Operation Management

Bloomberg Businessweek Case

Assignment
Report on the article
GM And Ford Are Having EV Difficulties
Submitted By,
Sarvesh R
1 MBA C
23JKSHIM123

Submitted To,
Prof.Karthik Kudroli
JKSHIM,Nitte.
Date Of Submission
20/10/2023
Abstract
The main goal of the report is to find and address the problems that General Motors and Ford Motors are
facing in the electric vehicle (EV) market, especially in competition with companies like Tesla and BYD in
China. The article briefly talks about the challenges in the EV sector and the tough competition from Tesla
and Chinese EV makers like BYD Motors. Despite being a well-known American automotive company, GM
is also dealing with difficulties in the supply chain for EV batteries.
The report suggests solutions to these problems by proposing various operational strategies. These include
diversifying supply chains, investing in new battery production capacity, and allocating resources to research
and development for creating new technologies and introducing innovative EV models. Implementing these
solutions is expected to help GM and Ford overcome disruptions in the EV market.

Bloomberg Businessweek Article:

GM And Ford Are Having EV Difficulties
To view this story in Bloomberg click here:
https://blinks.bloomberg.com/news/stories/RY1S9RBQ99TU

About the company

Ford and General Motors are two of the largest automobile companies in the world, with a long history of
success. Henry Ford founded Ford, headquartered in Dearborn, Michigan, while GM was formed in 1908
and is based in Detroit, Michigan. GM is well-known for its Chevrolet and GMC brands, with Chevrolet
being one of the top-selling brands in the United States, and GMC producing a variety of trucks and SUVs.
Both companies are heavily investing in electric vehicles (EVs). Ford plans to invest $30 billion in EVs by
2025, and GM is set to invest $35 billion in EVs by the same year. Both companies are committed to
transitioning to EVs and have a wide range of electric vehicles in the market. This transition is crucial for
the future of the global automobile industry.

Summary of the article

GM and Ford are facing significant challenges in transitioning to electric vehicles (EVs). GM is grappling
with disruptions in the supply chain for batteries, and Ford has reduced prices for its F-150 Lightning pickup
truck due to weakened demand. General Motors plans to launch a high-volume Ultium EV from Chevrolet
this year, but the Cami assembly plant in Ingersoll, Ontario, has temporarily closed due to a battery shortage.
GM is working on it’s battery expanding capacity, but reaching production levels will take time.

The article highlights China's leadership in the EV market, with BYD being the world's largest EV seller.
While Tesla is a technological leader, it faces uncertainties entering the Chinese market. Chinese EV makers
become a threat to both GM and Ford. Ford's confidence in producing a high-volume F-150 suggests
optimism in their product.

In conclusion, GM and Ford are facing challenges in the EV transition. GM is focusing on increasing battery
capacity, and Ford is ramping up production of the F-150. Despite the hurdles, both companies are
committed to the long-term success of the EV transition.

Problem Description:
The main problem highlighted in the article for both GM and Ford is the disruption in the battery supply
chain, a crucial component for producing electric vehicles (EVs). GM's CAMI Assembly electric vehicle
plant in Ontario had to close due to a shortage of batteries, indicating a significant operational issue. Ford is
also facing reduced demand and has cut prices for its F-150 Lightning pickup in response.

To solve these problems, GM is working to expand its battery capacity, recognizing it as a primary
bottleneck in their production process. Similarly, Ford is aiming to increase its plant capacity at the Rouge
Electric Vehicle Center in Michigan, planning to triple its F-150 Lightning production.

Both GM and Ford are engaged in a price war in the EV sector, likely influenced by Tesla's pricing strategy.
The article suggests that Ford's price cuts are a response to Tesla's strategy, leading to increased sales for all
three automakers.

The article also points out that Chinese EV makers can produce vehicles at a lower price due to the
availability of raw materials at a lower cost. This gives Chinese companies a competitive advantage,
especially in the production of larger vehicles. BYD, a Chinese company, is highlighted as the world's
largest seller of EVs.

China is recognized as a leader in the EV battery market, and both GM and other global automakers are
facing challenges navigating regulations in China. The article emphasizes the competitive edge of Chinese
companies in the EV market, driven by lower raw material costs and production efficiencies.

Problem Analysis:
Battery supply chain disruptions:
Ford and General Motors are currently grappling with a significant challenge – a shortage of batteries. The
reduced supply is a consequence of the surging demand for electric vehicles (EVs). Several factors
contribute to this scarcity. Firstly, the production of batteries has faced disruptions due to the widespread
impact of the COVID-19 pandemic. Additionally, the war between Russia and Ukraine had played a role in
contributing to the shortage of batteries. Additionally, a notable factor is the highlighted demand for batteries
across various industries, encompassing electric two-wheelers and other products. This increased demand
has led to a decreased availability of batteries for EVs.
Weakened demand for EVs:
Right now, not many people are interested in buying electric cars because they are expensive, and there are
worries about how far they can go and where to charge them. Also, many peoples don’t know about the good
things about electric vehicles. This creates challenges for GM and Ford in making money from selling
electric cars.

Competition from Tesla and Chinese EV makers:

Tesla stands out as a prominent player in the global electric vehicle (EV) market, holding a strong position
in both international and Chinese markets. An influential player in the Chinese EV market is BYD Motors, a
Chinese company. BYD's strategic advantage lies in providing EVs at a more affordable price, attributed to
the cost-effectiveness of raw materials in China. This factors become big challenges for GM and Ford as
they compare with both Tesla and BYD in EV industry.

Production inefficiencies:
Electric vehicles, are a part of the latest tech, and GM and Ford are trying to enhance their production
methods for better efficiency. In comparison to Tesla and the Chinese EV market, GM and Ford somewhat
limited experience might lead to less effective products. The Problems in the supply chain, particularly the
shortage of batteries, create a big challenge for GM and Ford in efficiently manufacturing EVs.

Lack of investment in battery production:

GM and Ford use batteries to build electric vehicles, but sometimes it's tough to get them from other
suppliers. This makes it hard for them to make electric vehicles. To solve this, GM and Ford should invest
more money in making their own batteries. This will help them have better control over the batteries they
need and might make their buses cheaper to build.

Discussion of possible solutions

After identifying the problem, it is feasible to find alternative solutions to these problem by applying
operation tools:

Forecast battery demand more accurately:

Accurate forecasting helps GM and Ford determine the right amount of batteries needed for production.
Without proper forecasting, they could face inventory shortages, causing production delays and impacting
timely deliveries. This, in turn, leads to potential revenue loss. On the other hand, good forecasting prevents
excess inventory, which is costly and time-consuming to manage. It may also result in markdowns and
discounts to clear out surplus stock.
Effective forecasting will help to make good communication with battery suppliers, it will help to make
long-term agreement and contract. It also helps in adapting to market changes, like sudden increases in
demand or shifts in consumer preferences for specific battery technologies.

Offer competitive pricing:

GM and Ford need to focus on offering their vehicles at lower prices. To achieve this, they must decrease
their production costs. One way to do this is by producing electric vehicle (EV) batteries themselves instead
of purchasing them. This self-production of batteries will help in them to reduce the cost of production..
Additionally, GM and Ford should consider forming partnerships with Chinese EV market companies. This
is because the Chinese EV market can provide raw materials at a lower cost. By collaborating with Chinese
companies, GM and Ford can further decrease their production costs.

Streamline manufacturing processes:

Streamline process means eliminating the unnecessary process. The article talks about GM and Ford having
trouble getting enough batteries. To solve this, start by looking at how batteries are made. Identify and fix
any issues or slow parts in the process. GM and Ford could combine some steps in making batteries and find
ways to do things simultaneously, making it faster.

Improving efficiency isn't just about the factory; it's also about the entire system of getting parts. This means
closely working with the companies that send materials to ensure everything comes in smoothly. If the
supply chain works well, there won't be delays, and production can stay on track.

Just-in-time (JIT) inventory management:

Just-in-time inventory management will help Ford and GM in handling battery supply. Implementing JIT
means keeping inventory low by ordering parts or materials just when they're needed for production. This
prevents overstocking, which can be expensive and tie up capital. For GM and Ford, using JIT involves
ordering batteries when it required it will reduce the risk of having too much inventory during less demand
for vehicles.
JIT management will also help minimize storage costs. Raw materials are supplied based on demand,
eliminating the need for large storage spaces. JIT enables cost savings by ordering batteries when it required
and it’s reduces the financial burden associated with large inventories.

Lean manufacturing:

Lean manufacturing is a method to produce things more efficiently by removing unnecessary steps. When it
comes to making electric vehicles (EVs), using lean manufacturing can solve the issues in process of making
batteries. This can result in batteries being made more affordably and quickly. Additionally, lean
manufacturing helps EV manufacturers be more flexible and adaptable, allowing them to quickly adjust their
production process in case of issues, such as a shortage of batteries.

Supply chain management

General Motors and Ford can form strong bonds and partnerships with their battery suppliers to minimize
disruptions. They may also consider diversifying their sources by acquiring batteries from different suppliers
to address potential supply chain challenges. By making good relationship with suppliers, GM and Ford can
explore advancements in new battery technologies. Furthermore, they can utilize supply chain management
tools for enhanced visibility and control over their supply chains, along with optimizing their inventory
levels.

Conclusion:
GM and Ford are dealing with a big challenge due to the shift to electric vehicles, including
disruptions in the battery supply chain and increasing competition from Tesla and Chinese EV
makers. To overcome these challenges, GM and Ford can use different operational strategies like
forecasting battery demand, managing inventory just in time, streamlining supply chain management,
and improving manufacturing processes. By implementing these strategies, GM and Ford can
enhance their operational efficiency, produce vehicles at various costs, and become more competitive
in the global EV market.