In the early 20th<\/sup> century, the world was more \u201cglobalized\u201d than it had been at any point in history.\u00a0 However, World War I and post-war isolationism led to the Great Depression and destroyed countless businesses, especially those which relied on international trade.[1]<\/a>\u00a0 Globalization accelerated after the Cold War, which led to further economic integration between countries and regions.\u00a0 Companies embraced distributed supply chains; however, these adaptations also created vulnerabilities, particularly to isolationism and political upheavals.\u00a0 The automotive industry is particularly susceptible to these threats, having developed extensive international supply chains, which assume continued economic openness between countries.<\/p>\n Historical Context for General Motors and Corresponding Concerns<\/strong><\/p>\n General Motors (GM) has built supply chains which include many countries, at great expense.[2]<\/a> [3]<\/a>\u00a0 Leveraging opportunities of international trade, economic alliances and partnerships, and labor and capital arbitrage, GM has adapted to stay competitive in response to globalization. \u00a0However, the same changes that kept GM competitive also make it vulnerable to political shifts towards isolationist policies.\u00a0 This transforms international supply chains from competitive advantages into dangerous liabilities.<\/p>\n For GM, investments in plants and supply-chain design are made with a fundamental assumption that underlying economic and political conditions will change gradually (if at all).\u00a0 However, both recent and distant history are replete with examples of whole industries which were disrupted by political events- the US auto industry was similarly upended by the Oil Crisis in the 1970\u2019s, and the September 11th<\/sup> terrorist attacks decimated the airline industry.[4]<\/a>\u00a0 These events highlight the importance of businesses preparing for low-likelihood events, and leaders at GM must consider how to mitigate these possibilities.<\/p>\n President Trump indicates a high likelihood of US withdrawal from the Trans-Pacific Partnership (TPP) and North American Free Trade Agreement (NAFTA).[5]<\/a>\u00a0 These foundational changes to the economic conditions on which GM has built its business would cause major disruptions.\u00a0 There are other severe potential shocks GM\u2019s global business, too.\u00a0 For example, tensions on the Korean Peninsula or in the South China Sea could escalate into hostilities which would disrupt supply chains and cause significant losses of property, inventory, and production capacity for GM.<\/p>\n GM\u2019s Strategy and Actions<\/strong><\/p>\n GM\u2019s CEO, Marry Barra, and her leadership team have made some short- and medium-term efforts to mitigate these risks. \u00a0Barra joined the Trump Administration\u2019s business advisory forum, presumably to influence policy decisions favorably for GM and the auto industry.[6]<\/a> \u00a0However, President Trump disbanded the forum, forcing GM to rely more on traditional government lobbying, which may fail to achieve goals of preserving economic stability for GM\u2019s business.<\/p>\n Since the 2008-09 financial crisis, GM has made significant advances to consolidate and economize its operations.[7]<\/a>\u00a0 These efforts included relocating\/consolidating production, new part sourcing arrangements, and focusing on new technology and emerging markets.\u00a0 However, many of these adaptations make GM more vulnerable to the risks mentioned above.<\/p>\n GM\u2019s 2016 Strategy Statement shows prioritization of achieving cost efficiencies and risk mitigation to make the company more resilient.[8]<\/a>\u00a0 However, GM\u2019s downside risk consideration focuses on downturns, not the more severe shocks this essay addresses.\u00a0 While the strategy seems proper for the current political climate, it was conceived before current threats to international trade.\u00a0 Though it could be adapted to isolationist challenges, GM should take additional steps to insulate itself against economic risks.<\/p>\n Figure 1: GM\u2019s 2016 Strategic Overview[9]<\/a><\/p>\n Recommendations and Remaining Questions<\/strong><\/p>\n Fortunately, Barra and GM still have time to refine their plans and take action to prepare GM to deal with potential disruptions.\u00a0 First, GM should continue its efforts to prevent US withdrawal from trade agreements, or if they occur, facilitate favorable new arrangements as quickly as possible.\u00a0 Preventing rash action by governments is a critical element of any effort to protect GM from potential political\/economic shocks.<\/p>\n Next, GM should continue its robust global development, while protecting its investments by ensuring supply chains are redundant and resilient to disruptions.\u00a0 This may mean holding larger inventories of parts and increasing lead times, but the short-term costs would be well worth the insurance against events like armed conflicts or economic disruptions.\u00a0 Another element of this strategy would be designing supply chains to rely primarily on domestically available parts, which would mitigate the effects of international strife should it occur.\u00a0 Finally, GM should monitor and proactively respond to political developments.\u00a0 Quick action in the face of a disruptive event could minimize the effects and allow GM to adapt quickly to new circumstances.<\/p>\n Suggesting these actions for GM is easy; however, there are competing considerations GM\u2019s leaders must consider as well.\u00a0 How much added inventory or domestic consolidation is warranted by these threats?\u00a0 What costs to the bottom line of preparing for potential disruptions is acceptable?\u00a0 Is it worth preparing for political upheaval when it may not happen?\u00a0 Business leaders always grapple with uncertainty, but considering these hard decisions is imperative to prepare GM for the future.<\/p>\n (Word Count: 798)<\/p>\n <\/p>\n <\/a><\/p>\n [1]<\/a> \u201cThe World Today Looks Ominously Like it Did Before World War I.\u201d Swanson, Ana. December 29th<\/sup>, 2016.\u00a0 https:\/\/www.washingtonpost.com\/news\/wonk\/wp\/2016\/12\/29\/the-world-today-looks-ominously-like-it-did-before-world-war-i\/?utm_term=.33c6aeef59a0<\/a><\/p>\n [2]<\/a> \u201cGM\u2019s Global Strategy: A Brand for Every Place.\u201d Pfanner, Eric. February 4th<\/sup>, 2008.\u00a0 http:\/\/www.nytimes.com\/2008\/02\/04\/business\/worldbusiness\/04gm.html<\/a><\/p>\n [3]<\/a> \u201cGeneral Motors Announces Growth Strategy for China\u201d March 21st<\/sup>, 2016. http:\/\/media.gm.com\/media\/cn\/en\/gm\/news.detail.html\/content\/Pages\/news\/cn\/en\/2016\/Mar\/0321_annoucement.html<\/a><\/p>\n [4]<\/a> \u201cTen Way the 1973 Oil Embargo Changed the Industry.\u201d Treece, James. October 14th<\/sup>, 2013.\u00a0 http:\/\/www.autonews.com\/article\/20131014\/GLOBAL\/131019959\/10-ways-the-1973-oil-embargo-changed-the-industry<\/a><\/p>\n [5]<\/a> \u201cTrump Abandons Trans-Pacific Partnership.\u201d\u00a0 Baker, Peter. January 23rd<\/sup>, 2017.\u00a0 https:\/\/www.nytimes.com\/2017\/01\/23\/us\/politics\/tpp-trump-trade-nafta.html?_r=0<\/a><\/p>\n [6]<\/a> \u201cGM\u2019s Barra in Tight Spot Among Executives on President\u2019s Advisory Panels\u201d Colias, Mike. August 15th<\/sup>, 2017.\u00a0\u00a0 https:\/\/www.wsj.com\/articles\/gms-barra-in-tight-spot-among-executives-on-presidents-advisory-panels-1502841112?mg=prod\/accounts-wsj<\/a><\/p>\n [7]<\/a> \u201cGeneral Motors Announces Growth Strategy for China\u201d March 21st<\/sup>, 2016. http:\/\/media.gm.com\/media\/cn\/en\/gm\/news.detail.html\/content\/Pages\/news\/cn\/en\/2016\/Mar\/0321_annoucement.html<\/a><\/p>\n [8]<\/a> \u201cGeneral Motors Strategic and Operational Overview 2016\u201d General Motors, https:\/\/www.gm.com\/content\/dam\/gm\/events\/docs\/5237319-645997-GeneralMotorsStrategicandOperationalOverview-9-21-2016<\/a><\/p>\n![\"\"](\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/Capture-17-300x189.png\")
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