GM and the world we have lost
THE BANKRUPTCY of
The impact that GM's failure may have on the economy has been much discussed. But to understand the full significance and magnitude of GM's decline, one must appreciate the extent to which this now-crippled company once dominated the nation's economic landscape. GM occupies a unique place in modern American history. For that reason, its downfall is genuinely historic.
For much of its 101-year existence, General Motors has been synonymous with American prosperity. Generations of Americans have aspired to "See the U.S.A. in your Chevrolet." In the 1950s, Charles E. Wilson, the CEO of GM who was being vetted by a Senate committee for the position of secretary of defense, was asked if he could make a decision that benefited the US government but hurt General Motors. Wilson responded that he could not conceive of such a situation. "For years," he said, "I thought that what was good for our country was good for General Motors, and vice versa."
Wilson's assertion was not unreasonable given that GM was the iconic American company of the 20th century. Not only was it the centerpiece of the American economy, it was the model of American management, as well. This was the company that:
Beat the seemingly invincible Henry Ford in the auto business in the 1920s with a revolutionary strategy characterized by "a car for every purse and purpose" and the annual model change. These innovations transformed the way Americans bought and thought of their cars.
Managed to make money every year in the Great Depression, despite the fact that its industry virtually collapsed.
Became by the mid-1930s a wide-ranging economic colossus, producing not only cars but, as historian Sidney Fine has pointed out, commercial vehicles, trucks and trailers, parts and accessories, refrigeration, heating and air conditioning equipment, lighting equipment, household appliances, airplanes and aviation equipment, locomotives, and power plants. It also had substantial interests in real estate, finance, and insurance.
Supplied fully 10 percent of American war materiel during World War II.
Accounted for about 3 percent of the US gross domestic product during the mid-1950s.
Topped the Fortune 500 for 37 of the 54 years that survey has been taken. It ranked number one as late as 2000. As late as 2007, it ranked third, behind only
Was the biggest of the "big three" carmakers who for decades were the American auto market. In the mid-1950s, GM, Ford, and Chrysler accounted for more than 90 percent of the cars sold in the United States. Today, that figure (which now counts cars and light trucks) is below 50 percent.
What went wrong?
GM was afflicted by the same malady that has recently stricken the financial sector as well as many other companies. That is, the separation of top management from its customers, its shareholders, its workforce, the public, and reality. This divide is perhaps best symbolized by Rick Wagoner's recent use of a corporate jet to go to Washington to beg for money from the government. This disconnect runs deep at General Motors. Let's choose just one example.
Time magazine selected Harlow Curtice as its "Man of the Year" in 1955 for no other reason than that he was GM's CEO at the time. The magazine breathlessly described the platoons of subordinates at Curtice's beck and call, ready to order his drinks and fetch his newspapers; the limousines and chauffeurs standing by to whisk him wherever, whenever; and, yes, the private air force at his disposal - not just one plane, but 18, all painted red, white, and blue. "In many ways he lives a life that is beyond the comprehension of most of his car owners," Time wrote. The tone was fawning.
Today, we may finally be realizing that the separation of the corporate and financial oligarchy from the life of the normal citizen and the welfare of the American republic comes at a high price. In GM's case, this realization has dawned too late.
Even if it survives, GM will be a greatly diminished company. And there is no new sapling growing up to be the mighty oak that General Motors once was. These facts will further erode America's already besieged middle class, the country's lifeblood, and are likely to be felt for generations. This falling tree will make a loud noise indeed.
Richard S. Tedlow is a professor of business administration and David Ruben is a research associate at Harvard Business School. 