... middle of paper ... ..., there is a small chance that unexpected events occurs, driving the relationship away from the so called 'self enforcing range' as Klein (1996) described it and a hold up results from this. This idea on hold up's can be compared with the notion that a hold up implies deceitful behaviour (Klein 2010), Coase (2006, p.260) also suggests that 'Opportunism is analogous to fraud". Williamson tends to describe hold up's in consideration to deception stating "By opportunism, I mean self-interest seeking with guile. This includes but is scarcely limited to more blatant forms, such as lying, stealing, and cheating. Opportunism more often involves subtle forms of deceit... More generally, opportunism refers to the incomplete or distorted disclosure of informations, especially to calculated efforts to mislead, distort, obfuscate or otherwise confuse" (Williamson 1985, p.47)
The automaker Chevrolet has experienced much technological change in the past 104 years. Although it, Chevrolet, is a French name, it is an American car company. It was primarily founded by William C, Durant, along with Louis Chevrolet, on November 3, 1911. It wasn’t until six years of existence that it became part of the Automotive Division at General Motors, otherwise known as GM. Durant had previously tried to buy out Ford and failed. This caused him to resort to co-founding Chevrolet. The first car sold by the company commonly called Chevy was the Classic Six, at the price of 2,500 dollars. Chevy started producing these vehicles in 1912-1913. The car’s value may seem like pocket change but that is the common day equivalent of roughly 57,000
Gaughan, P. A., 2002. Mergers, Acquisitions, and Corporate restructuring. 3rd ed.New York: John Wiley & Sons, Inc.
The case revolves around Bob Marvin, president of the Motor Parts Corporation (MPC), and his executive vice president, AL Shepherd, who held a key senior management position in the company. After Bob, Al had the most important job since most of the line functions reported directly to him. His job required a considerable amount of traveling which he was not able to do lately because of his wife’s illness. Al 's wife, Ruth, was suffering from a malignant brain tumor due to which he was spending more and more time away from work to be with her.
SUDARSANAM, S. (1995) The essence of mergers and acquisitions. Hemel Hempstead: Prentice Hall International, p.1.
The automotive industry has been in the global scene since its inception. Off shoring of vehicle production was begun with the mass production of system of Henry Ford, which came alongside mass markets. The automotive firms in America pioneered the early age of globalization in the 1900s. Firms such as General Motors’ are remembered for their production
General Motors Company (GM) is one of the world largest manufacturers in the automotive industry today. GM value chain of activities include designing and engineering vehicles with state-of-the-art technology, research and develop new models and innovations, as well as creating effective marketing strategies to up sell and compete in its field of industry. With more than 212,000 valued employees working in 396 facilities, GM’s presence had spanned across six continents over the world. GM offers a comprehensive range of vehicle selections for its customers from electric and mini-cars to heavy-duty full sized truck as well as convertibles. Along with its strategic partners, GM produces cars and trucks selling and servicing its vehicle through many recognized brands such as Chevrolet, Buick, GMC, Cadillac,
Ford’s production plants rely on very high-tech computers and automated assembly. It takes a significant financial investment and time to reconfigure a production plant after a vehicle model is setup for assembly. Ford has made this mistake in the past and surprisingly hasn’t learned the valuable lesson as evidence from the hybrid revolution their missing out on today. Between 1927 and 1928, Ford set in motion their “1928 Plan” of establishing worldwide operations. Unfortunately, the strategic plan didn’t account for economic factors in Europe driving the demand for smaller vehicles. Henry Ford established plants in Europe for the larger North American model A. Their market share in 1929 was 5.7% in England and 7.2% in France (Dassbach, 1988). Economic changes can wreak havoc on a corporation’s bottom line and profitability as well as their brand.
Garsten, Ed. “GM Saves On Flexible Assembly.” The Detroit News Auto Insider. 15 December 2002.
At the time, the merger of Daimler-Benz and Chrysler was unequalled in size and involved high risks. The reason Benz and Chrysler merging was not s...
Vertical integration as an alternative to governance. Retrieved from http://webh01.ua.ac.be/cas/PDF/CAS55.pdf. QuickMBA.com - a free online marketplace for quick and easy access to the Internet. (1999) The 'Secondary' of the 'Secondary' of the 'Second
Vertical integration where a company joins businesses when they are at different stages of production. The purpose of the integration could be to supply them with goods or buy goods from them. This way, the company has a huge control over the process of production.
This paper takes a look at the ways in which the ideas of Fordism and Taylorism helped the success of the U.S motor vehicle industry. The motor vehicle industry has changed the fundamental ideas on the process of manufacturing and probably more expressively on how humans work together to create value.
Because of high legal expenses mergers and acquisitions is costly due to which cost of acquiring a new firm would not be profitable in the short run. This is the reason that merger and acquisition is considered as strategic corporate decision other than tactical manoeuvre. The process of mergers and acquisitions can be worsened by the opportunity cost. When the same amount of investment is made, this cost takes place for generating higher financial returns (Chen, et al., 2015).
The roots of the automobile industry can be traced back to Henry Ford who was responsible for the development of the assembly line technique of mass production which allowed middle class America to afford to buy vehicles. However despite its impact Fords competitive advantage was short lived and was soon taken over as Alfred P. Sloan at General Motors sensed consumers wanted more variety than what they were being offered and he offered “a car for every purse and purpose” (Holweg, 2014, p. 14). Customers were soon given a choice with a broader range of products to include cars of different colour which was in contrast to Fords standard black car.
Eagle cars were the marque of the Chrysler corporation once they purchased American Motors Corporation (AMC). The Jeep/Eagle division was formed in 1987 and unlike any of the vehicle manufacturers that Chrysler had purchased such as Dodge the logo for the eagle range of cars remained as the Eagle Head logo and not the Chrysler Pentastar logo.