Corporate resilience in the face of economic crisis

Navigating Crisis: How Politics and Power Shape Workplace Dynamics in Global Corporations

Rhea Morgan in Business & Economy August 2025 • 4 min read.

"Uncover the hidden forces that influence employment relations during tough times, and learn how organizations can adapt and thrive."

The global economic landscape is ever-shifting, presenting businesses with both opportunities and unprecedented challenges. When a crisis strikes, like the financial meltdown of 2008–2009, companies are forced to make tough decisions impacting their workforce. But what truly dictates these decisions? It's more than just legal constraints; it's a complex interplay of politics, power, and institutional forces within multinational corporations (MNCs).

While much has been written about the importance of power and politics in organizational processes, the influence of legal and regulatory constraints often overshadows these critical dynamics. Understanding how these forces interact can provide unique insights into the negotiated nature of organizational processes and outcomes, revealing the range of options available to actors both within and beyond apparent legal limits.

This article delves into the eye of the storm, examining how a major multinational corporation, General Motors (GM), navigated the global economic crisis. By tracing key employment practices from GM's United States headquarters to its Australian subsidiary, GM Holden Limited, it uncovers the hidden forces that shaped decisions about pay cuts, pay freezes, and workforce reductions, demonstrating that institutional consistency does not guarantee successful transfer, and even host country legal institutional inconsistency is no guarantee of failure.

The Crisis at GM: A Perfect Storm of Financial and Market Pressures

Corporate resilience in the face of economic crisis

To truly understand the decisions made within GM, it's essential to grasp the context of the crisis that engulfed the company. By 2009, GM, once the world's largest automaker, was facing a perfect storm of product and financial market factors that threatened its very existence. Decades of steady decline, coupled with waves of financial turmoil, had brought the company to the brink of bankruptcy.

GM and Holden, while historically dominant players in the US and Australian markets, had suffered steady declines in market share. The company posted staggering losses, exceeding US$10 billion in 2006 and US$43 billion in 2007. The situation worsened in 2008–2009, pushing GM to its absolute limit.

Declining Market Share: GM's domestic market share plummeted from 50% in the 1960s to just 19.9% by 2009.
Financial Losses: The company faced massive financial losses, reaching billions of dollars annually.
Global Economic Downturn: The collapse of Lehman Brothers in 2008 triggered a global economic crisis, severely impacting the automotive industry.
Government Intervention: The U.S. government provided GM with a loan of US$13.4 billion, contingent on internal reform.
Holden's Struggles: Holden's car sales dropped by 20%, and GM's decision to cancel exports to the U.S. resulted in Holden losing 86% of its export volume.

By late 2008, GM was on the verge of financial ruin, forcing it to seek external funding and undertake a large-scale internal restructure. Despite borrowing billions from the U.S. Treasury, GM was unable to service its debts and underwent a corporate restructure via Chapter 11 of the U.S. Bankruptcy Code. This led to the creation of a new GM, largely owned by the U.S. government. For Holden, heavily reliant on both Australian government funding and its parent company, the decisions made at GM's U.S. headquarters held immense significance.

Key Takeaways: Navigating the New Normal

In today's complex global landscape, multinational corporations must recognize that managing employment relations is a multifaceted political transaction. Institutional consistency alone cannot guarantee success, nor does institutional inconsistency necessarily lead to failure. By understanding the interplay of politics, power, and market forces, and by fostering open communication and collaboration, companies can navigate crises more effectively and create a more resilient and engaged workforce. As the rules and conditions are in constant flux, leaders must stay aware of the political, institutional and market factors and a willingness to play the game.

About this Article -

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Everything You Need To Know

What were the main factors that pushed General Motors (GM) to the brink of bankruptcy in 2009?

By 2009, General Motors (GM) was facing a perfect storm. Several factors contributed to its near bankruptcy. These include decades of declining market share, with its domestic market share plummeting from 50% in the 1960s to just 19.9% by 2009. The company faced massive financial losses, exceeding US$10 billion in 2006 and US$43 billion in 2007. The collapse of Lehman Brothers in 2008 triggered a global economic crisis, severely impacting the automotive industry. The U.S. government provided GM with a loan of US$13.4 billion, contingent on internal reform. Also, Holden, GM's Australian subsidiary, struggled, with car sales dropping and a significant loss in export volume after GM cancelled exports to the U.S.

How did the decisions made at General Motors (GM)'s U.S. headquarters impact its Australian subsidiary, GM Holden Limited?

The decisions made at General Motors (GM)'s U.S. headquarters held immense significance for GM Holden Limited. Holden was heavily reliant on both Australian government funding and its parent company. The choices made in the U.S. directly influenced Holden's operations and financial stability. The cancellation of exports to the U.S. had a major impact, leading to an 86% loss in export volume for Holden. This highlights the interconnectedness of multinational corporations and how decisions in one part of the organization can have significant repercussions in other regions.

What role did the U.S. government play in General Motors (GM)'s restructuring during the 2008-2009 financial crisis?

The U.S. government played a pivotal role in General Motors (GM)'s restructuring. By late 2008, GM was on the verge of financial ruin, leading it to seek external funding. The U.S. government provided a loan of US$13.4 billion to GM, contingent on internal reforms. GM was unable to service its debts and underwent a corporate restructure via Chapter 11 of the U.S. Bankruptcy Code. This resulted in the creation of a new GM, largely owned by the U.S. government. This intervention underscores the significant influence governments can have on multinational corporations during economic crises.

Why is understanding the interplay of politics, power, and market forces crucial for multinational corporations, as exemplified by the case of General Motors (GM) and Holden?

Understanding the interplay of politics, power, and market forces is crucial for multinational corporations because it dictates employment relations during tough times. General Motors (GM) and Holden's situation is a perfect example. The decisions regarding pay cuts, layoffs, and workforce reductions were not solely based on legal constraints but were also shaped by these complex dynamics. By recognizing and navigating these forces, companies can better adapt to crises, make more informed decisions, and foster a more resilient workforce. Institutional consistency does not guarantee success, and institutional inconsistency does not necessarily lead to failure. As the rules and conditions are in constant flux, leaders must stay aware of the political, institutional and market factors and be willing to play the game.

How did the economic crisis of 2008-2009 impact General Motors (GM)'s market share and financial performance, and what were the implications for its global operations?

The economic crisis of 2008-2009 significantly impacted General Motors (GM)'s market share and financial performance. The company's domestic market share plummeted from 50% in the 1960s to just 19.9% by 2009. GM faced massive financial losses, exceeding US$10 billion in 2006 and US$43 billion in 2007. The collapse of Lehman Brothers in 2008 exacerbated these issues, leading to a global economic downturn that severely impacted the automotive industry. The implications for its global operations were substantial, as evidenced by Holden's struggles. The decisions made at GM's U.S. headquarters, influenced by the crisis, directly affected the Australian subsidiary, highlighting the interconnectedness and the need for a comprehensive understanding of market dynamics, political forces, and power structures within multinational corporations.