“Au Revoir and Auf Wiedersehen” from GM and Peugeot!

Let’s face it. The economy is still lousy, and many companies are trying to find ways on how to reduce their costs. For General Motors and Peugeot-Citroen, it is time to restructure their operations.

“GM removed the head of its European operations, Karl-Friedrich Stracke, after just seven months on the job and replaced him with Vice Chairman Steve Girsky amid growing frustration with the pace of the turnaround at its European business, which includes the German Opel/Vauxhall unit” (Terlep). “Peugeot plans to eliminate 8,000 jobs, or 8%, of its French workforce, and stop building vehicles at one of France’s largest car factories in 2014” (Terlep).

So what exactly are GM and Peugeot restructuring? Both companies are restructuring their operations management, specifically their capacity. In class, we learned about design capacity and effective capacity. Design capacity is the maximum theoretical output of a system, whereas effective capacity is the capacity a firm expects to achieve given current operating constraints.

“About 30 of the 98 European auto-assembly plants owned by major car makers are operating below 70% of their capacity, levels that typically cause plants to run up significant losses. European auto makers have the plant capacity to make 27 million cars a year but will only make 20 million this year” (Terlep). In operations management terms, 30 of the 98 European auto-assembly plants have a design capacity of 27 million cars, but they are operating below 70% of their design capacity. Their effective capacity this year is 20 million cars.

In order for GM and Peugeot to match capacity to demand and effectively compete in the auto industry, they will have to close some of their factories and lay off thousands of their employees. The general environment and the task environment change dramatically every day. Companies who do not build for change will experience what GM and Peugeot are experiencing today. There is a lower demand for cars, and costs are skyrocketing because factories are not operating at their full design capacity.

If you were the chief operating officer at GM or Peugeot, how would you restructure your company and “build for change”?


*If you would like to access my article, you can click on the link below:




Terlep, Sharon, and Sam Schechner. “GM, Peugeot Take Aim at Europe Woes.” The Wall Street Journal. Dow Jones & Company, 12 July

2012. Web. 12 July 2012. <http://online.wsj.com/article/SB10001424052702303740704577522053739434374.html>.


A Real-World Application of Project Management

In class, we learned about project management. I have always wondered about how project managers begin working on expensive projects. Before project managers begin their work, they must understand the project triangle: performance, cost, and time. All three aspects of the triangle are critical to the success of a project. I currently work in a fitness accessories company, and I decided to apply what I learned in class to my work. We recently formed a partnership with a manufacturer, and our current project involves establishing the manufacturing process for our product. In addition to learning about the project triangle, I learned about project management activities. Project management activities include planning (goal setting, defining the project, and team organization), scheduling (relates people, money, and supplies to specific activities and activities to each other), and controlling (monitors resources, costs, quality, and budgets; revises plans and shifts resources to meet time and cost demands).

We already finished the planning phase, and now we are working on the scheduling phase. Our manufacturer wants to assign three employees to our product’s manufacturing process, but that number is too high because our product is so simple that we only need two people to manufacture the product. We still need to record the activity times and the duration of the overall project, and we still need to develop standards so we can effectively measure our performance and maintain quality control.

In addition to the project triangle and project management activities, we learned about the project network (i.e. precedence diagram, activity on arrow (AOA) network. All three are essentially the same because all of them depict major project activities and their sequential relationships. The project network is the best way to depict major project activities and their sequential relationships because it shows precedence. For example, C and D must be completed before E can start. Activities in my company’s project network include cutting the material, sewing, silk screening, and packaging. Although it does not take weeks to complete the project, the project still requires project management. It is important that we write down the necessary activities, what their predecessors are, and how long it takes to perform each activity. From there, we can develop a Gantt chart for our process.

The most difficult part of working on the project with our manufacturer is making sure that they are on the same page as us. Teamwork is one of the most important things in business, and developing synergy with a partner is a difficult task. It is inevitable that our manufacturer will try to maximize its profits by assigning more employees to the project and increasing our costs. It is also inevitable that there will be inefficiencies in our manufacturing process. However, applying what I learned about project management and how to create a project network will help my company and our manufacturer stay on the same page, and it will allow both of us to work together and find ways to reduce costs and maximize efficiency.