By John LeBlanc
So it’s come down to this. One year after celebrating its centennial, General Motors, the world’s largest carmaker for 77 of its 100 years of existence is broke. This is a dizzying spin into irrelevancy that no one would have predicted a few years ago.
You’ll be hearing a lot of nostalgia for the “old GM” over the next little while. But that company — the 20th century giant that once led the auto industry in styling, engineering and marketing — hasn’t existed in a very long time. You’ll also read in the media about the external “if onlys” that could have prevented GM from its current mess.
“If only the price of gas didn’t go up last summer.”
“If only the U.S. sub-prime mortgage crisis didn’t stop people from buying Hummers.”
“If only there weren’t so many retired UAW members to support.”
But the cold truth of the matter is this: After decades of mismanagement and arrogance based on past glories — from the boardrooms in Detroit, right down to your local dealer service counter — the General only has itself to blame.
While the current economic recession will go down in history as the final blow to GM, the company started relegating its industry leadership role as early as the 1970s. The two oil crises of that decade shook the foundation of the company from a product standpoint. However, instead of responding to what educated car buyers were demanding — more fuel efficient and better-made vehicles — GM spent millions in court fighting tougher government fuel economy and safety regulations. All the while, it was looking down at compact cars from Japan and Europe like carnival sideshow acts. Things only went from bad to worse from there.
During the 1980s, GM became distracted from its core business of making cars. Instead of taking on the surging import brands in the showroom, it poured billions into high-tech firms (EDS) and defence contractors (Hughes Aircraft). GM did made an attempt to take on Honda and Toyota with its Saturn brand in 1985 (several more years would pass before production started,) but the self-titled "Different Kind of Car Company" never received the financial or product support it needed from HQ. Today Saturn — along with Saab and Hummer — is being sold off.
What some critics consider the largest albatross around GM’s neck today — the legacy employee retirement commitments — dates back almost two decades. In 1990, the automaker’s management agreed to the UAW’s jobs bank, where laid off workers would receive almost their entire pay cheque until a new spot opened up on the assembly line. Trouble was, the recession of the early 1990s pretty much killed off any recovery or opportunity for those workers to get back to making cars.
During all those critical management miscues, throughout the years, GM’s market share continued to shrink. But no one steering the sinking ship would admit or react to the leaks quick enough. For the past 15 years, GM has simply had too many models, too many brands, too many plants and too many dealers.
In the end, will filing for bankruptcy return GM to its former glory? The challenges seem insurmountable.
There are certain to be additional plant closures and employee layoffs announced this week. But GM still suffers from too much manufacturing capacity relative to its market share. Sure, it’s shedding (or at least trying to) half its brand portfolio from eight to four. But having to support Chevrolet, Cadillac, Buick and GMC may still be too much to handle.
The bottom line: All the billions (and billions) of tax payer-funded government bailout money in the world can’t erase 40 years of consumer perception that GM doesn’t build the best cars in the world or treat its customers as well as they can.
In the end, it was the product, GM. Something the “next GM” needs to never forget.
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