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|12-30-2007, 02:36 PM||#1|
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100 YEARS: GOING FORWARD
GM centennial to embrace future as it salutes past
December 30, 2007
BY KATIE MERX
FREE PRESS BUSINESS WRITER
As General Motors Corp. begins the celebration of its 100th year this week, the automaker hopes to focus on the technological and business promise of its next century as much as it commemorates its storied history.
GM has been a large force in shaping the American automobile and global commerce, and its executives today have their sights set on making vehicles that redefine personal transportation for the next century.
They've already promised to sell the first mass-produced, long-range electric vehicle. And next week, Chairman and Chief Executive Officer Rick Wagoner will address the Consumer Electronics Show in Las Vegas to share the automaker's vision of the vehicle of the near future as a safer, more fuel-efficient transportation appliance.
"The company has had a huge impact on the industry, a lot of industry firsts, so we're looking forward to the next hundred years to try to do some more of that -- same things in a very different context," Wagoner told the Free Press recently. "A lot of the first century was about the U.S. and developed markets. The way it looks right now, it's really going to be a very different geography for our business as we go forward."
GM continues to strive for the proper balance of innovation, growth and financial soundness -- much as its leaders have for the past 100 years.
"We have had periods where we've done a better or not-as-good job in pushing design and in pushing technology," Wagoner said, "but I do think it's a critical part of our culture."
And it's a part he said GM plans to celebrate in 2008, its centennial year.
GM is keeping specific plans for its celebration, GMnext, under wraps until Thursday.
"I hope GM really celebrates it," said Ford Motor Co. Chairman Bill Ford, whose company marked its 100th anniversary in 2003. "GM has had so many larger-than-life personalities through the years. I think it's great that those people will be brought to light for the current generation.
"They've had an enormous impact on the industry and they've had some amazing talents there -- the Harley Earls of the world -- who did some groundbreaking work."
In the beginning
On Sept. 16, 1908, William (Billy) Durant, owner of Flint's Buick Motor Co., founded GM with the vision of consolidating some of the early U.S. auto industry's brands into one controlling company, just as he had done in the carriage business.
In a little more than a year, he added Oldsmobile, Cadillac, AC Spark Plug, the Oakland Motor Car Co. (which later became the Pontiac brand) and the Rapid Motor Vehicle Co. (now known as GMC).
While Henry Ford gets credit for standardizing assembly-line production of automobiles, Durant -- a high school dropout -- largely gets credit for how America sells them: by giving consumers an array of brands, models and colors from which to choose.
His strategy was bold, but it did not succeed at first.
Within two years of its formation, GM faced bankruptcy. Durant was ousted as part of a deal in which bankers took control in exchange for bailing out the automaker.
On his own again, Durant started Chevrolet and had a hit that could compete with Ford's Model T, giving him the means to buy up GM stock certificates by the bushel basket. By 1915, Durant surprised the board at its annual meeting with the announcement that he had accumulated a controlling interest in the automaker once again.
But his autocratic style drove away key managerial talents, such as Henry Leland and Walter Chrysler. (He did, however, hire Alfred Sloan, who would soon become CEO, and Charles Kettering, who would become the automaker's first director of research.)
Durant's personal stock purchases nearly led to GM's demise for a second time in 10 years. Upon the insistence of the automaker's bankers, he again resigned as GM's president Nov. 30, 1920.
Sloan took over as president and CEO in 1923, adding the title of chairman in 1937, and remained at GM until 1956. He has since been credited with leading the corporation through some of its most dominant days and establishing many of the tenets of finance and management that became corporate standards.
He set up each brand or division to operate autonomously, competing for corporate funding and other support. He employed armies of accountants to analyze costs and profits -- generating reams of information. And his strategy of arranging brands in stair-step fashion from Chevrolet to Pontiac to Oldsmobile to Buick to Cadillac gave form to his concept of "a car for every purse and purpose."
Some call Sloan the grandfather of the U.S. corporate bureaucracy, but author David Farber, who wrote the book "Sloan Rules," said he was even more: the first celebrity CEO.
"Through marketplace performance and a relentless public campaign, he convinced Americans that the business corporation was the beating heart of the nation's political, cultural and economic life and that men like him were indispensable to the nation's security and prosperity," Farber said in a 2002 interview with the University of Chicago Press.
Although Sloan admired risk takers, GM still coddled people averse to risk, Farber said.
"GM's problem was -- and is -- that they had a hard time turning on a dime," Farber said in the interview. "GM has gone through periods during which its leadership placed way too much emphasis on business as usual. Sloan, at least during his most successful years at GM, knew that the company had to be willing to shake up the car market. He hired the legendary Harley Earl to do just that."
Farber said Wagoner's hiring of veteran car guy Bob Lutz in 2001 was a similar move.
Credited with establishing the automotive design profession, Earl was first commissioned to design the 1927 Cadillac LaSalle. The vehicle was a hit, with curves rather than corners and a long, low stance that set it apart from the upright Model T.
The success persuaded Sloan to hire Earl as the automaker's first vice president of design. Earl stayed for 31 years, approving the first use of tailfins on an automobile in 1948 and introducing the Corvette in 1953.
During the same era, GM broke ground around the world, buying or establishing operations in Germany, India, China, Brazil and Mexico; lost its battle to keep out the newly formed UAW in the 1936-37 sit-down strike in Flint; and in the late 1930s and early 1940s supported the World War II effort. By 1942, the automaker converted 100% of its operations to military production.
What's good for GM
By the time the war was over, GM had returned to automaking -- and it dominated the industry in those boom years.
In the 1950s, GM introduced important breakthroughs, including automatic transmissions, power steering, power brakes and fuel-injected engines as it rolled out exciting cars, like the first Corvettes and Bel Airs.
GM was synonymous with American power, for better or worse.
During Senate hearings that confirmed him as secretary of defense, GM President Charles E. Wilson was bombarded with questions about conflicts of interest and his unwillingness to sell his GM stock.
"For years I thought that what was good for our country was good for General Motors, and vice versa," he said. "... Our company is too big. It goes with the welfare of the country." (He was forced to sell his stock.)
In the '60s, GM responded to Ford's Mustang with its own pony cars: the Chevy Camaro and Pontiac Firebird.
Enter the world
But by the 1970s, the seeds of change began to take hold.
A 67-day national UAW strike, an oil embargo and stricter emission rules took their toll on the U.S. auto industry. The energy crisis pushed many Americans to smaller, more fuel-efficient foreign cars, prompting GM to institute massive layoffs.
And the start of the 1980s was equally inauspicious, with GM reporting its first annual loss since 1921.
That was followed by extensive plant closings in places like Flint, Detroit and Lansing, wiping out tens of thousands of jobs.
Flint -- the birthplace of GM, Buick and the UAW -- lost more than 30,000 GM jobs during the 1980s and 1990s, a story chronicled in Flint native Michael Moore's 1989 movie "Roger & Me," a polemic against GM Chairman Roger Smith.
Smith, a controversial figure who died last month, was lauded for his views on globalization and acceptance of technological innovation even as he was criticized for presiding over a decade defined by poor quality, an inability to compete with foreign brands and massive job cuts and plant closings.
During Smith's tenure, GM committed to establishing the Saturn brand and formed a joint venture with Japan-based Toyota Motor Corp. in California.
But it also purchased Hughes Aircraft Corp. and Ross Perot's Electronic Data Systems. The efforts earned mixed reviews. GM failed to integrate the purchases, but they resulted in the development of OnStar and earned profits for GM when it sold them.
Cars vs. finance ... again
Following Smith's tumultuous administration and criticism that the automaker had worked on everything except building great cars, GM's board handed the reins to car guy Robert Stempel in 1990. But he failed to impress directors more concerned with GM's deteriorating financial performance in North America, and when those directors voted against management, GM named financial executive John F. (Jack) Smith Jr. to the posts of president and CEO in 1992.
And many of GM's trends continued: shrinking at home and growing abroad.
Under Jack Smith (no relation to Roger), GM shuttered the massive Buick City complex in Flint and killed the Oldsmobile brand. In 1998, GM suffered through a 54-day strike at two parts plants that stopped GM production nationwide and cost the company $2 billion.
At the same time, Smith pushed GM's global alliance strategy: linking up with Suzuki, Isuzu and the company that makes Subarus.
As power shifted -- more gracefully this time -- to protégé G. Richard Wagoner Jr., GM went on to buy the bulk of South Korea-based Daewoo Motor Co.'s automotive assets. The low price paid -- a fraction of what was expected -- and GM's ensuing ability to make decent, low-priced cars that could compete in developing economies won the automaker kudos.
And GM's continuing growth in China made it the biggest foreign automaker there. It has generated steady, if modest, profits in China.
But growing buyer incentives in the U.S. market ate away at profits, and GM has repeatedly stumbled financially. It lost $10.4 billion in 2005 and $39 billion in the third quarter of 2007, the latter because of a write-down required by accounting rules.
In between, GM's stock was near a 24-year low, Wagoner's job was said to be at risk, and Fortune magazine speculated on the likelihood of bankruptcy.
Billionaire shareholder Kirk Kerkorian took advantage of the lower stock price to increase his stake and attempted to broker an alliance with Renault-Nissan. His effort failed, though, and GM went on with its North American restructuring, again trying to get its business at home to the right size for customer demand.
This year, the automaker ushered out 34,410 hourly workers through a buyout and retirement plan; sold a majority stake in its finance arm GMAC for about $13 billion; wowed the world with the promise of a range-extended electric car, like the Chevrolet Volt concept, by 2010; and endured a two-day strike by the UAW in forging a landmark labor contract that is expected to significantly cut labor costs for the long term and eliminate tens of billions of dollars in future retiree health care costs.
Heading into its second century, GM is still losing market share at home, its stock price is perilously low and management can't reliably promise profits.
And yet it is widely seen as the strongest of Detroit's automakers.
It has award-winning crossover vehicles and sedans to complement its pickups, SUVs and Corvette. Chevrolet is the nation's best-selling brand. And GM is selling more vehicles overseas than at home as it stretches the Chevy bow tie across China, India, Europe and elsewhere.
"We'll be 100 years young and setting ourselves up for the next 100 years in some pretty impressive ways," said Larry Burns, whose job as vice president of research & development and strategic planning is geared toward planning for that future. "Would we like to have had the last 20 years to have played out differently? For sure we would, but nevertheless we're still hanging in there. ... And we're really excited about the future."
"Keep the faith." - - Read Before You Post.
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