By on November 5, 2008

In 1955, GM company reps testified at the Senate Committee on the Judiciary. The Subcommittee on Antitrust and Monopoly was unhappy that The General’s five auto divisions accounted for 50.76 percent of all cars sold in the U.S. (peaking at 55 percent in 1956). The same year, GM CEO Harlow Curtice was named Time magazine’s “Person of the Year.” “Because of the success of the American economic system, the U.S. rolled through 1955 in two-toned splendor to an all time crest of prosperity, heralded around the world. Much of this prosperity was directly attributable to the manufacture and sale of that quintessential American product, the automobile. Some 8,000,000 of them were produced and sold, and a good half of them were made and marketed by General Motors under the direction of President Harlow Herbert Curtice—the Man of the Year. Yet this production alone would not make Harlow Herbert Curtice, 62, the Man of the Year. Nor would the fact that he is president of the world’s biggest manufacturing corporation—and the first president of a corporation—and the first president of a corporation to make more than $1 billion in net profits in a year. Curtice is not the Man of 1955 because these phenomenal figures measure him off as first among scores of equals whose skill, daring and foresight are forever opening new frontiers for the expanding American economy by granting millions to colleges, making new toasters that pop up twice as fast, or planning satellites to circle the earth. Harlow Curtice is the Man of 1955 because, in a job that required it, he has assumed the responsibility of leadership for American business. In his words ‘General Motors must always lead.'”

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20 Comments on “Ask the Best and Brightest: Where Would GM be Today if the Feds Had Broken-Up The Company?...”

  • avatar

    Depends on how the feds wanted to break up GM, I suppose. Oldsmobile might be around, Saturn may not exist, and Buick isn’t synonymous with geriatric rental cars. That’s all I can think of for now.

  • avatar

    Actually, GM’s individual units, or Baby Motors if you will, would each focus on a specific region of the auto market. Eventually, they would begin to merge with each other in order to better compete with Ford. After some years, there would only be two of these “Baby Motors” left. At this time, there would be many more competitors (Toyota, Honda, Nissan), and the regulators would no longer fear a GM monopoly. This would allow one BM to buy another BM, and retake the name, GM. (See the break-up and re-formation of AT&T for my inspiration)

  • avatar

    Now that Obama has won and all the allegations of socialism are irrelevant, if I were him I’d have my cake and eat it too by meeting with heads of GM, Chrysler and Ford.

    I’d give them their bailout if and only if they agreed to the same rules applied to banks we bailed out, and if they met my standards where I would let them know that:

    #1 I’d make business for them easier by giving them tax incentives and help creating jobs for AMERICANS by building factories IN AMERICA.

    #2 These factories are to produce cars that DO NOT USE FOSSIL FUELS. The Chevy Volt for example and whatever electric/fuel cell cars Chrysler and Ford have on the drawing boards would be the start of production, followed by more models later on.

    #3 As president I’d be working out deals to create jobs for infrastructure repair. This would give out of work licensed and unlicensed construction workers employment.

    And yes, the government would subsidize some of it if neccessary.

    You can call my views socialist but my bottom line is getting America back to work and producing again. Through a green, fuel efficient infrastructure we csn create jobs, boost the economy and improve national morale.

  • avatar

    My guess is that they would be exactly where they are now.

    For historical perspective we can look at the breakup of AT&T. Over the years all of the baby bells merged together, and eventually merged back with AT&T.

    As the market shares for the various GM divisions shrunk they would have merged back together (their mergers would gain approval because of their smaller market share) and ended up where they started.

  • avatar

    The most plausible scenario would have been a break-up with Chevrolet and GMC on one side, and the rest of the brands on the other. Chevrolet would be a a market leader in cheap cars and trucks, on sheer volume alone. Oldsmobile, Pontiac, Buick and Cadillac would diversify, and through platform sharing become a player in the niche markets, sans trucks. Perhaps they would have picked up International in the 60’s, to create the first luxury SUV craze? A sort of sixities PAG-group.

    Or something similar to what William Lyons opposed to when approached by Rover-Triumph to create a similar company, before Jaguar was swallowed up by BMC, and BMC merged with Rover-Triumph and Leyland, to become British Leyland. In that case, Triumph, Rover, Jaguar and Daimler would have been a similar upper middle class niche group as Oldsmobile, Pontiac, Buick and Cadillac would have been in the states. Perhaps they could have created or resurrected a cheap brand of cars below Oldsmobile to replace Chevrolet, but they would not have made the volumes Chevrolet made.

    Chevrolet/GMC would have been pretty much as it is today, with some lesser platforms to play with, and the others, in a best case scenario would have been the Volvo/Jaguar/Land Rover of today, or in a worst case scenario, gone like Rambler.

    Or something like that…

  • avatar

    Oops, I just restated BlueEr03’s comment.

  • avatar

    Weren’t there also antitrust rumblings around 1972 to split Chevrolet off from the rest of GM?

  • avatar

    As my father was a Chevrolet dealer back then (1950-1965), I can remember the talk around the dinner table about that subject. Dad, of course, was totally against the idea – why mess with success?

    The most logical scenario at that time was to separate Chevrolet and Buick from Pontiac, Oldsmobile, Cadillac and GMC. This would have given two roughly equal companies, at least in market penetration. Chevrolet’s sales (which were fully half of GM’s profit by themselves) would have made up somewhat for the lack of a middle car to match the gap with Buick.

    At that time, remember that the price and model differences beween the five marques had very little overlap. In the late 50’s/early 60’s a top of the line Chevrolet Impala cost the same as a bottom of the line Pontiac Catalina – except that the Catalina had an interior that equaled the Chevy Bel Air, one model down. To get an Impala quality interior, you had to go up one model in the Pontiac (can’t remember the model name) and then it was still a one model jump to the top of the line Bonneville . . . . . which sold for about the same as an Oldsmobile 88.

  • avatar
    Dr Lemming

    That’s a really interesting question because it gets to the heart of what I would argue has been the main driver behind “Grosse Point myopia” — the relative lack of real competition among the American automakers during the 1950s, 60s and 70s. Those decades established the dysfunctional behavior patterns that Detroit has never been able to fully transcend.

    Government action is, at best, a blunt instrument. It can also have unintended consequences. Thus, the success of a GM break up would have depended significantly upon the details of how Uncle Sam did the deed. Timing also mattered, e.g., if a break up was implemented in 1957 that would have made a much bigger difference than if legal foot dragging had delayed implementation for a decade.

    That said, breaking up GM into two companies would have doubled the potential for innovation among staff released from the stasis of a rather large and monolithic bureaucracy. In addition — and this may be even more important — these two companies would have been mere peers with Ford and Chrysler rather than THE dominating presence in the industry through the mid-80s. To a striking degree, GM made the rules that the rest of the American automakers followed. And if GM suffered from a lack of vision, that by and large set the standard.

    In other words, if GM had been broken up, the American auto industry might have taken a step back to the more robust competition of the 1930s or even the early post-war period, when the likes of Studebaker, Hudson, Nash, Kaiser offered a healthier diversity of approaches. I don’t think it is any accident that foreign automakers became a major presence in the US only after domestic competition had drastically shrunken. Nature abhors a vacuum.

    As for the baby GMs, their status today would have depended largely upon their quality of management. Either could have succumbed much more quickly to Chrysler-style crises than an unmolested GM. The smaller the company, the more quickly cause and effect would have played out.

    Both baby GMs would likely have paid significant homage to their Alfred Sloan genes, e.g., an emphasis on big, stylish and powerful vehicles hawked through multiple dealer channels, a hierarchy of brands and Hollywood-style marketing. Key phrase: More is ALWAYS better! By the luck of the draw, whichever baby GM got big trucks might have benefited by the SUV era, but it also might have taken a bigger hit when the market crashed.

    Of course, meaningful antitrust actions were politically impossible. GM was so powerful that it was able to squelch all but some minor tinkering around its margins. See, this is because what’s good for GM is good for America.

  • avatar
    Robert Schwartz

    GM was far better off back in the 50s when the divisions were run as separate companies than it was after Roger Smith laid waste to the divisional structure. My guess is that a more competitive domestic industry would have maintained more dynamic companies and would not be in nearly the trouble that it is now in.

  • avatar

    The more interesting question is where would GM be if the threat hadn’t been there that the feds would break off Chevy from the rest.

    Remember, at that time, Chevy was the car that fed people into the GM trade-up brand hierarchy. So, breaking off Chevy would have hurt the company where it would hurt most.

    So, the company made sure it never got more than 50% of the market and made its profit by making cars with cheaper materials rather than by making more cars.

    It is that stupid federal government policy that allowed foreign competition to get its toehold and then increase it to a foothold, and then to more and more of the market.

    If there were real justice, those lawyers at the Justice Department would be paying now all of those GM shareholders who are losing all.

    So, yes, we can thank the government for making the auto industry all that it is today.

  • avatar

    Actually the proposed split as I remember it would have potentially worked. Pontiac could have easily dropped back to take the low price division.

    Buick handling the Cadillac/Lincoln/Imperial competition wouldn’t have been that much of a stretch, either. Just before WWII, Buick got cut back slightly as it’s top of the line Roadmasters were going well within Cadillac territory, not just nibbling at the bottom.

    Something might have had to be developed to add a middle line, however.

    Then again, my dad wasn’t dumb. He didn’t have any more faith in the federal government telling business what to do, than we do today.

  • avatar
    John Horner

    I can only think of a few historical precedents to look at: The breakup of Standard Oil and the later dismantling of AT&T.

    Standard Oil was broken up into companies which evolved into Chevron, Mobil, Exxon, Sohio & Amoco. Over time, the oil industry has re-consolidated. It is likely that the Standard Oil breakup probably resulted in lower prices and more agressive competition in the industry in the period from 1911 when the Supreme Court forced the breakup until recent times when the feds have seemingly encouraged industry re-consolidation. In the oil industry, concentration of power seems to have resulted in stagnant technology and higher prices. That example suggests a broken up GM might have been healthy.

    Competition in the telecom market has coincided with the massive growth of wireless communications and the explosion of the internet. The breakup of AT&T happened at about the same time competitive markets were forced upon the previously protected/regulated industry. Some of the pieces of AT&T withered and died, notably Western Electric, which became Lucent. The surviving long distance company AT&T and “Baby Bells” have largely been re-assembled again into a less dominant AT&T. Meanwhile, the Japanese and European telecom industries have also been agressive adopters of new wireless technologies without large scale corporate dismemberment and re-assembly. Wall Street bankers and lawyers extracted extraordinary amounts of money for the deal making involved in busting up and then re-assembling AT&T.

    All that aside, the pieces of GM probably would have done better torn asunder than they have by being left together. The top-down homogenization of GM from the 1970s onward destroyed the creative spirit which once had found full expression through the various divisions. Today the divisions don’t even exist. “Cost rationalization” led directly to the redundant brands and dealers problem as MBAs and accountants thought that nobody would notice as bit by bit the things which made a Buick, Pontiac, Oldsmobile or Cadillac unique were spindled, folded and mutilated. Remember the lawsuits when customers discovered that their Oldsmobile, etc. engine was really from a Chevy? GM has long known how to cut costs on paper, but not how to do so without sacrificing the viability of the brands and relationships with customers, workers and suppliers. They remain, collectively, management idiot-savants: Good at a certain kind of numeric manipulation, but clueless about any and all manner of relationships.

  • avatar

    More companies would have increased competition and would have resulted in better vehicle choices and less costs for US.

    While I’m not a fan of government controls in general, I’m definetly not a fan of letting giant businesses dominate and destroy all of their competition either.

    The lack of competition in almost all industries is costing US dearly, in my opinion. Price fixing, whether “formal” or not, exists anytime there are only a few huge companies in a particular market. Furthermore, there isn’t nearly the motivation for innovation, enhancements, quality, or durability. As long as it’s more or less equal to the other guys, it’s good enough.

    While reading about all the woes of the BIG 2.8, I’ve often wondered why we don’t split them all up into individual companies by their respective brands. Put them on an equal footing with the transplants (i.e. free of the unions and mandatory dealerships) and let the free market work it’s magic. Yeah, some would die, but those that survived would be far better than the stinking massive piles of incompetence that we have now.

  • avatar

    If GM had been broken up and not allowed to get so large, it would most likely be in a much healthier position today. The monopolistic control GM and Detroit had over the american market for decades led them to their waterloo. The complacency and arrogance set them up for the fall. And the government will support these con men with the tax dollars from average hard working americans. Detroit will most likely not survive intact. The question is whether our democracy will survive when some americans are deemed more worthy of bailout money than others.

  • avatar

    I know I’m a little too late for many people to read this, but here goes:

    I think the prospect of being broken up by the Feds (at least in the late ’60s) helped lead to the badge-engineering we have so much of today.

    In an effort to discourage the “trust-busters”, GM Chairman Tom Murphy decided to morph the divisions so interwovenly together that breaking Chevy off from the rest of GM would be like taking a brain apart cell by cell.

    The GM Assembly Division was created around 1970 mainly to bolt together all of GM’s cars, taking away that responsibility from the individual divisions.

    As soon as that happened, beancounters started asking why (for just ONE example) GM had 4 divisions each with their own 350 cube engine and their own 454/455 engine, none of which shared any major parts; when standardizing the designs would be so much cheaper. As the years went by, this mindset expanded from the parts under the sheet metal to the sheet metal itself; so the customers could SEE the close relationship between the makes.

    This effort to save money was shortsighted in the end, as it ended up taking away any real reason to choose a Buick over a Pontiac except for style or prestige.

  • avatar

    There are so many “what if’s” in the auto buiz.

    What if Ford had bought Volkswagen after WWII? They were offered it at bargain basement prices. Good chance that would’ve muted German competition.

    What if the US Military hadn’t given Toyota a massive contract for trucks during the Korean War? That most certinaly pushed a struggling company into the black.

    What if Chrysler never got their bailout? Would AMC be alive and well? Would we have ever got the minivan?

    So, if GM had been busted up in the 50’s would they had eventually remerged? Maybe Ford would’ve been the dominant player. Maybe…maybe..maybe.

  • avatar

    “The GM Assembly Division was created around 1970 mainly to bolt together all of GM’s cars, taking away that responsibility from the individual divisions.

    … As the years went by, this mindset expanded from the parts under the sheet metal to the sheet metal itself; so the customers could SEE the close relationship between the makes.”

    Fisher Body had forced a lot of commonality long before GMAD. Doors, glass, roof panels and more were already the same across divisions by 1955.

  • avatar

    Flashpoint: #2 These factories are to produce cars that DO NOT USE FOSSIL FUELS. The Chevy Volt for example and whatever electric/fuel cell cars Chrysler and Ford have on the drawing boards would be the start of production, followed by more models later on.
    Hehehe… And let’s ask Mr. Obama to walk on water while he’s at it…

    I guess Flash is unaware that the bulk of US electricty is produced burning FOSSIL FUELS. So after spending all that money, you have achieved pretty much… nothing. But hey, Uncle Sam is great at that. See Corn Ethanol for more entertaining adventures of your tax dollars going to wealthy lobbyists at work.

    As for hydrogen: Think battery that leaks and explodes. Add to that a fuel that can’t be transported economically, or stored without spending a ton of $$$.

    The Shrinking 2.8 have more than enough on their plates just trying to survive. Let’s not task them with saving the plant from global warming all by themselves, right now.

    Nothing wrong with encouraging the recipients of Uncle Sam’s bailout bucks to produce more fuel efficient vehicles. But barring any better ideas I vote for CAFE standards. Assuming the elegant solution (gas tax, anyone?) is dead.

  • avatar

    Isn’t Verizon bigger than the current AT&T? They aren’t the same company. Verizon is a baby Bell.
    I think if GM was broken up in the 50s we would have just Chevrolet and Cadillac now. Chevrolet would be as big as GM is now, perhaps with the same problems. Cadillac would be smaller, possibly owned by a European company.

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