Business reporters for national newspapers tend to be at their best when they provide detailed, play-by-play coverage of major events in the U.S. auto industry. Unfortunately, they haven’t been as good in analyzing why things happened the way they did, which is all too often left to the few scholars in the field.
A typical example is Bill Vlasic’s (2011) book, Once Upon a Car. The New York Times Detroit bureau chief retold the story of the Big Three’s decline during the Great Recession and subsequent revival. His prose has a “you are there” quality that makes for engaging reading but can oversell the accuracy of the narrative.
One reason why: If the reporter hadn’t seen a given event in person, he or she is dependent on what sources say. All but inevitably their stories will be colored by the specific role that they were playing as well as their imperfect memories and personal agendas.
Another potential problem with narrative-focused journalism is that it can tilt toward getting access to key players rather than holding them accountable (go here for further discussion). Pushed far enough, the resume polishing hagiography can have the uplifting quality of the TV show, Touched by an Angel.
Obama tries to save GM with a radical pruning
At any rate, let’s check in on Vlasic’s storyline about the Obama administration trying to save General Motors. As part of a corporate restructuring, Rick Wagner was asked step down as chairman and CEO. Company president Fritz Henderson took his place.
“Henderson committed himself to complete cooperation with the federal fixers. He called together all of his senior executives — Gary Cowger with the plants, Troy Clarke in North America, Mark LaNeve in sales and marketing — and instructed them to do everything they could to help Wilson and his people carve up GM into a drastically smaller company. And it would be a bloody operation. Four brands would go away for sure: Pontiac, Saturn, Hummer, and Saab were history. At least one thousand dealers were slated for extinction. There would be more plant closings and considerably more job losses.
How management expected to run an auto company in the interim was never talked about. GM would spend several months in virtual hibernation, waiting for its financial freeze to thaw. So many plants were idled anyway, sales were pathetic and the product pipeline had slowed to a trickle. By mid-April, Treasury officials directed GM to prepare for ‘surgical’ bankruptcy. Two weeks later, Henderson laid out the game plan. The company would produce 30 percent fewer models, cut twenty-three thousand more jobs by 2011, and close sixteen manufacturing plants within a year after that” (pp. 357-358).
Bailout represented an extraordinary turn of events
Vlasic went on to note that GM had thus far taken out more than $15 billion in federal loans and would require at least $11 billion more to rebuild. In exchange for the helping hand, all GM shareholder equity would disappear as part of Chapter 11 bankruptcy proceedings. The government, bondholders and United Auto Workers would get an ownership stake.
This was an extraordinary turn of events for a corporation that had utterly dominated the auto industry in the postwar period. Back then GM was so big and wealthy that it could afford to buy the best of everything — executive and design talent, dealerships, technology and even political support.
How could a corporation with so much going for it struggle so mightily by the dawn of the 21st Century? This is a question that I don’t think the American automotive history field has adequately grappled with — and this can cloud how well we understand the auto industry’s current travails.
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RE:SOURCES
- Vlasic, Bill; 2011. Once Upon A Car. HarperCollins Publishers, NY.
An honest look at GM’s history shows that it was in serious trouble long before the 21st century. GM had been declining since the 1980s.
Roger Smith’s spending spree on automation had seriously hurt the corporation’s bottom line, without providing much, if any, boost in factory productivity or quality.
After the 1979 E-body, GM introduced a series of new vehicles that either failed to catch on with customers as expected (J-bodies and 1986 E-bodies), or initially sold well until quality issues reared their head (the X-bodies).
Saturn was a money pit that never made any serious profits, while diverting precious development dollars from Chevrolet.
Factory closures and layoffs during the 1980s and 1990s meant that GM was supporting an ever-growing army of retirees and laid-off workers while dealing with stagnant sales and market share. Sharper competition, meanwhile, meant that GM wasn’t able to price its vehicles at the level necessary to turn a decent profit (except for the full-size trucks and SUVs).
GM almost went bankrupt in the early 1990s. I’ve read that it was a “fax away from bankruptcy” at the time, but private financing saved it. In retrospect, GM should have gone bankrupt at the time. The company could have reorganized its brands (dropping Oldsmobile, Buick and Pontiac, and abandoning the Saturn experiment), shuttered more factories, trimmed its dealer body and rewritten the UAW contract. Harsh measures, to be sure, but necessary for a company that no longer held 40+ percent of the market.
The reality is that by 1992 the days of GM setting the pattern for the domestic auto industry were long gone. GM management, dealers and the UAW refused to believe it.
That’s an excellent overview. I suspect that the biggest impediment to a major corporate reset in the early-90s was psychological — GM’s leadership couldn’t accept that the automaker had fallen so far and fast. So they tried to nuance the situation with more modest changes that didn’t help all that much.
By the early-90s GM had become so change-resistant that it would have been a major victory even if it had eliminated just one brand. Yet even that was considered too radical of a step.
Although Saturn ultimately was a failed effort I do not believe that what its original intention was was wrong.
It was supposed to allow GM to have a car division where it could act un-GM like. No haggle pricing. A concentration on smaller cars without the mentality of trying to move everyone to a traditional full size car. A different agreement with the UAW.
My suspicion is that there were too many internal obstacles for that to play out as Roger Smith had envisioned. Not sure that it would have been possible to turn an existing division into what Saturn was supposed to be by way of GM corporate or the dealers.
Which make me wonder, what if GM had someone else other then Roger B. Smith as president/CEO of GM? What if former general-manager of Oldsmobile, John Beltz and Buick former vice-president Edward T. Ragsdale hadn’t died so young and lived much longer? How Oldsmobile and Buick would have been menaged with them during these turbulent times?