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    GM

    Uploaded by

    swarup30
    fadsfasd

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    © All Rights Reserved
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    of 8
    AND M It was the Great American Company when I started covering it three decades ago. But by clinging to the attributes that made it an icon, General Motors drove itself to ruin. 2 FORTUNE December, 2008 ‘than pay actention to the raute book. Polite and good-bumnored as usual, Wagoner mostly ignored my directions and followed the car in front of us: “Two hours later we found ourselves back atthe hotel, had been navigating from the ‘wrong map, and checarin front of us, driven bby Chinese journalists, wasjust as lst as we were, Lunch sold be delayed while we he edly made our way tothe track, meaning had effectively kidnapped the chaieman of General Motors for three hours. Sure, we ‘GM should have forgotten that and become mote like Toyoca Toyota's market cap isnow $103.6 billion; GM's i $1.8 billion. ve visited GM operations In Japan, China, Germany, Bravil, and Chile, not to mention the US, Tve attended auto shows, ical background ses predict launches, tc sions, and news conferences, in addition to interviewing legions of GM executives lysts, and constlsants, Looking back relatively recent events signaled the depth of the problems that have overwhelmed the vee to bean ald the wl tin by Wagoner’ at eae security decall, but ltzamatred bebt2 i Ask Diet Twas in the audience at GM's Tech Center respect distance and never stoppadtoask WY in Warren, Mich on the day in October ee Wagoner why yn stil bepelasanse What Iearned from the incident were. GM isn’t more son of the Pontise Aztek to the press for the several things. Fest, never underestimate the ability of s knoweitall journalist to gevit wrong, And second, 2t some point good man ners and civility become a lability rather ‘han an asset, After three decades of cover ing the auto industry, I've Tearned that Ford executives tend to be serappers skilled at bbaze-knuckle office politics, while the top brass at Chrysler traffic in bravado and cha- risma, Not at GM. Guys like Wagonerset the like Toyota, and he‘ tell you, “We're play- ing our own game—taking advantage first time, The company was positioning it asa lifestyle suppore vehicle” that was the “mnost versatile vebicle on the planet." With ur curiosity piqued, we watched drapes pulled off and the room went strangely silent, The Aztekbristled with gills, creases, roof racks, and plastic cladding—and that was the good news, A toxic mix of overreacha bby market research, compromises by mam facturing, and ponnd-foolish accounting by tone: smart, sneer, dligent—moderm ay finance had resulted ina vehicle that ap Eagle So of our own posed co pactlly no one, Within weeks unique heritage (i 4 ould be judges one oF the ut 17 ns WORKING for the largest company in the industry for 80 long they bee: Insular, selfeferential, and too swedded to the status quo- now, when GM is on the precipice. They prefer stability over conflict, continuity over disorder, and GM's way aver anybody lve’. They believe that hard work will ovexcome adversity, and ne comfortable rats that persist even row will be better than today—despite four decades ‘of evidence to the contrary. In many ways the story of General Motors since the 1960s is 2 tale of accelerating irrelevance. Customer preferences changed, competition tightened, echno! ‘ogy made big leaps, and GM was always driving a lap behind. became a red state company, its Buicks and Pontiacs seldom sen in California or New York City. GM bes beon losing market share in the U.S, since and geturning no share price appreciation to invastoss. I've had a chance to watch all this up close a8 a business journalist for the past 32 years, including 23 at Fortune, Or the years the company as tried ta reform itself any nurnber of times, but thas been doomed by what once made: Hong it the GM way. Ask Rick Wagoner why GM ist't more like Toyota, and he'd tell you, "We've playing our awn game—taking advantage of our own unique heritage and strengths.” Tras out .9608, destroying capital for years, (94 PORTUNE. Decor 200 and strengths.” cst ears of al time. Creating vehicles that people want to buy isthe most fundamental mission of any auto company, and CM had failed with the Aatek. Now it's September 2008, and I ly to Southe drive GM's new fuel-cell ar, called the Sequel, New government fuel-economyy stancacds and changing consumer preferences are ating demand for leaner whicles, CM wants leapfrog its Japanese competitors with fuel-cell cars Since the Sequel ist licensed for on-the-voad use, GM has rented the U.S. Marine Corps Camp Pendleton asa proving ground. Aside from some stalling problems caused by software glitches, the vehicle rans as promised, generating electricity from the fue eel and pro- ducing only water droplets as exhaust. A GM executive calls “ame changer.” We are told GM will have a prodhetion-ready fuel-cell vehicle by 2010. 1s GM realy to become « technology leader again? Js different research road. In Detzoit another group of executives unveils plans fora ph and it also will be ready for market in 200. A GM executive ae months later GM announces itis heading down & n electric car called the Chevy Volt, calls ita "game changer,” and nobody mentions fuel ceils. Has the furare suddenly dimmed for fuel cells? Or have they arosven ssocrars Oietper Thr allen victim to some corporate infighting? GM isn't saying, i's biggest carmaker, st ightly 10 -anomay standards, suddenly changing Hore isthe na neet tough new fuel strategy without warning, What's remarkable about itis that paritex wasnt much of a car guy, but he considered himself a shrewd shopper and always looked for the est deal. In the sum rer of 2952, Twas sitting on the frome step four home in Byram, Conn., when a new ‘Chevrolet Deluxe two-door was delivered. Price: $1,696, The Taylor family turued oat not: be loyal GM custoraers. My fathec mover on to Fords, a Plymouth, and then, as my sb and I reached driving age, a hodgepadge of used European and deus. But che idea imports that would be rt by ofa big, powerful General Motors resonated in my unformed mind. A couple of yeats later Time named GMs president, Haslow Curtice, man of the year, Time described Curtice as First among equals,” a businessman “whose skill, dating, and foresight are forever opening new frontiers for the expanding ie, “General Mo- Curtice wold American econom a people that wanted to toes must always lead." [started tellin be the chairman of Geneeal Motors when I grew up. After getting out of college and journalism schoel, hawever, Accided te bea network TV correspondent. So wert vo works a reporter ata Time-Life television station in Grand Rapids. Like the estof wer Michigan, Grand Raps pte, home ra three big GM parts plants, One gloomy afternoon ‘smallish man in a gray suit named Richard Gerstenberg came to town to hold a news conference, He was next ia line the largest corporation in the world. GM sold halE the ears in the US., and by tell, the Chevrolet division was larger than most standalone auto companies. Everybody knew the slogan “See the USA, in your Chevrolet. ssparcof the GM em: GERSTENBERG WAS THE QUINTESSENTIAL GM MAN. A graduate of the University of Michigan and an accountant by training, he got his frst job at GM Keeping track of employee timecards and worked his way up froma there, After he retired as chairman and CEO in November 1974, he zernained on the board of directors until May 1980. He was part of a system that perpetuated the antometive enterprise but did not adit much Jn the way of ech alr, "We have the best people in this or any i tai, ae UVELUE aenasy Hung it Oa Ta Hane cncenei Devembers, 2008 FORTUNE 95 indastry.” Gerstenberg told a group of em ployees in November 1972, “Lalways feel a special persona! pride, a General Motors ore, because Tam one ‘Motors man.” Years later I saw Gessten bergagainata GM event in New York City By then Bo years old, he shyly incroduced himselEtoa current GM executive in atten ance, Though tila GM man, Gerstenberg, seemed she the corporate apparatus behind him. Mere man and CEO, ‘were nothing compared with the might of ‘Abuiomensie eal fyou—a General $6.tion and insignificant without men, even a former chai ‘he company s In 1970, I witnessed my first strike agninst GM by the United Auto Workers It lasted 67 days, triggering layoffs at parts suppliers and steel companies, and damp “339 ‘ening economic growth nationwide. The UAW deployed a massive army back then Some 400,000 union workers walked (of theie jobs; one historian described it LOST CAUSE nef camgwns foe theca of eco GAP ce 000 ‘GMs econamic value addled” wide reached an astonish 1980—but cracks were appearing that would siden into fissures. The com: pany seemed to forget how to execute. I 53,000 in started to downsize its mode! ine after the 1973 oll embargo and change over to front-wheel drive, but it encountered all kinds of engineering problems. The small Chevy Vega was prone to overheating that swanped the cylinders in its aluminum en+ 1e black. GM introduced diesel engines that couldn't withstand the higher tem: peratures needed to buzn diesel foel. To among its brands, blurring their distinc tiveness, A shortage of V- engines caused GM to install Chevrolet engines in mid priced Ponsiaes, Okdsmnobiles, and Buicks. Complaints cxescendoed in 198 with the arrival af the Cadillac Cimarron, wich customers quickly discovered was little siis more than a Chevy Citation wearing the as “titanic clash between two massive Cadillac ees permanent entities" The union won this 887 Since Roger Mudd was in no danger «lash, as itwon most, because GMs high rnogprtcternee from my eareer in TV news, Istarted to fixed costs made the company especially ened freelance in print and landed a job in 1977 vulnerable toa production shutdown. The new contract was a sweet one: no cap on ccostofliving adjustments to wages, full retirement after 30 years regardless of age, and increases in already lavish health-care benefits, Detroiters referred to the ‘company as "Generous Motors.” The cost of those benefits ‘would bedevil GM for the next 35 years. But they didn't buy ‘union peace. Rancoroas relations and periodic strikes remained a fact of life at GM, GM was still growing—the number of employees woeld- 96 FORTUNE December 2008 ‘on the Detroit Free Press, a morning paper ‘then the sisth-largest in he U.S, with 2 daily circulation of 620,961, Detroit had been badly scarred by race riats in 1968 and the recession of 1973. and white residents were fleeing the city, but it was stl 1 great news fown, and we fought every day against the ate Detroit News, Asa business reporter, I worked alongside ftuce stars like Forrune’s Allan Sloan and began toinhale the auto industry on a daily basis. Henry Ford II was king of De troit, making news whenever he appeared in public. He fired ord president Lee Zacocca in 1978 with the dont like you Jandled at Chrysler in amsatterof weeks and npaign for the first for an auto Famous line, “ju Iacocca ‘wont on to lead its success a goverment bailey company—a year later everything, and rebellion was frowned on. I encountered former GM DeLorean i ecutive Jon 2, after abook appeared that he had co authored aa then disowned before publication, Flamboyant by Midwest standards with sidebuens, tur Uenecks, and flashy girlfriends, DeLorean gained renown developing muscle cats like the Pontiac GLO. He also took an adoles- en's delight in flouting GM's rules and was pushed out of the company in 1972, Seven years late he'd lost none of his desive for attention —a poster size picture of hima shit: Tess with his young son hung in his New York office—but nothing else about him seemed oot of the ordinary, He certatnly faded af ter he lef: CM. His sports car company ol lapsed in a swamp of recriminations, and he was arsested in 1982 for drug trafficking (he was acquitted of those charges). The last ‘ona bench i tome I saw him, he was siting New York's Central Pazk, seemingly in no lidne seem like much ofa revolutionary to me, bait at GM they've never forgotten hit, hurry ta be anywhere particular H modernize the company, but his reorganiza- tion left it so traumatized that subsequent bosses were reluctant totake more bold steps. mn 1g, Hefe Deteit for New York City and a plam ob vrting forthe business pages o 1 Under the newsmagazine syste | depended on our focal correspondents to report on the indus try. ] would still yo back to Deteoit on special assignments and tovisit my indaws. (My wife, Mary, grew up inthe vty, and we ‘married in 1983, Roth Ler father and her sister worked for GM.) By then GM had found a chief excentive who actually understood t roblems and was willing to try anything In order to fix them. Asa candid internal review of the company, published by the General Motors History Project, points ‘out, GM was still making decisions undes the same basic structure that had been put in place 50 years earlier, and it was falling behind. Chairman and CEO Roger Smith, having risen through the ranks, krew that better than anyone, twas easy ta cari Smith, finance specialist, as a corepany apparatchik—and an annoying one atcha company's stroyed the informal networks th: with his squeaky voice and pushy manner, ‘When I intorviewed Smith, he was always approachable and agreeable, though people who worked for him considered him tyrant, demanding and intolerant of dis senting ideas. lot of them chuckled at the 1989 movie Roger and Me, in which Michael Moore made vicious fun of the company’s avails. But Smith was big thinker, and he understood that GM had become toa con plex and slove moving for ts own good, Smith kept us reporters on our toes. He was fll oF in the status quo at CA ‘hought out, and athers were badly imple- ‘mented. To make GM mare corapnter-savvy, Smith bought EDS and got its founder, Ross Perot, on hisboaud of dixectors; Pert heckled Smith constantly until Smith perssaded him to leave. Smith conceived the Saturn divi sion as amoon-shor effort to find a revolt tionary way of making and selling cars, but Saturn turned out to be short of new ideas and nevor gotaizborne. Stith spes billions toautomate GMs factories with robots Us ally robots permit a car company to produce several diferent madelsin a factory. ButGM, ‘wanting to keep thin, nfigured ats plants to produce just axe or two mod: ‘els—and ended up with a syst no more efficient than the old one, Smith ee arranged North American operations to rnod cemlze GM's manufacturing, and paralyzed ‘the company for 18 months hecause he de- .ctnally got the works ative ideas for upending |b some were badly that wae done in the highly buxeaucratized company. The notorious “seorg” so traumatized fuse CEOs that they ne tempted a Sonith's again at *hingso radical vorst mistake was in not grooming a broad gauged manager to succeed him when he reticed in 1990. Instead the job went to Robert Stempel, 2 well-liked engt neer wha came in ata ad tle, Market share had declined precipitously under Smith, fall- ing from 43.5% to 35.5%, and the recession oF 1990-92 ravaged the company, leading 1 massive plant closures and layofls. The pes sre on Stempel was enormous, ard he dint handle it well. Stempel’ face would turn red when he got angry, and he visibly worked te ‘control himselé. Iwas the target of bs pent up rage on several occasions. Once I was forced tositand listen while he read one of may ticles aloud, coreecting me on every point with ‘which he disagreed, Dererber 2008 FORTUNE 97 Under 8 CEOs as well, GM was in perpetual ture around. Time after time it promised that it brad finally learned how to make cars that people really wanted to buy and would have thein at dealers soon. One critic called ithe ‘mafiane corapany.” Trouble is, even whea ith and Stempel, and future GM got the newest 2s of its productline to be competitive, the remaining 75% had to be disposed of at fire-sale prices. At a Chicago 8 top executive ordered the lights dimmed so that he could dazzle the audience with im ages of a seemingly crdless sunvher af new Baicks, Oldsmobiles, and Chevroets.Iewas a challenge just wo stay awake By the end of 1992, Stempel and his cadre of executives were gore. pushed out ‘bya boaud of directors revolt led by reticed Procter & Gamble CEO John Smale and board counsel [ra Milstein, Moving to head ‘the eounpanyy came an all new team lee by an ‘other Gnance guy named Seth, but one who understood foreign competitors like Toyota, baad worked sucessfully abroad, and wast't afraid of independent thinking Jack Smith avoided the media at frst, but ‘once he began giving interviews he became favorite of many reporters, we included. He displayed not ascirilla oFambition ar eyo, and his relentless common sense, combined with svryhumoe, won me over That adwsiration fed toa Ferre cover story in 1994 proclairning Smith «genius ina gray suit and GM on the road to recovery, nmeciately,a nasty and expensive strike broke putin Flint, ard the new GAL began to look more like the old one again, twouldn'tbe thelast time Tallowed my personal viewofa ops. xs by bis count, forinstance, there were 27 separate purcbasing organizations that chief cxecutive to color my assessment of ac GM was still Balkaniized when Smith took entually had to be consolidated inco one. Smith lol started palling the unitstogether so that GM conld deploy its vast economies of scale. The prosperity of the ‘gos helped keep GM solidly profitable until the end the decade although it never reachod Smith's target of $8 net profi: mangin. He also kept shrinking the company (helped greatly by the spinoff of the Delphi garts making unit), Total employment, which stood at 73 Smith took over, had fallen to 388,000 by the time he left office, But Smiths elfin charm ‘wasnt enough rostop warring factions among, engineering, manufacturing, and design from 8 FORTUNE Decerhors, 2008 Smeuitia shrank the company, but not fast enough to save it. He couldn't bring himself to discontinue such underper- forming brands as Buick and Pontiac. ‘undermining one another’ work. And Smith failed to address such looming problems as ‘why GM stil hae divisions ike Pontiac, Bick, and Oldsmobile. With its market share down 10 30% and falling, it didn't need all those Drands, and ersu distinctive remained a constant headache. “The probletn of "lookalike car revealed in that each made] was. ‘me:morable 1985 Fortune cover photograph, continued to bedevil GM. SMITH’S MOST SURPRISING FLAW was his infatuation with Inaki Lopez, a Basque: hhad worked in Europe. Smith moved Lo- pez to Detroit and made him global head. ‘of purchasing so that Lopez could install his proprietary system to slash parts costs, Lopes was unquestionably energetic and, some would say, charismatic, but his sys term sounded like sinoke and mirrors when ne explained it to me. Suppliers suspected Lopes: of simply shopping their price quotes around town to find lowes ones—a viola industry etbies. When Volkswagen tried to jute Lopez away, Smith made him head of GM's North American operations and called a news conference to announce his appointment. But Lopez never showed ups he hopped a plane to VW headgu: ith, ast earned ont, alt of informa ala tion about future CM vehicles. CM pursued him with a criminal complaint and event: ally reached a legal settlement with hin uith seemed ited and ready to move on in 2000 when be handed the company over to Rick Wagoner, his longtime pro: tég6. Thad mot Wagoner back in the late 1980s when he worked vith Smith at GM Europ raised in Richmond and educated at Duke. Te spent more hours ‘wth hito chan with ll hs predecessors combined, and Tye never '8 Southern goatleman, Wagoner was failed tobe impressed by his éepth and scope. Early on Wagoner could be testy when con ‘ontee! with bad news—he once accused me ofboing "thiceheaded"and I stil recognize ‘the glances he shoots when confronted with particularly thiekcheaded guestions. Under ‘the tutelage of public relations guru Steve Farris, however, Wagoner has lea eatient, even playful, with the pres. At the turn of the millennium GM was a ned to be seronger company than it had been ten years cares, but itwas til chim, Initially slow to capitalize on the SUV boom, it was churning ‘out Tahoes and Suborbans at cleificient ‘SUVs called crossovers, and once again, CM lagged the indastry leaders. Though Wagener quickly shut desen Oldsmobile, GM stil lacked the capital to keep Saturn, Pontise, and Buick uppermost jn consumers’ minds. Cost cutting proceeded ata brsk pace, But now the market was turning to lighter, more bat not quickly enough to offset the pressure on prices breght by foreign compet tors, And US. market share continued its relentless dlecling, down to 22% this year. Investors voted with, ‘their dollars. In Wagoner’s first year, GM stock hit a high of $75.75 and went ‘dasea from there ‘Tall, broad shouldered, and steeped in GM lore, Wagoner still seemed a

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