The downfall of General Motors

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The downfall of General Motors

By Micheline Maynard The New York Times

Posted: 06/01/09, 9:00 PM PDT |

It is a company that helped lift hundreds of thousands of American workers into the middle class.

It transformed Detroit into a symbol of the industrial prowess of the United States. It built iconic cars, like Cadillacs, that became synonymous with luxury.

And now it is filing for bankruptcy, something that would have been unfathomable even a few years ago, much less decades ago, when it was a dominant force in the American economy.

Rarely has a company fallen so far and so fast as General Motors. And while its bankruptcy appeared increasingly likely in recent weeks, the arrival of the moment is still a staggering blow, particularly for anyone with ties to the company.

I never ever could have believed that one day this thing would go that way, said Jim Wangers, a retired GM executive who was part of the team that developed the Pontiac GTO, and the author of Glory Days, about Pontiac’s heyday in the muscle-car era of the 1960s.

We were so successful, he added.

Founded in 1908, GM ruled the car industry for more than half a century, with a broad range of vehicles, reflecting the company’s promise to offer a car for every purse and purpose.

The expression What’s good for General Motors is good for the country entered the lexicon, even though it was a slight misquote of Charles E. Wilson, GM’s president in the early 1950s.

But then GM began a long and slow process of undermining itself. Its strengths, like the rigid structure that provided discipline early on, became weaknesses, and it lost its ability for reading the American car market it helped create, as Japanese automakers lured away even its most loyal buyers.

Only eight months ago, Rick Wagoner, then its chief executive, stood before hundreds of GM employees to celebrate the company’s 100th anniversary. We’re a company that’s ready to lead for 100 years to come, Wagoner said.

Instead of leading, GM will be following other failed companies on a well-worn path into bankruptcy court.

The moment will reverberate to every corner of the country, from Fifth Avenue in New York, where it built its financial headquarters, to Epcot, at Walt Disney World in Florida, where GM sponsors the Test Track Pavilion, a showcase of its latest cars.

GM factories sprang up all around the country, from Massachusetts to California, from Wisconsin to Louisiana. They churned out family cars, pickup trucks and memorable muscle cars with taut, sculpted body panels that were rolling displays of American DNA.

A GM plant was a ticket to prosperity for the communities lucky enough to land one. GM put Spring Hill, Tenn. on the map when it picked the town outside Nashville for its Saturn plant in 1985, prompting the hamlet to swell with new homes, motels and restaurants.

Now city officials around the country, including those in Spring Hill, nervously await phone calls on Monday to tell them if their plants will be among the 14 GM is expected to announce it will close in the latest round of cuts.

But even after its deep cuts, GM can still claim that it’s the country’s largest automaker.

For GM, that simple fact — its sheer size — was long used as a trump card to end debates. If the critics were so right about all that was wrong with GM, why did so many people buy its cars?

The company did have vast numbers of loyal buyers, but GM lost them through a series of strategic and cultural missteps starting in the 1960s.

It bungled efforts in the 1980s to cut costs by sharing the underpinnings of its cars across different brands, blurring their distinctiveness.

GM gave in to union demands in 1990 and created the Jobs Bank, paying workers even when plants were not running, forcing it to build cars and trucks it could not sell without big incentives.

Its finance staff wrestled with product developers and marketers, causing GM to fall victim to a practice called launch and leave — putting vehicles on the market, then failing to support them with advertising.

When they didn’t sell, the finance staff would push to abandon them as just another failed effort, including the EV1 electric vehicle.

With its market share shrinking, GM could not give its multiple brands and car models the individual attention that helped Honda attract customers to the Accord and Toyota to its Camry.

Now GM’s brand lineup is being halved, with the company deciding to jettison divisions like Pontiac.

Nobody gave any respect to this thing called image, because it wasn’t in the business plan, said Wangers. It was all about, `When is this going to earn a profit?’

Over the years, GM executives became practiced at the art of explaining their problems, attributing blame to everyone but themselves.

That list included the United Automobile Workers, for demanding health care coverage and pensions (even though GM agreed to provide them); government regulators, for imposing rules that GM said hampered their competitiveness; the Japanese government, for unfairly helping its own carmakers break into the U.S. market; and the media, for failing to appreciate GM vehicles and the strides the company was making to improve them.

Asked in 1995 why he didn’t move faster to reorganize the company, the late GM chief executive Roger Smith replied, Wouldn’t it have been wonderful if we could have flipped a switch? Even last week, GM’s newly retired vice chairman, Robert A. Lutz, said the automaker had experienced a world of hurt, much of it not of our own doing.

Sloganeering was not backed up by execution. Executives wore lapel pins, for example, in 2002, with the number 29 — referring to the market share the company vowed to regain (most companies focus on profits). Through April of this year, its share was 19 percent, a steep drop from its peak of 54 percent in 1954.

Consumers started blaming GM for subpar vehicles. They may have given them second and third chances, but many eventually started switching to other brands, which will make it that much harder for GM to win them back.

Wagoner was able to hold on to his job for longer than people expected, as GM’s stock fell steadily from about $70 when he took charge at the start of the decade. It closed at 75 cents a share on Friday.

Wagoner was pushed out by the Obama administration, which is now making the call to push the company into bankruptcy court. A judge will then start the process of building a new, though much diminished, GM into a company that might have a shot at a second century. But the automaker that so dominated center stage in the American car market for so long will have to earn that place back.

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