General Motors and the Acquisition of Packard Electric

General Motors and the acquisition of Packard Electric

Fernando Vasconcellos

Southern States University

Abstract

The main purpose of this case study is to provide detailed issues about the General Motor`s acquisition of the Packard electric in the year of 1932, retelling the history about Packard Electric since its foundation in 1890 and how The Packard brothers had developed a company that produced carbon filaments lamps and transformers. Clarifying the issues about the acquisition and how they had awaken the General Motor`s interest to buy and transform Packard Electric in its own division, renaming it as Packard Electric Division. This report still highlights to the reader the importance of Packard Electric Division regarding the competitiveness that General Motors had experienced in the 1980`s, especially from the Japanese Imports. The Packard`s revenues had grown year by year, while the GM`s market share had dropped. Moreover, this study shows the Packard Electric`s concern about the development of new products and how they organize functional groups to increase the quality and excellence in order to keep the sales revenue growing. Ultimately, this report shows how Packard Electric`s had managed when they had experienced problems and rejections with a new product, particularly the injectable hardshell grommet (IHG), developed in the 1970`s, which had failed in the strenuous leak test, and how they replaced the IHG for the new technology RIM grommet in 1986. The decision have had to be made by the analysis and the recommendation of David Scramm, the Chief Engineer for cable and component design.

Analysis

The Packard Company was founded by the Packard Brothers in the late 19th century with the aim to produce carbon filaments lamps and transformers. In 1899 The Packard Company switched its targets and oriented to the automobile industry business, and they start to produce automobiles. However, in 1932, General Motors, a multinational corporation, one of the world`s largest auto manufacturing company bought the Packard Company. Packard Company had assumed a position as the main division of the electrical General Motor`s components, renamed as Packard Electric Division. Worth to emphasize that the majority of sales from Packard Division were to General Motors and other automobiles companies, and it had became a valuable and potential  asset for General Motors during the 1980`s, when GM had been facing a strong competition from Japanese imports and had seen its market share in the U.S market shrinking from 45% in 1980 to 34% in 1989, regarding the Packard division revenues grew steadily in the rate of 8,9% a year, with approximately 2 billion in sales, and that was a remarkable and impressive number for General Motors. In addition to being the largest automaker, GM prided itself on producing automobiles at the lowest cost while remaining the style leader of the industry (Olson e Thjomoe, 2010).        The Packard Electric products had been divided mostly in two areas: Components and assemblies, Packard was renowned by the executives as a power and signal distribution company, and had sold every type of electrical cabling and connectors required to interconnect the electrical devices in a car. For example, cables, connectors, conduits, harnesses e subsystems, and they used to sell to automobile companies and General Motors .Typically Packard Electric would sell the complete wiring system, named as harness. The harness installation process had required from the wiring people engagement in every step of the process, extremely working out in the details. The wiring system, considered as the easiest thing that can be changed in a car, ECO`s, the engineering change orders, had taken an expressive amount of time from the engineers, 50% of time was spent in ECO`s. It was a significant and expressive number, and had became a huge concern for the chief of engineering David Schramm and a major effort and goal , the reduction of the cost of ECO`s for Packard.                                                         Packard electric division, has had a tremendous interest on the customer`s satisfaction, and for this reason, they had create a new product development organization, divided in 3 functional groups, involved and responsible for product engineering, manufacturing engineering and reliability, the last one, with the mission in oversee Packard Electrical commitments to quality and excellence in all phases of its business. Packard Also had created another program called CIE, Cooperative Involvement Engineering, was responsible to examine Packard`s decisions which had involved customers, providing a direct line for client`s feedback. Another highlight program, was the resident engineer program, the idea was to do what was right for the client, with the main purpose to integrate the Packard`s design with customers needs, focusing on the best experience for the client and the best solution. These programs had shown the importance that the company used to have to deliver to the client excellence and quality. To integrate the efforts of all these teams involved in the process was created the PPR (product, process and reliability) committee.                                                                                 In the late 1970`s, Packard Electrical engineers had developed the (IHG) injectable hardshell grommet, primary used to pass the cables through the fire wall, the main goal was to prevent any water or vapor in the engine compartment from entering the passenger compartment, but after numerous tests to certify the quality, the grommet had failed in the most strenuous leak test, the static water test. After a long time, in July 1986, a Packard`s engineer, Bob Mc Fall, brought to the company a new idea using a reaction injection molding (RIM), to form a grommet around the cables, as similar as the epoxy principle, when two liquid material were mixed in order to form a rubbery solid. In the following years, Bob Mc Fall and other engineers was not focused much on this project because they were involved in several different projects. Later on, Packard had received a request from a customer who wanted the RIM grommet to its 1992 vehicle, therefore, after the increase of customer pressure, Packard Electrics had gathered all efforts on the RIM project to finally deliver the customer`s request. During this period, Mc fall had worked closely to Keith Turnbull, Packard`s resident engineer, who was on-site full time at the customer`s development center. The RIM grommet was quite recognized superior to the IHG grommet, but not enough to pass at the five and five test. Although the failure in the initials tests, the engineers had insisted that they could improve the RIM and in favor of the engineers, the customer was also very much excited for the RIM grommet, regardless the fact that the RIM was more expensive than the IHG grommet. Many problems had occurred on the RIM Grommet along the project causing such an emotional drama issue for several people. But, by the other hand, RIM had offered many other advantages than the first project IHG. Ultimately, Schramm has had three options to recommend as a chief engineer and he had to present his recommendations to the PPR committee on the RIM grommet project. He definitely needed to be accurate in your decision, and tell them how to avoid and prevent such problems in the future.