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How GM Lost Its Way - Timid management and coddled workers couldn't compete with Toyota.
Decades of dumb decisions helped send General Motors to a bankruptcy court yesterday, but one stands out.The year was 1998, and the United Auto Workers was striking at two factories in Flint, Mich., that made components critical to every GM assembly plant in the country. The union was defending production quotas that workers could fill in five or six hours, after which they would get overtime pay or just, you know, go home. Most strikes are forbidden during the life of a labor contract, so to provide legal cover the union started filing grievances. GM lawyers contended the walkouts violated the contract anyway and drafted a lawsuit -- the first by the company against the UAW in more than 60 years. But GM's labor-relations department freaked out because the lawsuit would antagonize the union.  Just think about that. The union had shut down virtually all of GM, costing the company and its shareholders billions of dollars, and yet the company's labor negotiators were afraid of giving offense. After heated internal arguments, the suit was filed and GM seemed on the verge of winning. But the company settled just before the judge ruled. UAW members marched victoriously through downtown Flint. GM executives who advocated a tougher stand got pushed out of the company. The picture of a heedless union and a feckless management says a lot about what went wrong at GM. There were many more mistakes, of course -- look-alike cars, lapses in quality, misguided acquisitions, and betting on big SUVs just before gas prices soared. They were all born of a uniquely insular corporate culture. The GM bailout probably will cost close to $100 billion, counting money from the governments of the U.S., Canada and Germany. On paper, the new company should emerge from Chapter 11 fully able to compete in the brutally competitive auto industry. Whether it will actually prosper is far less certain, but some things are beyond dispute. Bankruptcy didn't have to happen and the fact that it did happen is incredibly sad given GM's many contributions to American society and culture. General Motors invented the modern corporation by developing the concept of giving operating executives power and responsibility to run far-flung operations subject to central financial control. While Henry Ford invented mass manufacturing, GM's long-time president and chairman of the board, Alfred P. Sloan Jr., developed mass marketing: a "car for every purse and purpose," as he put it in the company's 1924 annual report. This meant a hierarchy of brands ranging from practical Chevrolets to prestigious Cadillacs. GM's industrial might helped win a world war and made America rich in its aftermath. For half a century, between the 1920s and the 1970s, GM seemed to have an instinctive feel for what Americans wanted before consumers themselves even knew it. Chrome, tail fins, muscle cars and even the first catalytic converters that let cars run on lead-free gasoline were developed at GM. But the company signed generous labor deals during the 1970s, including the right to retire after 30 years with full pension and benefits, partly because it believed the contracts would cripple its smaller competitors, Ford and Chrysler. Then along came Honda, Nissan and Toyota, which didn't have to deal with labor contracts at all. That was the beginning of the agonizing decline. This fate could have been avoided with better foresight and less hubris, but by 18 months ago bankruptcy was inevitable. GM's U.S. market share had declined to 22% from 52% in the early 1960s. There were too many brands, too much debt, a cumbersome union contract as big as a phone book, and an enormous dealer network built for the glory years of yesterday instead of the market share of today. Posted by: GolfBravoUSMC 2009-06-02 |
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