Why General Motors failed

General Motors headquarters faces troubled times

General Motors’ new CEO Fritz Henderson announced in early April 2009 that a company bankruptcy appeared likely. Governement officials helped the company avoide that fate and now we taxpayers own 60% of General Motors. This is a company that once stood as a symbol for America in all its industrial glory. And, a company that has produced many sought-after classics of automotive history. First year 1953 Corvettes, split-window 1963 Stingray Coupes, 1969 Camaros, 1963-65 Buick Rivieras, and 1957-58 Cadillac Eldorado Broughams, all continue to command sky-high prices at auction.

Buick's elegant first-edition Riviera was introduced in 1963

The raging economic crisis is, of course, party responsible for GM's fate but in reality, it simply hastens a process set in motion decades before. After CEO Harlow Curtis's retirement in 1958, the management culture of General Motors evolved dramatically. A culture born of an elite clique of accountant princes developed a stranglehold on the corporation when "The System" of management was born. Executives were no longer promoted on the basis of achievement or talent, but on how well they supported “The System.” John Delorean describes the suffocating culture of GM’s airless, beige 14th floor executive suites in his 1973 book, On a Clear Day You Can See General Motors. DeLorean cites case after case when his efforts to enhance the quality of GM cars was thwarted by a stultifying lack of concern for anything but avoiding a threat to The System and next quarter’s numbers. The executives that ran GM lived like princes, chauffered to 14th floor offices where plush carpets hushed any sign of dissent from The System. And The System worked, didn't it? GM was the largest manufacturing company in the world, wasn't it?

The problem? The System rewards mediocrity. Encouages it. Nourishes it, even This might not be so dangerous when a company enjoys a comfy spot in an oligopoly, as GM and its companions in Detroit's Big Three manufacturers did for a long while. Then Vokswagen arrived to show Americans that a small car could be fun to drive and quality built. This was a lesson the Japanese took and ran with.

Now, colossal General Motors lays on the mat staring upwards, its face glazed with an expression of incomprehension as the ref counts down its fate.

Some blame fat U.A.W. contracts for General Motors’ difficulties but weren’t those granted by the company''s management? And, isn’t that the same management that sucked the content and quality from GM cars for decades, saving a buck here or there while import carmakers relentlessly added value and captured market share?

One of the bean counters bright ideas was to centralize  all GM divisions under their control. Whereas Buick, Oldsmobile, Pontiac, Chevrolet, Cadillac and GMC had previously been autonomous, having their own command and control, they were brought under the control of The System on the 14th floor. That's when all distinctions between the various makes began to disappear and "badge engineering" or just making minor cosmetic differences differentiate the brands became the norm.

In the end, the auto business is product driven. But at General Motors, the bean counters were in control. Firmly in control. And they can be fiercely bottom-line driven, even to the detriment of a company's long-term health. As Delorean said, “A man trained and skilled only in financial control, who has no direct operational experience, simply lacks the understanding necessary to run the business.” But that didn’t stop the attack of the bean counters, for run the business they did, straight into its grave. Like a dinosaur that rules the animal kingdom through sheer size and weight, GM’s momentum carried it for a very long time. But, to paraphase Abe Lincoln, you can’t fool all the people all the time, or even enough of the people for a manufacturing company tyrannically driven by its financial staff to be successful. At the dawn of the twenty-first century, Japanese car companies like Honda were helmed by engineers as U.S. companies once were, but American companies were now run by accountants. This approach can only work for a limited time, for it contains the seeds of its own destruction.

2011 Chevrolet Volt will introduce game-changing electric car technology

GM is selling a brand new, re-invented Camaro that does everything right but it's essentailly an updated, old-school muscle car, launched when the market is in a sober, conservative mood. The company has announced that its quantum leap of engineering, the Volt plug-in extended-range electric vehicle, will be available in late 2010 for the 2011 model year. That will be a real accomplishment, but at a projected $40,000 price, the Volt will face stiff competition. General Motors is feverishly off-loading its life-sucking Hummer, Saturn, and Saab brands, closing plants, laying off workers and developing new models. A bankruptcy would have the advantage of allowing the company to shut down brands without suffering massive lawsuits from dealers while it gives GM breathing space to develop smart new models. But even breathing space will be of limited value in the current situaiton. General Motors executives have precious little time to save what was once the world's mightiest manufacturing company. 

Will General Motors' near death experience bring about a spiritual awakening? In other words, will the company's bean counter cult finally be forced to release their shaking hands from GM's neck so the company can breathe the fresh air of reality?

Stay tuned.