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GM’s 4G LTE Initiative
James Sutton,
Jessica Brounson,
Karen Fernandez-Valentine,
Tammy Boughner-Diaz,
Viviana Vanrel
FIN/370
March 30, 2015
Richard Tappe
Introduction: GM’s initiative and relationship of strategic and financial planning
How the initiative affects the organization’s financial planning
The leadership at General Motors has been together for nine months and they have spent a great amount of time together setting goals for GM’s future which includes developing a specific action plan. The action plan include initiatives like the 4G LTE for which GM anticipates will assist them in achieving nine to ten percent margins on an EBIT-adjusted basis by early next decade.
Their plan consists of launching the world’s largest automotive deployment of 4G LTE high-speed mobile broadband. They will be introducing this vehicle-to-vehicle connectivity in the 2017 Cadillac CTS and launching a highly automated driving technology that they currently call Super Cruise. This allows extended periods of hands-free driving on the highways.
With the 4G LTE technology joint venture in China, they are planning to invest fourteen billion dollars from 2014 through 2018 opening five new vehicle-manufacturing plants and support sales of just under five million vehicles on an annual basis. GM Financial has seen its earning assets grow from eight point seven billion dollars in 2010 to thirty seven billion today. They continue to invest to support the sale of new GM cars, trucks and crossovers all over the world. The customers that GM serves have increased in the United States, Canada, South America and Europe.
In Europe, their financials expects to return to profitability in 2016 and in China the joint venture will maintain net income margins in the nine to ten percent range. “GM intends to return excess cash flow to stockholders primarily through strong and growing dividends based on sustained improvements in the company’s underlying financial performance” (Investors News, 2014).
How the initiative affects costs and revenues of the supply chain
In the course of their business operations, General Motors has realized that supply chain competencies tend to affect the core functions in more direct ways than one might actually realize. The cost of sales usually determines the gross profit of the company which is also the responsibility of the company’s bottom line. It should be noted that almost all expenses that are connected to the value adding activities are generally controlled via the supply chain processes where the efficacy of such processes determine the cost foundation of the activity (Kidney, n.d). General Motors has acquired the knowledge that developing supply chain process capabilities tends to influence the process efficiencies that end up affecting the costs while increasing revenues. The LTE initiative has encouraged GM to view suppliers as strategic partners and strives to continuously improve its relationships with suppliers based on trust built through open, transparent and fair business practices. GM prefers to build where they sell and to buy where they build as an important part of their supply chain philosophy. This practice can increase complexities, add redundancies and drive additional part and vehicle validation activities. GM has partnered with AT&T to provide LTE fourth-generation wireless technology; GM will receive $20 each month from whatever subscription AT&T charges for 4G connection (Higgins, 2013).
Ethical concerns related to the initiative
GM’s initiative to bring the World Wide Web inside their automobiles via a 4G LTE network is an innovative idea that the market place is seeking. Pandora is a regular function in must car radios, or, individuals play the streaming music over 4G on their phones passed through to their car radios. Now, automobiles will have this already installed. Financial planning will be used to put this strategy in place and ensure profitable cash flow. This innovative process has ethical concerns GM must consider including how they seek profits, consumer safety while being connected to the web, consumer privacy concerning location services, and government control. GM’s 2013 sustainability report states, “Can the auto industry satisfy customer appetite for constant connectivity and also enable a more sustainable transportation future?” “Our philosophy of “Customer-Driven Sustainability” – an approach for meeting our customers’ needs through sustainability by making the mobile experience safer, more efficient and better integrated with everyday life”. The report also goes on to state that by GM’s Board of Directors staying committed to upholding the highest legal and ethical conduct possible ensures they are fulfilling their responsibilities. (GM Sustainability. 2013)
Integrating the World Wide Web into an automobile has the potential to expand an already dangerous situation of distracted drivers on the road. “The National Safety Council reports that cell phone use while driving leads to 1.6 million crash each year”. (Edgar Snyder & Associates. 2015) Other ethical issues arise such as privacy. Kuebler, Palm, and Slavec discuss in their published paper “The Ethics of Personal Privacy and Location-Based Services”, that when different entities and governments can tract where people are going and have been, the possibility of immoral acts, unethical behavior and resistance becomes more difficult. (Kuebler, Palm, and Slavec. N.D.) Progressing with GM’s strategy of integrating wireless technology into automobiles brings up ethical concerns that can have financial consequences. GM’s financial planning must take all ethical concerns involved with such strategy into mind when planning to implement the system and value the profit that can be produced by the initiative. GM as a company follows ethical guidelines and certainly has incorporated such beliefs into their initiative. The financial planning should equally incorporate such ethical beliefs when valuating and planning the initiative.
Conclusion
Reference
Higgins, T. (2013). GM CEO Sees Profit Streaming From Deal for In-Vehicle LTE. Retrieved from www.bloomberg.com/news/articles/2013-05-13/gm-ceo-see-profit-streaming-from-deal-for-in-vehicle-lte
Investors News, (2014). GM Outlines Strategic Plan. Retrieved from
http://www.gm.com/company/investors/latest-news
N.A. (2013) Connecting You to What’s Important 2013 Sustainability Report. General
Motors. Retrieved from http://gmsustainability.com/fancybox/_pdfs/gm2013sr.pdf
Kuebler K., Palm D., Slavec A. (No Date) The Ethics of Personal Privacy and Location –
Based Services. EthicaPublishing.com. Retrieved from
http://www.ethicapublishing.com/confronting/5CH5.pdf
N.A. (2015) Cell Phone Use While Driving Statistics. Edgar Snyder & Associates. Retrieved
from https://www.edgarsnyder.com/car-accident/cause-of-accident/cell-phone/cell-phone-statistics.html
