Broke? GM spends $15B on tech
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From: Marlton NJ
Broke? GM spends $15B on tech
http://money.cnn.com/2006/02/02/news...t_gm/index.htm
SAN FRANCISCO (BUSINESS 2.0) - General Motors, despite its billion-dollar losses and weakened credit rating, is going ahead with plans to spend as much as $15 billion on information technology over the next five years, the largest such subcontracting agreement ever.
Today, Ralph Szygenda, GM's chief information officer, announced the winners of a two-year bidding process for the automaker's $3 billion a year tech budget. EDS (Research), which today manages the bulk of GM's technology infrastructure, lost about a third of its current $2 billion-a-year business but expects to continue to receive more than half of GM's tech dollars, according to an EDS statement.
Hewlett-Packard (Research) and Capgemini increased their share of GM's budget, while Compuware (Research), IBM (Research), and Wipro saw their share stay steady.
For EDS, keeping more than $1 billion a year of GM contracts is a victory, as it had consistently warned Wall Street that it could lose as much as half of its $2 billion-a-year GM business. EDS has been running most of GM's business since the IT services company was spun off from GM in 1996. Its current GM contracts expire in June. EDS estimated that the contracts it won today have a value of $3.8 billion, and it could win additional GM business over the next five years.
Hewlett-Packard's increase in business is a significant win for new CEO Mark Hurd and top HP executive Ann Livermore. Likewise, it's a shot in the arm for Capgemini, which has been looking to increase its IT services business in the U.S.
Compuware, whose Covisint division currently runs much of the infrastructure GM uses to communicate with suppliers in North America, will expand those responsibilities to GM's Asian, European, and Latin American suppliers.
IBM's failure to increase its share is an embarrassment for Big Blue. CEO Sam Palmisano had personally campaigned to win more GM business. While the money at stake wouldn't have been a significant boost to IBM's $46 billion-a-year services arm, General Motors (Research) is seen as a blue-chip account that would have let IBM demonstrate its combination of advanced computing technology and sophisticated business consulting.
In a December interview, Szygenda had said that cost savings were not the primary goal of the contract award, but today, he announced that GM would cut its budget from the current $3 billion as a result of the new contracts, making the final value less than $15 billion.
Smaller companies won't be shut out of GM's budget, either. Last month, Szygenda told Business 2.0 that he's setting aside $2.5 billion to $3 billion to spend on startups with new technology.
Today, Ralph Szygenda, GM's chief information officer, announced the winners of a two-year bidding process for the automaker's $3 billion a year tech budget. EDS (Research), which today manages the bulk of GM's technology infrastructure, lost about a third of its current $2 billion-a-year business but expects to continue to receive more than half of GM's tech dollars, according to an EDS statement.
Hewlett-Packard (Research) and Capgemini increased their share of GM's budget, while Compuware (Research), IBM (Research), and Wipro saw their share stay steady.
For EDS, keeping more than $1 billion a year of GM contracts is a victory, as it had consistently warned Wall Street that it could lose as much as half of its $2 billion-a-year GM business. EDS has been running most of GM's business since the IT services company was spun off from GM in 1996. Its current GM contracts expire in June. EDS estimated that the contracts it won today have a value of $3.8 billion, and it could win additional GM business over the next five years.
Hewlett-Packard's increase in business is a significant win for new CEO Mark Hurd and top HP executive Ann Livermore. Likewise, it's a shot in the arm for Capgemini, which has been looking to increase its IT services business in the U.S.
Compuware, whose Covisint division currently runs much of the infrastructure GM uses to communicate with suppliers in North America, will expand those responsibilities to GM's Asian, European, and Latin American suppliers.
IBM's failure to increase its share is an embarrassment for Big Blue. CEO Sam Palmisano had personally campaigned to win more GM business. While the money at stake wouldn't have been a significant boost to IBM's $46 billion-a-year services arm, General Motors (Research) is seen as a blue-chip account that would have let IBM demonstrate its combination of advanced computing technology and sophisticated business consulting.
In a December interview, Szygenda had said that cost savings were not the primary goal of the contract award, but today, he announced that GM would cut its budget from the current $3 billion as a result of the new contracts, making the final value less than $15 billion.
Smaller companies won't be shut out of GM's budget, either. Last month, Szygenda told Business 2.0 that he's setting aside $2.5 billion to $3 billion to spend on startups with new technology.
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Joined: Jan 2001
Posts: 372
From: Indy
Re: Broke? GM spends $15B on tech
Sure does sounds like a boat load of money............but if they don't invest money now for future technology, they will no be able to sell products. "You have to spend money to make money"
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Joined: Mar 2001
Posts: 13,713
From: The Golden State
Re: Broke? GM spends $15B on tech
GM is by no means "broke". Not by a LONG shot!
GM's problem is that it's losing money daily, and they need to reverse that. But they can't reverse that till they get new products. To get new products, they need to spend even more money.
If that's not enough of a catch 22, how about this:
when GM's sales are down, they can't simply cut production and lay people off. If they lay people off, they are getting payed without making something GM can sell. But if they are making something GM can sell (even if it's at a loss) GM can cover part of their salaries and the expense of maintaining the plant, since whatever comes out will be sold eventially. GM is better off making cars that need money losing incentives than making nothing at all.
So, in short, it's not that GM's broke. It's that they need to get new models out quick enough while keeping their losses manageble enough, that they can get on solid footing. this is going to take at least a couple more years.
It's that the people with investments in GM want GM to slash the living daylights out of itself so it makes an immediate profit.
Fortunately, there's a career GM guy running the show, and he's got alot of key car people in top places.
The guys running GM are on the right track, they just need to find ways to do things quicker.
GM's problem is that it's losing money daily, and they need to reverse that. But they can't reverse that till they get new products. To get new products, they need to spend even more money.
If that's not enough of a catch 22, how about this:
when GM's sales are down, they can't simply cut production and lay people off. If they lay people off, they are getting payed without making something GM can sell. But if they are making something GM can sell (even if it's at a loss) GM can cover part of their salaries and the expense of maintaining the plant, since whatever comes out will be sold eventially. GM is better off making cars that need money losing incentives than making nothing at all.
So, in short, it's not that GM's broke. It's that they need to get new models out quick enough while keeping their losses manageble enough, that they can get on solid footing. this is going to take at least a couple more years.
It's that the people with investments in GM want GM to slash the living daylights out of itself so it makes an immediate profit.
Fortunately, there's a career GM guy running the show, and he's got alot of key car people in top places.
The guys running GM are on the right track, they just need to find ways to do things quicker.
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