Macroeconomic Forecast

Macroeconomic Forecast

Organization Overview (Automotive)

General Motors Corporation (GM) headquartered in Detroit, is the largest automaker in the world. GM was founded in 1908 and today it employs over 300,000 people worldwide. GM operates globally and has manufacturing related operations in over 30 countries. GM sells nearly 9 million vehicles in over 200 countries. Automotive Industry in general is re-inventing itself by introducing more fuel-efficient cars due to the global increase in gas prices. Along with the high cost structure GM is also facing Operational issues such as their dependence on vehicles designed for developed markets and add to the mix planning issues related to the speed of change that has accelerated dramatically and the fact that current models are having a shorter shelf life than in the past. According to (Korth, 2005) “The ability to turn around these negative trends is in question and the scale of improvement required in the short term is daunting.”

Recent numbers provided by key economic indicators such as Retail Sales, GDP, Unemployment Rates and Interest Rates do not bode well for General Motors. “Retail new-vehicle sales in the first nine days of October were down 33 percent versus the same period a year ago, and down 44 percent versus the first nine days of September, according to the Power Information Network, the industry’s premier source for real-time automotive monthly retail sales data.” (Retail New-Vehicle Sales Drop, 2005) Given the current quagmire, GM faces several operations and planning related issues. First, cost-issues with suppliers; GM will be giving suppliers cost-cutting targets for parts based on market data and other factors. Second, planning fuel-efficient models in the high fuel cost environment as indicated by the macroeconomic forecast data; GM has developed concept fuel-cell car Sequel. Third, planning for the workforce; within the next four or five years, about 60% of GM hourly workforce in North America will be eligible to retire.

Economic Indicators: Historical Trends / Individual Forecasts

Real GDP

The latest GDP number was announced on September 29, 2005. According to final estimates released by the Bureau of Economic Analysis, real GDP increased at an annual rate of 3.3 percent in the second quarter of 2005. In the first quarter, real GDP increased 3.8 percent. Personal Consumption expenditure, exports, equipment and software, residential fixed investment, and government were the prevailing contributors to the increase in real GDP in the second quarter. The decrease in real GDP in the second quarter was attributed to a downturn in private inventory investment.

The following chart shows a slight increase for the next year:

Source: http://www.neatideas.com/gdp.htm

The following table shows historical data (1995 to 2005) for the Real GDP:

Year/Quarter Forecast Value

1995-01-01 7973.735

1995-04-01 7987.970

1995-07-01 8053.056

1995-10-01 8111.958

1996-01-01 8169.191

1996-04-01 8303.094

1996-07-01 8372.697

1996-10-01 8470.572

1997-01-01 8536.051

1997-04-01 8665.831

1997-07-01 8773.720

1997-10-01 8838.414

1998-01-01 8936.191

1998-04-01 8995.289

1998-07-01 9098.858

1998-10-01 9237.081

1999-01-01 9315.518

1999-04-01 9392.581

1999-07-01 9502.237

1999-10-01 9671.089

2000-01-01 9695.631

2000-04-01 9847.892

2000-07-01 9836.603

2000-10-01 9887.749

2001-01-01 9875.576

2001-04-01 9905.911