DealZone

GM, Rewind before hitting fast forward

June 1, 2009

A quarter century ago, when GM was first experimenting with Toyota-style lean manufacturing, then-GM board member Ross Perot famously complained that “Revitalizing GM is like teaching an elephant to tap dance.”

gm1Now it’s the Obama administration’s turn to call the tune for GM as it attempts to remake the 100-year-old company in a fast-track bankruptcy process it aims to complete by August.

The goal: $50 billion in taxpayer funding to turn around GM and not a dime more.

For that bold attempt to create a “new GM” through the courts to succeed it will require a sharp break with the “old GM” that Americans have known, loved and hated for the past century.

Since it began, GM has been about deals to create and preserve scale. Its most profitable and memorable vehicles have been about size, speed and excess.

Founded by William Durant in 1908, GM was conceived as a way to consolidate brands such as Buick, Oldsmobile, Cadillac.

Under the stewardship of pioneering chief executive Alfred Sloan, who pledged the automaker would deliver “a car for every purse and purpose,” GM rose to dominate the U.S. and global industry. It added Vauxhall (1925), Germany’s Adam Opel (1929) and Australia’s Holden (1931).

It also developed a strong central bureaucracy and financial staff that have continued to define GM and the glass-towered headquarters on Detroit’s riverfront that insiders jokingly call “the mother ship.”

By the time Sloan retired as chairman in 1956, GM had some 514,000 employees, more than the population of Nevada and Wyoming combined at the time. It accounted for about half of U.S. new car production.

A large part of the reason that GM is around today is that U.S. officials accepted the argument from former chief executive Rick Wagoner and others that a company indirectly responsible for about as many American retirees as the population of Atlanta was too big to fail.

It will take more than a smaller balance sheet for GM to transform itself into the lean and green car maker that its biggest investor is describing. It will take the recognition that big is no longer beautiful.

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