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?
I would add as a reference book the one by Steve Ratner who was part of the government bailout review. Obviously, a self-serving account of what he and his bailout group did. I do believe it also shows the weakness of having people that really don’t understand automotive development timelines and how product is always important.
That sounds like a good book to add to my library. For those who are new to Indie Auto, a “Quotes” post isn’t a full-fledged article — it presents a quote from one person. Sometimes I offer some background and sometimes I just run the quote.
Regarding Rattner, it wouldn’t surprise me that he wasn’t able to get up to speed with all of the nuances of the auto industry. However, let’s remember why he was in his position — GM was in such deep financial trouble that it needed government help to survive.
Think about that for a moment: GM’s deep bench of automotive experts — the best that money could buy — got them in this mess. How could that possibly happen?
I do think that there is a valid argument to be made that GM’s crisis was inflicted upon them by a lack of liquidity in the financial markets. GM was undergoing a turnaround that was costing development money. 6 months prior there would not have been a problem securing the money but the financial markets had dried up at this point.
Ford only had survived because for their own problems, arguably worse than GM’s, had mortgaged everything they had including the Ford name to secure funding. But, that had been prior to the start of the crises when financing was available.
Not automotive but, I was with a person who told me how he/the family entity had been approached by Home Depot during that crisis time for a sale/leaseback of all their properties as a way to raise money at a time when everyone was scared about liquidity.
So you think Wagner’s turnaround strategy would have met the moment in the absence of a liquidity crisis?
As an aside, I found it interesting that Wagner would diss Mulally as a newbie when he at least managed to avoid having to ask the government for a bailout.
I recall reading that, even before the liquidity crisis, GM’s financial sheet was so dire that raising the necessary credit to finance a true turnaround would have been impossible. No lender was going to extend that amount of cash to GM.
The bitter truth is that GM was structured for an auto market that no longer existed. There was no need for a company to have five separate brands to cover the market. By the early 2000s, buyers age 40 and under no longer saw any meaningful distinctions between the GM brands (aside, perhaps, from Cadillac).
GM thus needed enough money to shutter divisions, pay off the associated dealers, shut down plants, and lay off both white-collar and blue-collar employees. Then it had to address the UAW contract that required laid-off union members to be paid indefinitely.
What financial institution was going to extend that level of credit to GM?
While Ford was in serious trouble, it was better situated. For example, it could at least delay phasing out Mercury.
This is an excellent site—I’ve been surfing here for way too long tonight! I wonder, too, if GM’s product mix was regularly wrong through the 1970s and into the 1990s. Much has been said about the “corporate” approach to the Vega or how similar the X-cars all were. But also look at the product cycles. The J-car started as a Honda Accord rival. Honda kept revising and upsizing the Accord every four years or so. GM kept the J-car going till it was no longer competitive. By the time the ’95s came around (on a related platform), the surviving Chevrolet Cavalier and Pontiac Sunfire were gunning after Honda Civics. They had moved a whole class down in 13 years. And we all know the saying: small cars mean small profits.
In Europe at least, GM recognized that by 1988, the J-car had to be replaced completely to stay competitive. That could have been a good opportunity to bring that platform Stateside as well. I always thought a four-light version of the Opel Vectra A could have been made into a decent compact Buick built in the US.
We can make similar arguments for the A-cars sticking around for as long as they did while buyers defected to Accords and Camrys. GM wasn’t alone though, as Ford let its Escort and Taurus get less competitive as the years wore on, too.
General Motors’ downfall to me could be summarised as “failure to adapt to the times whilst retaining the core values of a GM product”
1980s GM cars were/possessed:
– unattractive exterior styling, with an almost omnipresent vertical C-pillar that made it to Fortune magazine’s cover, plus dull side sculpting and massive overhangs compared to the wheelbase
– low quality looking interior plastics which to be fair followed the fashion of the time, that sort of sponge-looking dark grey plastic that made it even into European luxury cars (to be honest, even today most car interiors of most companies are a decisive step back compared to the mid 2000s)
– some drivetrains had choppy reliability
– general tendency to deliver underbaked cars and update them gradually, so that at the end of their run the cars had become relatively decent
In short, 1980’s GM cars had nothing of the cars that had made GM great until the late 1960s: GM was THE car company that first played with exterior styling and color and material combinations for their interior. Engineering wasn’t really important to the average GM buyer, engineering was functional to reliability, comfort, predictable handling and ease of maintenance. So the speak, GM’s engineering I would say “there had to be but would not look like it was there”. GM was no Saab or Citroën, whose sales did rely on showing their innovations.
The FWD cars that debuted 1985 through 1988 – C/H, E/K, and W bodies – were flops that appealed neither to younger buyers (who preferred Accords, Camrys, BMW 3 series, etc.) nor to the older buyers who purchased their popular predecessors. GM never recovered from the high development cost of these unsuccessful platforms.
There appears to be some restriction on the quantity of Replies to Replies. Maybe it is just that it does not become two individuals just going back and forth.
Steve says:
April 16, 2025 at 2:08 pm
So you think Wagner’s turnaround strategy would have met the moment in the absence of a liquidity crisis?
As an aside, I found it interesting that Wagner would diss Mulally as a newbie when he at least managed to avoid having to ask the government for a bailout.
My response:
The financial crisis is what brought GM to bankruptcy. None of us will ever know if the turnaround plan that was underway would have worked or not. With the financial crisis GM could not raise the money they needed and that would have been available to them. Ford really had more problems to solve but had lined up their financial package earlier. I have never viewed that as some better reading of the tea leaves by Ford, rather their problems were so bad in 2006 that they were lucky to have gotten their financing in place before the bottom fell out of the financial markets in 2008.
Alan Mulally was absolutely great for Ford. Although not from automotive he came from Boeing where long term planning of product was normal. He was an engineer with Boeing so had a grasp that one needs to solve the process from the start of a program. Ford would be in a far better position today if Bill Ford had not gotten pissed off with Mullaly wanting to listen to other CEO opportunities. So, Ford reverted to the regular C Suite shit storm that they historically are and remain still today.
I don’t remember Waggonner disparaging Mulally but don’t deny that it could have happened. I would doubt that he held that same opinion by the time Mulally had been running Ford for a year.