This case is about General Motors (GM) and its decision to exit the European market. GM made a deal with France-based automobile company PSA in 2017 to sell its Opel brand for a hefty sum. The deal would also see PSA become Europe’s second largest carmaker behind Volkswagen AG. For GM, this deal would free it from continuous losses in Europe and help to improve its overall profit margins and increase returns to shareholders. GM was facing tough times since 2000 in Europe with the failure of the Chevrolet and Opel brands. Added to that, the changing European market conditions and excess and idle production capacities forced GM to consider the strategy of divestment from Europe. Brexit too led to GM incurring extra tariffs for exports from the UK. GM’s CEO Mary Barra said GM’s decision was aimed at reshaping the company through disciplined capital allocation to its higher-return investments. While some analysts said this was a good move, others felt that exiting a market like Europe would leave GM less diversified and more dependent on its performance in the US and China markets, and expose it to potential risks.
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The case is structured to achieve the following teaching objectives:
Understand issues and challenges in Corporate-level and international strategy.
Understand the issues and challenges in managing the corporate portfolio and value creation as the corporate parent.
Understand the nature of problems faced by GM in Europe and the reasons that prompted General Motors to exit Europe.
Study and analyze GM’s divestment strategy in Europe and the implications of leaving a key market.
Understand the nature of problems faced by foreign companies like GM in saturated markets like Europe.
Corporate-level strategy; International management; International Strategy; Divestment strategy – model of leaving; Product/market diversity; International diversity; International strategy; Value creation; Managing the corporate portfolio; BCG matrix; Directional policy matrix; PESTEL; Five forces; ‘Global-local’ dilemma; Strategic alliances