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Carmaker in Crisis

28 Pages Posted: 13 Feb 2011  

Heike Nolte

University of Applied Sciences Emden-Leer

Ellen Wondra

University of Puget Sound

Date Written: February 12, 2011

Abstract

In September 2009 General Motors' board of directors announces it would sell the majority of its European subsidiary Opel to a group led by Magna International Inc. But two months later it decides to keep Opel, upsetting German officials and workers and harming its reputation in Germany. Why did GM’s board steer such a vacillating obscure course? Why were German stakeholders angry?

This article makes the argument that, due to the difficulties of humans to perform complex decision making in environments overloaded with information regarded as dangerous (noxity, Schroeder et al, 1967), the board of directors discarded GM's deliberate strategy (Mintzberg & Waters, 1985) when the firm was in financial distress. The deliberate strategy – which included cultural sensitivity as well as keeping Opel as an integrated, strategic relevant part of the conglomerate – was superceded by an emergent strategy derived from the routine General Motors had developed over many decades: the firm had learned to solve its problems by selling or closing units in order to increase its overall profitability. When General Motors had overcome its immediate financial emergency, it returned to its deliberate strategy.

The concepts of exchange value uncertainty versus social uncertainty explain why not selling Opel after announcing it was legitimate from the point of view of General Motors but not from that of German stakeholders, such as officials and workers. They are discussed on the background of common law and civil law systems.

Keywords: Stakeholder, Shareholder, Civil Law, Common Law, Noxity, Exchange Value Uncertainty, Social Uncertainty, Emergent Strategy, Deliberate Strategy, Stress, Decision Making, Germany, USA

JEL Classification: D23, D71, D81, F23, F21, J53, J50, K10, L14, L22, L62, M14

Suggested Citation

Nolte, Heike and Wondra, Ellen, Carmaker in Crisis (February 12, 2011). Available at SSRN: https://ssrn.com/abstract=1760613 or http://dx.doi.org/10.2139/ssrn.1760613

Heike Nolte (Contact Author)

University of Applied Sciences Emden-Leer ( email )

Constantiaplatz 4
Emden, 26723
Germany

Ellen Wondra

University of Puget Sound ( email )

1500 N Warner St.
Tacoma, WA 98416
United States

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