Why GM Deserves to Fail
A ChevyRules editorial
February 27, 2009
GM deserves to fail period. This company has been mismanaged since the beginning and it is sure not going to be fixed anytime soon. From when Billy Durant ran the company into the ground TWICE, to the 1980ís with cost cutting and rebadging galore, to 2009 with CAFE and the economy looming down their throats. GM has shown us they cannot get themselves out of dire situations without panicking and knee-jerk reactions.
Letís start from the beginning. General Motors started back in 1908 when Billy Durant was buying all of these automakers. The man was a genius when it came to forming a company, but had no idea how to run it. This caused the banks to take over GM in 1910 for 5 years trying to right the ship before their investment went to hell. Mr. Durant again showed his genius when he ran Chevrolet and took back GM by buying up GM shares. When new vehicles sales collapsed again, he was unable to manage a strategy that would return the company to stable grounds and he was ousted again and Alfred Sloan took over.
Under Sloanís control General Motors was able to claim the title of worldís largest automaker in 1931, which is a great achievement considering it was in the middle of the Great Depression. Under Sloanís control I will argue this is the only time GM was able to deal with a crisis when it rose to power. GM continued to grow and grow until it reached their highest marketshare of 55% in the 1950ís. GM was booming. Basking in the 50ís and 60ís glory of the muscle car era. They were even able to stave off the first Japanese invasion due to no one wanting small cars and the quality was sub-par at the time. Then came the first energy crisis of the 70ís and the second invasion of the Japanese automakers. At the time GM had nothing in their product portfolio to deal with the American sudden change of taste in vehicles. Fortunately, the Japanese did by offering small and fuel efficient vehicles. After the oil embargo was lifted, the US government formed the EPA and set a mandate of that the companies vehicles must average 25 MPG as we enter the ďgloriousĒ 1980ís.
First letís review what is the structure of GMís brands. Chevy was the entry level brand, Pontiac the performance brand, GMC truck division, Oldsmobile being entry luxury, Buick being mid-luxury, and Cadillac being top luxury. Each division filled a niche and had hope that the customers would slowly work up to Cadillac as they kept on making more money. This was great as each division didnít invade their particular niche and were relatively separate with everyone developing their own components and little sharing.
So now we see GM going into panic mode and making knee jerk reactions with the Japanese invasion and the 25 MPG mandate. They integrate all the brands into one entity pretty much. Losing their independence in order to cut costs. They started sharing engines, platforms, etc. Then came rebadging where they would take a Chevy vehicle and rebadge it across the line with minimal changes. The most famous vehicle is the Cadillac Cimarron which was a rebadged Cavalier with very minimal changes. They also went Front Wheel Drive happy due to their more efficient packaging and fuel savings. Cadillac taking the brunt of this sudden change. They also even considered and completed prototypes of front wheel drive Camaroís. Then there was the lame attempt of Displacement on Demand or Active Fuel Management as it is called today. Officially, dubbed the 8-6-4 engine which ran on 8, 6, or 4 cylinders as required. A great idea, but lacked the computing power to make it work reliably as it does today. GM probably realized this, but were desperate to do anything to keep customers happy. Then there was the cost cutting gone wrong with the Oldsmobile diesel. Taking a gasoline engine block and converting it to run on diesel which burns at a higher compression rate. This caused the engine block to break eventually and became a reliability nightmare. The Oldís diesel also ran dirty as hell which killed the image of diesel engines which contributes to todays lack of diesel penetration into the U.S. market. We can thank Saturn for killing the FWD Camaro, but it also started another unnecessary brand. There was no reason why General Motorís could not have made the small cars into Chevy and force their dealers to fix themselves or risk their franchise. But, what done was done and Saturn was created.
Enter the 1990ís and the baby Saturn brand. Probably shocking the industry, Saturn had a warm reception to the American youth. The brand paid for itself after 4 years when the first car hit the market, their customer base was extremely loyal, customer service was top notch and changed the industry with the polymer panels. Who was probably the most shocked about Saturnís success was big bad Chevrolet. They groaned and moaned to the higher ups as they were probably worried that Saturn could potentially unseat them as GMís volume brand. And they got their wish too. Saturn was starved of product and sales crashed as product grew stale. Saturn was never able to recover from the crisis again. But, hey chin up. GM was booming in general. Marketshare was recovering and they were raking in the profits. GM has the surge in SUV and truck sales to thank for that. Wait a second here, GM relying on a class of product, where does that sound familiar? Oh that is right, back in the 60ís and 70ís right before the fuel crisis hit when they relied on fuel guzzling muscle cars. GM was setting themselves up again for another crisis in the future for not paying attention to the rest of their lineup.
Cue 2005 and gas prices soaring past $3 a gallon and even approaching $4 in some areas. SUV and truck sales plummeted and GMís profits went down for the ride as well. Posting a staggering loss in 2005 which prompted doom articles being posted up all over the Internet in 2006. GM entered restructuring mode stat. But, wait a second! They based most of the plan off of the profits of their new GMT-900 based trucks and SUVís! Gas prices still looming in the $2 range and sales becoming stagnant in the segment if not dropping still. They also refused to enter into the hybrid market, but for PR sake, made the joke of a hybrid; the Silverado hybrid. Things did look up for GM in 2007 as they just renegotiated their UAW contracts and signs of the turnaround plan working started showing up. Also great news for enthusiasts, a huge array of RWD vehicles were planned including the return of the Camaro! The Impala, G6, DTS, Lucerne and possibly more products were all planned to go RWD! This would also make Pontiac into the performance brand it once was! BOOM! Congress now requiring a 35 MPG mandate by 2020. We enter the 1980ís again. GM panics and cancels EVERYTHING RWD except for the Camaro and DTS/Lucerne replacements. But, the DT7 didnít remain for much longer either. That was killed too which of course brought the Lucerne replacement down with it. Now in 2009 we have GM on the brink of bankruptcy. Only remaining alive due to federal loans. Which then they go further into 1980 hysteria and now killing Cadillacís revitalized image. We have the wonderful FWD Theta-Epsilon based SRX, Alpha is on hold, Escalade going to Lambda, and now an Epsilon II based DT7 is rumored to be green lighted any day now!
As highlighted in the previous paragraphs, GM has been unable to cope with any kind of crisis. Seeing how the government is too scared to require a total management change, if GM ever recovers from this situation there will be no guarantee GM will fix the mistakes that caused them to be in this situation and will not learn from the past. These events also has proven that GM is a reactive company that has the ability to gather intelligence on future market changes worse then the CIAís ability to gather security intelligence. It will be better for all of us to have GM fail and have the viable divisions to be spun off in hope they can develop the product necessary for them to survive. This will save us money in the future when a crisis arises again and GM canít cope with it and needs more federal money to keep them afloat when they refuse to be a proactive company.