By on September 19, 2009

A bad day for Old GM. Hey, why is that guy still around, anyway?

The bile triggered by news of my departure (last day November 12) brought back old memories of rancorous accusations of anti-American bias. At the beginning of the GM Death Watch, I had to delete several hundred obscene, hate-filled comments and ban dozens of persistent posters of TTAC Must Die TOO comments. Now, after the fact of Chrysler’s and GM’s bankruptcy, there’s a revisionist theme arising. “Anyone” could have predicted Detroit’s dissolution (many did long before TTAC, of course). And, believe it or not, yeah, well everything’s OK now. New GM is kicking ass. Leaving aside that delusion, I wonder: when was the last moment GM could have turned things around? I reckon it was the day that Bob Lutz and Rick Wagoner decided to spend GM money refreshing their GMT SUVs. IF GM had spent that cash improving their passenger cars AND cutting brands (they could have afforded to do so at the time) AND then got rid of Lutz and Wagoner for an outsider like Mulally, they MAY have dodged the bullet. As I told Stuart Varney, if my grandmother had wheels I’d be a trolley car. Still, what’s your take? When was the last time old GM could have turned it around?

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108 Comments on “Ask the Best and Brightest: When Could GM Have Turned It Around?...”

  • avatar

    mid 90s, when it was time to replace the J body cars. I think GM at that point said, screw cars, we are just going to sell SUVs in the US. Made them a ton of money for a while too, but it allowed them to stagnate their car development and push it off to the overseas subs. Those got delayed and when the SUV boom crashed 10 years later, GM had two cars it could sell in the US (Malibu and CTS).

  • avatar

    My bet would be the lack of refinement and evolution of the cavalier endless run…it started to kill GM that a generation of first buyer saw they’ve been screwed…i would also add the corporate greed that make them take the lowest cost supplier (i had to change twice a wiper motor on my saturn, like after 100 years of building cars they should get that right eh?) Die GM, it’s Darwin law…

  • avatar

    the end was inevitable the day they sold GMAC. you can’t burn furniture to have heat.

  • avatar

    Mid 80’s, and the Roger Smith era. Smith wasted billions and billions on acquisitions outside the auto industry, that at the end only ate of the resources. The GM10-Project was an absurd display of wasted opportunities. In my mind, if Smith had put those resources in r&d instead of spending, GM wouldn’t be where it is now. To my mind, the last time GM really had a chance, but blew it once and for all.

  • avatar

    Believing that the failure or success of a company resides on a few events is what caused GM to fail.

    You had a long series of editorial about the corporate culture of the company and the slow decay that destroyed the company from within. Issues like that result in failure, because the culture existed where they thought a few simple tweaks can result in a significant impact.

    In reality tens of thousands of minute little decisions caused the failure of the company. Things from how thick the cylinder liners were on a Quad-4 or the amount of laminated glass on a GMT. It’s fun to poke at significant product launches since they’re convenient – but you’ve got to dig deeper.

  • avatar

    Don’t forget dragging along ancient pushrod V6s all the way until 2004 when they finally started released the HFV6 DOHC engines.

  • avatar

    It started in the 80’s when they looked down their noses at the imports. The last hope was the middle 90’s but Honda and Toyota already had a piece of the pie and were not giving it up. “Hey, lets build tarted up trucks that mimick luxury cars!” That worked for a while. Now there is no furniture left to burn. Or transmission companies, locomotive divisions, heavy equipment, etc…

  • avatar

    It wasn’t possible without “breaking” the unions.

    If Toyota and Chevy set out to design a $20,000 car, Toyota says, “Ok, first take $2500 off the top for wages and benefits. GM says, “Ok, first take $5,000 off the top for wages and benefits.” You just can’t engineer around a $2,500 cost disadvantage – it’s just impossible.

    The only way GM was ever going to turn things around, was by getting its cost structures in line with its competitors.

  • avatar

    As I write this I am almost 30 years old. The J-body Chevy Cavalier went into production shortly before I was born. When we were in university my best friend bought a J-body Cavalier brand new as his first car. Eventually we both graduated, got jobs and still the J-body Cavalier was in production. If GM truly had the will to succeed they would have replaced the J-body at least a couple of years before I got my drivers licence. Instead the company continued excreting Cavaliers onto their dwindling customer base.

    In all this time GM was still the biggest and most powerful automaker in the world. They had all the resources they needed not just to survive but to kick ass. They could have chosen to do the difficult things that are necessary to succeed at any time, instead they chose to slouch towards oblivion. I feel sorry for the workers on the production lines and the engineers who do the real work of car making day in and day out who will lose their jobs. But I have no sympathy for the executives and managers, the “leaders” who couldn’t lead their way out of a paper bag. They’ve truly earned their failure and I cannot begin to feel sorry for the loss of GM when GM couldn’t be bothered to save itself.

    Sigh, I’m beginning to feel old.

    The shorter, more direct answer: GM could have turned itself around anytime before about 2002. After that the damaging effects of the cheap crack of sales incentives and 0% financing combined with the cost and long lead times of new car platform development probably sealed their fate.

  • avatar

    The ’60s when they made the original bad deals. Someone should have got them an actuarial table.

  • avatar

    I think they gave up the last chance they had it get it straight when they brought Lutz in.

    His Big personality and obsession for (now dead) niche products like the Solstice/XLR/GTO and others was a giant distraction that cost time and energy that should have been directed to the mainstream products.

    Between him pontificating years ago about “dead brands walking” (Pontiac) and then waisting the time on the G8 – Calling Global warming a “Crock” then dumping money into the Volt and then the Gang kicking Jerry York off the board for stating the obivious (eliminate brands), those guys were riding the Luzt jetfighter to elimination.

    The GMT thing didn’t help but Toyata and Nissan were reading the same bad tea leaves too.

  • avatar

    GM really went down the toilet when, one day, the Powers that Be started taking their customers for granted. It started about 1980. Before that, GM made a decent car for the money. What happened was the Japanese made better cars for the money. Instead of raising the ante with a better product to respond to eroding market share, GM intentionally made their cars cheaper so they could make more profit per unit.

    GM evolved very quickly into an incestuous organisation that was only concerned with the people working within GM, not the people outside the hierarchy. The wages and bonuses of the top brass had first priority and the guys on the line also were only concerned with their bottom line. Any attempt by the GM management to improve quality or change anything on the line met with instant hostility from UAW members. A good example is how the UAW went ape sh*t when GM tried to introduce the “Quality Circle” in the 1980s.

    While this inward focus continued, GM still believed their own lies, “If we build it, they will buy it.” Problem was people did by GM cars only to see them fall apart and self desrtuct. Instead of responding with better cars, GM blamed everybody else and they are still doing it with their absurd “perception gap” bamboozle.

    GM will not succeed. Our money has been wasted. The same people who busted the company in the first place are still in charge. They are still blaming their customers for their failure. GM is an organisation that must die. It should have died last year. The problem in America is that failure is no longer punished. It is rewarded.

  • avatar

    I feel sorry for the workers on the production lines

    Aren’t they the ones who voted to strike in order to compel GM to agree to contracts that lead directly to GM’s bankruptcy?

  • avatar

    When Ollie Johnson wrote his damning memo in the late 80s. Had GM upper mgt or the BOD taken it seriously, some moderate housecleaning could have been done and GM would not be where it is today. Once that memo was ignored and Johnson left, I think that the handwriting was on the wall.

  • avatar

    It wouldn’t be too late to turn around GM right now, if there was a solid management team that could deliver a viable plan, and if there was enough cash. But the management team isn’t there to deliver the plan, and it’s hard to get private sector cash when the team isn’t very good.

    The beginning of the end dates back to the 1950’s, when GM overextended its brands. Before the war, the brands had been comprised of a couple of models each, with several body styles among them. After the war, that morphed into a sprawl of numerous nameplates and niches.

    That overextension occurred simultaneously with another mistake of GM’s decision to avoid pursuing total market share in excess of 50%. Combined, those decisions would ultimately make badge engineering inevitable, given how the lineups were crowding together, which in turn would feed the bloat that kept the company from responding to new competition as it emerged during the 60’s and 70’s.

    Too many products led to dilution, but the organization was too arrogant to see the threat. A brave manager would have made the decision early on to either curtail the brands or merge them together. A really brave one would have spun some of them out entirely. Neither happened, of course.

    The end became almost inevitable when Jack Smith decided to focus on trucks and SUV’s, to the detriment of the car business. That turned GM into a niche player that would be highly vulnerable to any dramatic changes in demand for trucks, and sure enough, that change in the market is exactly what put the nail in the coffin. Funny how he was lauded at the time for such great management, when he was ultimately responsible for creating the foundations for the destruction of the company.

  • avatar

    I think the correct answer is “who cares?”. This is like discussing how Germany could have won WW2.

  • avatar


    It is too late, the company received taxpayer money to stay alive. Any “turnaround” now is purely artificial.

  • avatar


    I don’t believe the disparity was ever that bad.

    GM puts about 20 hours of labor in a car, that’s $1400 if you allow the $70/hour figure. TOyota puts 21 hours of labor in a car, that’s $700-900. The difference in wage cost per car is on the order of $700-$500. That is hardly a crippling deficit.

    And GM could have easily made up for that deficit with the value of domestic preference. When Toyota and Honda first started in to the US market, domestic preference was worth a lot to GM. They lost that edge when it became obvious that Toyota and Honda were building better cars.

    In fact, there’s still a hard core of buyers who absolutely will not consider a “foreign” car and if it wasn’t for them, GM would be out of business.

  • avatar

    “I reckon it was the day that Bob Lutz and Rick Wagoner decided to spend GM money refreshing their GMT SUVs.”

    I don’t think any statement could be any more wrong.

  • avatar

    A similar question could be asked about TTAC. Now with RF and Jack leaving. What could have been done to prevent it. :(

  • avatar

    As a system of systems, you have to blame decade upon decade of wimpy BOD. If there is no cleansing mechanism for those who make the big decisions, then the system does not get cleansed.

  • avatar

    Ingvar :
    September 19th, 2009 at 12:31 pm

    Mid 80’s, and the Roger Smith era. Smith wasted billions and billions on acquisitions outside the auto industry, that at the end only ate of the resources. The GM10-Project was an absurd display of wasted opportunities. In my mind, if Smith had put those resources in r&d instead of spending, GM wouldn’t be where it is now. To my mind, the last time GM really had a chance, but blew it once and for all.

    + 100 on that…

    But I’d disagree that this was the last hurrah. Remember the ’90s, when the Big Three was raking it on SUVs? Instead of reinvesting that money into product, they sqaundered it buying up other companies (or in Chrysler’s case, it was the other way around; Daimler raided its war chest after the “merger of equals”).

    Three more blown opportunities that could have made their current predicament a lot less serious: the 2002 Chevy Malibu, 2003 Saturn Ion, and 2005 Chevy Cobalt. Think how much better positioned the whole company would have been for the current downturn if they hadn’t ruined these basically solid platforms with poor execution. Saturn might even have ridden the storm out if it’d had a decent entry level product six years ago.

  • avatar

    Now, after the fact of Chrysler’s and GM’s bankruptcy, there’s a revisionist theme arising. “Anyone” could have predicted Detroit’s dissolution (many did long before TTAC, of course).

    I think many predicted major problems, based on the product, and the recession that was inevitably coming our way.

    What people couldn’t predict, though, was the perfect storm of 2008: the collapse of the capital markets, the collapse of the real estate market, and $4.00 gas.

    I think Chrysler and GM could have probably ridden out a normal downturn without bankruptcy, but this wasn’t a downturn – it was a steep dive off a cliff.

    Then again, like a personal financial disaster, the events of the last year have forced these companies to take a hard look at what was wrong.

  • avatar

    Now with RF and Jack leaving.

    No more Baruth??? Where will I go now to read of tales of thoroughly irresponsible driving? :) (His car reviews are pretty good, though.)

  • avatar


    Perhaps it wasn’t the last hurrah, but to my mind, it was the last time GM had the opportunity to stay on top as the worlds largest automaker. If they had done things right then, they could have been equal or better/larger than Toyota.

    Smith spent and lost something like 40 billion dollars in equity altogether, money that could have been better spent. Of course, there are other, later “last hurrahs”, but they would only make GM continue as a second tier.

    And for Daimler ransacking Chrysler’s war chest. I’m sure Daimler must have lost something in the league of 50 billion dollars on the Chrysler experience, so any resources they raided could only have been a tip in the hat.

    But it’s nice to see you agree with me on something…. :)

  • avatar

    Thirty years ago, when I was still in my 20s, I was thrilled to be hired for a pretty good management-track job at GM headquarters, the company where I had always wanted to work.

    What an experience … I could tell they were rotting from within even then. With few exceptions, the people with whom I worked were unhappy complainers who were waiting to retire and who bragged about how much they were paid and how little they did. Whenever I busted my ass on an assignment, one of the lifers was generally appointed to ask me to slow down. It was like they ALL were UAW members.

    By then, the cars were already starting to turn to shit. My first company car was a downsized ’79 A-body, one of the cars with the lightweight Turbo Hydra-Matic that was always in the garage. They admitted to me that it was a huge problem, but said they couldn’t afford to fix them. They just gave me a new car, of course.

    I left after two years to join an upstart import company that today is among the most successful in the industry. My GM colleagues ridiculed me and my boss told me I was making the mistake of my life. I don’t think so.

    The downsized B- and C-bodies were then still relatively new and relatively trouble-free (if you don’t count the diesels), but they remained in production 15 years. The 1981 J-bodies were an unmitigated disaster, and the 1982 A-bodies were little better; all versions of these two cars all looked the same. The new 1988 GM-10 cars were to have been the new family sedans — too bad they could only build coupes for the first few years.

    By turning out such horrendous sleds from the late 70s to the mid-90s, GM alienated the largest generation of car buyers the country had ever seen and ever will see. The baby boomers and their kids are gone to the imports forever.

    If I had to identify GM’s last clear chance to pull up, it was probably when they paid Ross Perot billions for a company they had no business buying, then billions more to make him leave because they didn’t want to hear the truth. Had any of the Pet Rock directors understood fiduciary responsibility, they would have broomed Roger Smith and kept Perot. But I have my doubts about whether even he could have changed such a stagnant, political, back-scratching culture.

    The sooner we all accept that GM is dead and our money gone, the sooner we can move on.

  • avatar

    I am apparently in the minority, but I still think there is something salvageable at GM. They have thousands of highly skilled manufacturing people at all levels and some of the best auto engineers on earth. What will make it a lost cause is if they continue to let the accountants run the business and do not get rid of the entire tier of top “management” who got them into this fix.

    No leader worth a crap would allow the product he uses to be hand selected, then hand rebuilt, if he is representing a mass-market product. All of the current management have done so knowingly for their entire tenure and for this reason alone they should be gone.

    Having said it’s salvageable, I’m guessing its 100-1 against them coming back as more than a niche truck builder. The culture of rotten management is so inbred they “did not see this coming” when the event had been choreographed since the mid-70’s. At that time, they ceded the small car business to the Japanese and it was cheaper to lobby for concessions in safety and fuel economy standards than to simply build the safest and most fuel efficient cars on the planet.

  • avatar

    I’ll say around 2002-2004. The wind-down of Oldsmobile was in full swing and GM had a chance to realign all its brand with some high quality products.

    Instead, over that period they released a warmed-over Grand Prix and Lacrosse, the Cobalt, the Aveo, the Ion, the H2, the SSR, the “not-quite-there” 6th gen Malibu, and absolutely horrible minivans across Pontiac, Chevrolet, Saturn, and Buick.

  • avatar

    I don’t believe the disparity was ever that bad.

    GM puts about 20 hours of labor in a car

    That’s just the assembly of the components – until it went under, wasn’t Delphi also paying union wages?

  • avatar

    1971, aftter the NHRA Nationals in September.

  • avatar

    After Sept. 11th, 2001 GM aggressively marketed 60 month 0% financing with a program called “Keep America Rolling”.Next up was Employee pricing. Finally it’s been an endless stream of holiday red tag sales. GM has focused on selling the deal and product be damned for the most part.Buyers that demanded quality and longevity moved away from GM. Whatever chance GM had it was way before the endless discount programs.

  • avatar

    I don’t think GM could have turned it around at anytime given its internal power structure. Ross Perot tried to and look what happened: too many others in some position of power $$ to vote against him. GM’s bonus system for exec’s (90% still there) and cost cutting for product is still there.
    Ford had Bill Ford as the one in power that came to the conclusion that Ford co. needed to get outside help, thus bringing in Mulally. If at some time GM tried that, yeah then they would had a chance, but not likely as stated previously and honestly Whtitcare + Pres Task Force + UAW, etc. can’t do it either.

  • avatar
    Gardiner Westbound

    The first thing we do is kill all the lawyers. – Shakespeare, Henry VI.

    Shakespeare was wrong. Killing lawyers would be a waste of good ammunition when there are accountants out there.

    The beginning of the end came when the Detroit automakers made accountants decision makers. They don’t understand the car business, never did, still don’t. Their nature and training leads them to apply logic to a business that wholly relies on emotion.

    In the 1970s, about 25 years after the original Oldsmobile Rocket V8 engine appeared, General Motors adopted a corporate policy of mixing and matching engines among car lines. Many Oldsmobile owners were surprised and outraged to find Chevrolet V8s under their hoods. Even though the Chevy engine was a newer, more sophisticated design, Olds owners were so soundly convinced of the Rocket’s superiority they took GM to court for misrepresenting its product. The matter was eventually resolved, but it was a demonstration of the power of mystique. The accountants didn’t see the handwriting on the wall. And where is the Oldsmobile brand now? And GM. In the dumper, that’s where!

    The domestic automakers probably could have turned it around as late as MY2000 when they still had roughly a 50-percent of the market by building good automobiles people wanted to buy at a profit and treating customers fairly and with respect. They didn’t, still aren’t, and will fail because their time is up.

  • avatar

    Actually, it was 1969 (actual GM ad):

    Volt?: Phhhhhhhttttttttttttttttttttt !!!!
    40 years and still spending…

  • avatar

    “When Could GM Have Turned It Around?”

    Answer: “When Could the Former Soviet Union Turned it Around?”

    (this is a rhetorical question. the answer is, “Never”, in both cases. As with the FSU, GM was Hopeless. Their arrogance in refusing to accept any criticism for their ton of huge errors, errors that brought their market share steadily downhill, from 50++% a few decades ago to less than 20% now, and expected to be 10% a few years (the “new” much smaller GM), was monumental.

  • avatar

    Early 1950’s.

    At that time the European countries were putting in place partly government run health care systems and GM said something to the effect – we don’t need anything like that we can take care of our workers.

    This showed tremendous arrogance and a total lack of care about the American people (their customers remember) and it frightened union members making them dig in their heels whenever a contract came up for renewal.

  • avatar

    Perhaps when they removed the little “Body by Fisher” plates with their cute little coaches from the door sill kick plates … definitely when they were too embarassed to keep the statement “Mark of Excellence” below the GM corporate logo…

    The electric car ad from ’69 is amazing, and one’s heart can’t help but sink when one reads the names of all the good and great divisions (and brand equity) squandered and divested since that time …

    Made me realize that the old saying: “it takes a generation to build a company, another to benefit from it, and the 3rd to destroy it”, is a scalable truism …

    SAD, Sad, sad…

  • avatar
    Stu Sidoti

    Godspeed Robert and thank you for a great site that I read nearly everyday-please keep us informed of your next escapade, I’ll be happy to tag along.

    The generations-old ‘rot’ inside of GM as JSF22 points out, is a cultural issue and as such, I believe that at nearly any point over the last 30+ years GM could have turned it around by hiring a bunch of talented go-getters from other companies ‘doing it right’ such as Honda, Toyota, BMW or whomever you think was doing it right at the time. However, GM’s unwillingness to hire from outside, their near-insistence that anyone in a position of power come from within the ranks is what I feel was or is, at the root of the rot. As a GM lifer friend of mine says ” Stu…we don’t make cars at GM, we make careers “…That’s scary stuff if you spend 90% of your day on career posturing and 10% of your day on actual work-Yikes!!
    The GM board is the biggest culprit of their failures; they could have made massive changes at the top to the senior management and thus to the culture at any time over the last 30+ years. The second biggest mistake at GM over the last 30+ years was when the BoD gave accounting more decision-making power than engineering had. This happened right after Ed Cole retired in 1974. From then on, Engineering never again determined the parameters of a program-accounting did with disastrous results.
    While not fully back from the brink yet,I believe that from what I see and hear coming out of the Tech Center that GM has cleaned out a lot of the old deadwood and is making strides in the right direction. They’re not there yet, some of the old ways of thinking do permeate, but from my experiences dealing with GM staff on a regular basis, it is a vastly different attitude today from just five years ago. I think they are on the right track, but again, I would like to see some fresh faces from Hyundai, Honda, BMW etc…I think they just need a little more new blood and a BoD that gives a damn and they’ll be much better off in five more years than you might imagine if only they will institute a culture that rewards results.

  • avatar

    GM’s biggest and longest lasting problem has been its culture and I don’t see any signs of change even today. Having Henderson, Lutz & LaNeve still in place and all their underlings waiting in the wings is a surefire recipe for failure. I don’t know how far back you’d have to go to have changed the culture as it is self perpetuating. If you wanted to succeed at GM you had to buy into the culture. John DeLorean and Ross Perot would be two examples of what happens when you don’t.

    Truly and sadly GM doesn’t have a clue how to compete today and they don’t have the luxury of time to figure it out and move forward.

    I really don’t think any one point was a last chance to turn it around because the overriding culture would not allow that to happen despite any individual decisions that may have been made contrary to what they were.

    GM is a doomed entity which the government will allow to continue until GM is so small it won’t have anywhere near the impact. Then they will be gone as we know them.

    After the current management is gone they will be replaced by the same. Of course, doing the same and expecting different results is the definition of an exercise in futility if not insanity.

    GM for as long as I can remember was so big the right hand never knew what the left hand was doing which produced disaster after disaster. The reason for it of course is the corporate culture, either buy in or be left out.

  • avatar

    It was the 80’s when GM made huge errors of omission and commission that put it on the path to doom. But I doubt that any CEO could have changed course because there were so many well-off and powerful stakeholders threatened by any change from the status quo.

    JSF22, I’d love to hear more stories from your experience at GM headquarters. For example, do you know if anyone at HQ ever seriously dealt with the question, “Why is the Cavalier so crappy compared with a Corolla or Accord?”

    Accountants are often blamed for poor product, but can anyone cite some specific examples when engineers were overruled by Finance? Did accountants compel, say, the use of Dexcool, or the notorious “rope” driveshaft or the Citation’s awful brakes? GM claims thousands of terrific engineers–what is the evidence of that?

  • avatar

    I remember when GM introduced Dexcool, I went to a Buick new car intro for salespeople for the 96 model year and the entire meeting was about Dexcool. I thought to myself at the time, you’ve got to be kidding me, an entire new car intro show and nothing is mentioned about the cars only Dexcool??? Then a few years later Dexcool turns into another GM disaster.

    Just another small example of GM think vs. the real world. Can you imagine the reaction of a potential customer if all you talked about was Dexcool? They would think you were smoking Dexcool.

  • avatar
    bumpy ii

    Let’s take a slightly different approach and say 2005. IIRC this was the tipping point when GM’s non-US sales matched or slightly exceeded its US sales for the first time. Also the first year when the profit from GM’s everyone-else operations wasn’t enough to offset the losses in North America. At that point, Rick Wagoner should have run the numbers and walled off the GMNA sinkhole from the rest of the corporation, cleaved off the bits of GMNA worth saving (Corvette, the full-size pickups and SUVs, the LS program, and the Cadillac badge but not the vehicles), carried out an in-house divorce to let the rest of GMNA collapse on its own, and enjoyed the tax write-off.

  • avatar

    GM’s downfall is their employees belief that we are to big to fail and I can remember back in 1991 when our regional Chevrolet district manager said that had not JACK Smith taken the helm from Stemple that they would have been insolvent and bankrupt in 12 months.

    If you are old enough to remember the 1989 Grand Prix and the 1999 Chevy Lumina were available in 2 door only because according to my sources they did not have the money for tooling up the 4 doors.

    This was just after ROGER Smith had sunk millions into Geo and we all know how that turned out. Although I would mind having a Geo Storm for the night to trash around some curves.

    Then came Saturn!

    Millions spent and I don’t believe that to this day that Saturn ever made any money for GM.

    Then they started selling companies they had purchased over the years to conceal their losses. Check it out on wikipedia and see the companies thy have sold since the early nineties, millions maybe billions squandered.

    Add Hummer, Saab, Delphi, and you must see a trend of failure.

    Christ, how can you let a Saab customer open the hood of their car and see an efen “GM” logo on cap of the windshield washer fluid container and think that that would exude confidence in the brand. Ca mon. Thats just arrogance and stupid. These guys in GM management have been efen the dog for years and riding the gravy train provided by shedding assets for cash and the penchant of the American publics belief that GM’s a good company.

    Well in fact it is, it has built over the years some laudable and great cars and trucks and still does. It the efen management that has lead them to where they are. Laneve,fool. Stemple,fool. Roger Smith, fool. Don’t get me started on Rick. These guys have taken a great company and, like a officer of GMAC said to me many years ago, when they bury him they are going to have to screw him the ground.

    I’m am very sorry to inform all of you that General Motors is a dead man walking, soon to fall over and be buried by the sands of time.

  • avatar
    Dave M.

    1966 is when the slide started (but no one knew it): Chevy came out with the Caprice, thus all 5 brands had luxurious models.

    1980 when they released the X-cars, hugely underbaked in development.

    1988 when they thought the Corsica was anywhere near competitive to the Accord or Camry. As well as investing in EDS and everything else under the sun but their platforms.

    However, if they had played chicken with the union in 1998 and closed shop for a few months, that may have set the stage for more reasonable contracts and the possibility of salvage-ability.

    Then again the Ron Zarella brand experiment maybe would have extinguished that ray of hope.

  • avatar

    They could have turned around in the early ’70s when Toyota and Datsun sales started to take off. They could have had Deming in much sooner (and they could have actually followed his advice for more than a year).

  • avatar

    Their downfall was their lack of near-death experience that both Ford and Chrysler had in the early ’80s. Coming so close to being killed off led Ford and Chrysler to have a lot of innovative and well-recieved products in the 80s and 90s (before Daimler raped Chrysler, and before Nasser screwed Ford with his little buying spree and the Firestone debacle.)

    Think of the innovative things Chrysler did pre-1998. The minivans, cab forward, they styling of the early ’90s Ram that every pickup maker eventually copied, the Cherokee. And Ford had some hits too–the initial Taurus, the Probe, the Explorer, the Navigator (which ushered in the luxury SUV market, BEFORE the Escalade).

    Whenever General Motors DID try to do something innovative in this time period it was horribly executed and turned into a disaster. The GM-10 debacle, the dustbuster minivans, the Aztek. As bad off as Chrysler is today, and for as close to death as Ford came in the middle of this decade, both companies have real bright spots in their last thirty years. You can’t say the same for GM*. It’s just either failure, mediocrity, or piggy-backing off the success of the other two Detroit carmakers.

    *MAYBE the CTS, but even it’s initial launch had quality problems. But because of the styling, people largely ignored this and gave it a chance. But I’m at a loss to think of any other really big, category-busting successes along the lines of the Taurus and Chrysler minivans.

  • avatar

    That’s very true, GM has had not one mainstream hit vehicle that I can think of in the last 50 years. Fifty years ago their success was based on many brands and models but not one of them a huge hit that I can remember.

    As I think about it perhaps the long downward slide started with the advent of badge engineering which caused all of the different versions to lose sales to the point we are at today. Too many divisions, too many badge engineered models and not enough resources or market share to support them.

    Yet after all of this they still insist on badge engineering. They are truly clueless.

  • avatar

    Mid 90’s because the economy was booming. The economy went in the tank 2000 to many years down the road. Too late for GM.

  • avatar
    johnny ro

    I think it was right after WWII. USA wanted Japan to be capitalist not communist. We let them have technology and $ and we allowed them to insulate and incubate their industries.

    GM ignored.

    It wasn’t just GM that died. (I think its dead man walking now)

    How many areas of manufacturing were destroyed in USA because of cheap asian imports?

    The real question is why GM was able to stick around so long? Why did those lenders let them build up so much debt? Don’t they understand what they were lending to? I Think they should have been bankrupt long ago.

  • avatar

    That picture of Maximum Bob or Lutz the putz as I like to call him is a great poster boy shot of all that is wrong with GM.

    I still vividly remember the idiot saying when gas was on its way to $4/gal GM’s large SUV sales would be unaffected until gas was $5/gal.

    Right Bob, file that one next to your perception gap BS.

    The only perception gap that exists is Lutz thinking the car buying public gives a $hit about anything he has to say.

  • avatar

    It was a mistake to create a separate Saturn Brand when GM couldn’t afford to feed all the babies it already had. I always found it ironic how much the initial Saturn SL series looked like the Olds Cutlass Supreme of the day. The Oldsmobile brand could have been transitioned to the Saturn experience and Saturn could have been the base model. In the alternative, the SL-SC Saturns could have replaced the already old Cavalier.

    Hummer – Not a good idea.

    Also, instead of fighting to kill the Clinton health plan in 1992, GM could have supported it and would have saved billions of dollars if it would have passed.

  • avatar
    Steven Lang

    BDB: I would consider the late model Corvettes, Silverados and Suburbans to be the full-fledged successes of GM. Of those three only two of these models have made GM the billions needed to keep their ship afloat for so long.

    JSF22: You have a story that definitely would open some eyes here.

    As for when GM entered a point of no return spiral… 1986. By this point GM was more concerned about paying off their critics than re-examining their organizational failures.

    After that point it’s been one self-defeating compromise after another.

  • avatar

    @ Dynamic88

    They could have turned around in the early ’70s when Toyota and Datsun sales started to take off. They could have had Deming in much sooner (and they could have actually followed his advice for more than a year).

    We have the winning answer right there.

    From that moment onwards, Detroit practised a “look over there” excuse mongering slight of hand that we know now as the “Perception Gap”.

  • avatar

    When they launched and then betrayed Saturn. After a lot of the boneheaded mistakes they made, but they could have made Saturn work. Instead they brand engineered it to hell as the other managers conspired to kill anything that might be decent about it.

  • avatar


  • avatar

    My dad had an old 1960s GMC van for his business (funny, for his personal cars he was a Ford guy, but anyway) and aside from the floorboard completely rusting through and being able to see the tires while driving it was, I guess, OK. (I was real young, didn’t know any better.)

    He traded it in on a new GMC Vandura, which just a few years later, began to magically transform into rust. In time it was literally more rust than steel. The thing was, every Chevy and GMC van I saw was rusting in the very same area, around the windshield, and for the next 20 years GM did nothing to change a thing or alter the design. How hard (or costly) is it to drill some drain holes?

    I think this van is a metaphor for the company. GM is rusting away and, despite the corrosion being quite visible, no one bothers to change a thing or alter the business plan. Whitacre could completely clean house and bring in a bunch of Toyota execs and they might not be able to do a thing. I don’t know exactly when GM started to rust away but this company is toast.

    My folks were talking about getting a new car and I suggested that they get a Cadillac CTS since the government was bailing out GM… might as well help GM pay back the loan, right? Nope. They went and got another Lexus.

  • avatar

    Accountants are often blamed for poor product, but can anyone cite some specific examples when engineers were overruled by Finance? Did accountants compel, say, the use of Dexcool, or the notorious “rope” driveshaft or the Citation’s awful brakes? GM claims thousands of terrific engineers–what is the evidence of that?

    The problem that you face is the once the Accounting people have power, it’s very hard to fight them. Silly statement you say? Well, any accountant can show you where you can save money in the short term. This is important particularly when times are hard. So, they can always look good by saving you money. You, on the other hand are arguing to spend more for something that you can’t PROVE matters. You learn to avoid these battles, or your boss does. He won’t take the expensive option to the meeting, or he’ll take it, but only as a straw man for the cheaper option.

    Then the habit spreads to the rest of the culture. Bring the cheap option to the table. Don’t fight for quality or you’ll be a whiner and banished.

    The company will start a quality push, but go to a meeting and it’ll be too expensive to do it right. The “we can do it just as well cheaper” people prosper. Except you can’t do it just as well. However the money saver will have been promoted before the failures start. You, the whiner, will still be in your old job. So, are you going to fight another battle, or are you going to become a cost-saver?

    You don’t think that anybody noticed how ugly the Aztek was?
    But it made it to production, didn’t it.

    That’s the evil of letting accountants have power.

  • avatar


    “Their downfall was their lack of near-death experience that both Ford and Chrysler had in the early ’80s. Coming so close to being killed off led Ford and Chrysler to have a lot of innovative and well-recieved products in the 80s and 90s (before Daimler raped Chrysler, and before Nasser screwed Ford with his little buying spree and the Firestone debacle.)”

    Agreed. Chrysler got too fat and happy in the late 80’s and went thru another downturn (with everyone else) in the early 90’s. But they got a shot of new, outside blood when they acquired AMC. They were not afraid to hire people from outside the company and industry. They looked at Honda and decided they had a better way to develop cars. And so they copied it and adapted it to their needs. Chrysler in the 90’s was showing Ford and GM how it was done.

    But GM? Slow decline. If you chart the market share from 1980 to today it just goes inexorably downward.

    Ford and Chrysler had periods of ascendency. GM never did. At best it slowed it’s rate of decline. It never stopped it. GM was bad. How bad was GM? GM was so bad that it took an ex-GM exec by the name of Bob Eaton to sell out Chrysler to Dumbler. In away not only did GM f#$k themselves but they f#$ked Chrysler too. You gotta be really bad to FUBAR *TWO* companies!

  • avatar

    Dynamic88 & PeteMoran: I agree.

    GM missed the boat by answering the Pinto with the Vega and then the Chevette. They didn’t aim high enough by trying to learn from the Japanese.

    By 1972, they already believed they were “too big to fail”.

    I actually thought the X-cars were pretty impressive at the time, and their legacy lives on in today’s GM products. But they were unrefined compared to the imports, and their unreliability eventually killed the GM brand.

    They lost their lead one customer at a time.

    Saturn looked promising until it got absorbed back into GM; that was a watershed moment.

    As for dealing firmly with the unions: Well, that goes for all of Detroit.

  • avatar

    I think the GMT 900 pull forward decision was a spectacular failure. This happened right before the dawn of $4 a gallon. They shelved all of the RWD sedans to bring these to launch “early.”

  • avatar

    The end for me, was when GM killed the EV1.
    At that point in time, GM was at the pointy end of the field with EV technology, and then they just threw it away. Imagine where the EV1 would be now!
    Let’s do SUVs they said. There’s no future in ev’s they said. That’s what happens when bean counters run a car company. A truely great tragedy for the american automotive industry.

  • avatar

    Long, long time ago. It’s not for nothing that all of the big3 has pretty much gone down the drain in lockstep. Back when GM were actually creating valuable IP, they should have split the company into separate pieces, leaving finance, design, engineering and marketing free to contract for manufacturing and other back office functions wherever they wanted. Flexibility rules, even though it might leave smaller fiefdoms for management to rule over. When you’re as big as the Big3, the only winning strategy is one allowing you maximum freedom to play political arbitrage, as size and profits draw leeches like an open wound.

  • avatar

    # 1 Putting a sleeveless alloy engine in the Vega. with a real engine (+ a other better quality choices ) GM could have sold small cars early enough to maybe fight off the imports.

    # 2 why did they create an entirely new division in Saturn only to copy Oldsmobile styling, then wait FOREVER for an up date, & then close Oldsmobile. If the SL1 was just the new Forenza and the Olds dealership experience was revised into a saturn like program, craploads of cash could have been saved.

  • avatar

    There is nothing GM could have done with Saturn that it couldn’t have done with NUMMI, GEO or Opel for billions of dollars less.

    No. “X” marks the spot where GM could have turned it around. GM spent millions on developing these cars, the largest automotive capital investment [IIRC] for a company up to that time.

    And yes, they were one of GM’s big successes. The Citation alone sold over 800,000 units that first extended model year. These cars were roomy,quiet,economical, luxurious in the Buick and Olds versions and at the time the answer for a lot of people downsizing, economizing and sticker shocked into something outside thei comfort zone.

    They were also slapped together at such a rate they earned an early reputation for poor workmanship and the 10 recalls [a record held until the 2000 Ford Focus]didn’t help their rep any. Think just how many pissed off people GM had on their hands.

    Even if they had treated every problem and customer well, the X was enough to turn off an entire generation of customers for GM cars, for good.

    And in the face of this disaster GM’s president [I think it was Roger Smith by that time]was refusing to call this a disaster. I am paraphrasing but the comment went to the effect that a successful car is whether it sells or not. We sold a lot of X cars.

    Yes, and because of that, Toyota, Honda and Nissan’s sales continued to increase…..

    Bankruptcy is not an option, dontcha know?

  • avatar

    That GM is dying from a thousand paper-cuts is fairly obvious. That they decided to ignore the lessons of Deming & NUMMI and damned the careers of those who didn’t ignore them is pretty large on that list.

    As to when their last real opportunity to change things… Late 80’s early 90’s when they were last at their death bed and failed to do what was necessary to change the culture of the organization. The profits of the mid-late 90’s were squandered as a result and led to continuous decay after the recession in ’01.

  • avatar

    “What people couldn’t predict, though, was the perfect storm of 2008: the collapse of the capital markets, the collapse of the real estate market, and $4.00 gas.”

    All of those were predicted, and lots of people predicted it. Ignoring all of the blogs that were predicting this/following this at the time (CalculatedRiskBlog, HousingBubbleBlog, and even semi-mainstream media (The Economist), it’s very evident by the action of the markets during that period that quite a few people saw this coming (insider memos).

    Inverted-yield curve, insider selling, run-up in gold price, flight to commodities (driving up oil), it was all predicted. I sold all of my equities, as well as my house, in 2007. Apparently GM, unlike Ford, didn’t have their ear to the ground.

  • avatar

    GM’s failures, a long and varied list.

    Have to agree with some points here:

    Saturn – I’ve heard a former GM’er say that it was an admission that GM couldn’t make cars. OK, GM needed a complete re-do, but they did not need another division. If they wanted to bring in import intenders to GM dealers, GEO worked OK for that. Saturn brought in import intenders but then left them with nothing to move up to. Those buyers moved on to Honda, Toyota, etc.

    Actually, it was GM’s lingering perception of “import” buyers vs. the rest of the market that was the problem. Buyers don’t segment themselves that way. There are car buyers, period.

    GM-10 was a debacle, the look alike, downsized, badge engineered cars of the 80’s were a disaster, no question.

    Roger Smith’s emphasis on technology (robots rule!) over product.

    I’m an accountant by trade but I agree that accountants should not make product decisions. I have seen GM cars that look like someone made a deliberate decision to cheap the car out. Ooh, let’s save $ 500 on this interior. Never mind that it makes the car so undesirable that it takes $ 1500-2000 in incentives to get the damn thing off the lot.

    To answer Robert’s question of when was the last time GM could have turned it around, I agree that the early part of this decade was the last time. Profits from trucks and SUV’s were still strong.

    This was when GM could have financed new, competitive CARS. What if the current Malibu had been introduced when the last gen Malibu had been introduced?

  • avatar

    The truth is, other than the Corvette (and not so much these days), there has never really been a GM product that I would consider purchasing (maybe some of the recent Cadillacs). They’ve never been on my radar screen (although I liked some of the last Oldsmobile models, I’m not sure if I would have bought one). The Saturn was impressive for GM, but the imports were still better. 98% of the models I have driven between 1980 and now were junk.

    But as others have mentioned, Chrysler and Ford had some real hits. Just the other day, I saw one of Chrysler’s cab-forward cars (an Eagle?) from the 90s, and I thought “Wow, Daimler really screwed up”. But even in the 00s, Chrysler had attractive products (Pacifica, Spitfire).

    GM? There is absolutely nothing I would want.

    I worked a GM auto show around 1989. I got to drive all of the cars to-and-fro from the lot. The only car I liked was the Cadillac Allante: it was the only GM car that was as nice as my 1984 Mazda 626.

  • avatar
    Rod Panhard

    GM could have turned it around when they looked at two year old Chevy Vegas that were rusting to death. And those Vegas were being driven in locations where drivers salt french fries, and not driveways. And those same Vegas were parked next to two-year-old Corollas and B210s that weren’t rusting to death.

    That’s when GM could have turned it around. But no, instead, they gave us the Chevette.

  • avatar
    Bill Owen

    That day in 1999 when GM’s board chose Rick Wagoner was the last possible moment to avoid the mess the company is now in.

    Everything went downhill from there. While not a complete financial picture, consider this.

    General Motors averaged a piddling profit of $1.5 billion each year from 2001 thru 2005 amounting to less than 1% of gross sales. And that’s if the figures are accurate, as GM had to restate earnings for the prior 5 years after a Securities and Exchange Commission investigation in 2001.

    By 2007, GM’s gross sales declined to $180 billion and lost $43.3 billion ($38.3 billion was a one-time tax charge write-off).

    In 2008, GM’s gross sales again declined to $149 billion and lost $30.9 billion for the year with no tax write-offs. Effectively the worse 4-quarters in the 100-year history of the company.

    In summation, GM’s gross sales have steeply tanked for the past 10 years with a cumulative loss of over $80 billion. Market shared has collapsed as well.

    Frankly, I think anyone who visits the TTAC site could have done a better job than Rick Wagoner at calling the shots.

  • avatar

    gslippy :
    September 19th, 2009 at 11:09 pm

    GM missed the boat by answering the Pinto with the Vega and then the Chevette. They didn’t aim high enough by trying to learn from the Japanese.

    Depends on what they were supposed to “learn” from the Japanese. If the time period in question here was the 1970’s, and you refer to leading-edge products and tech, then there was nothing to learn – Toyota, Mazda and Datsun compacts were RWD compacts with beam axles in back, and big, rough four-bangers, just like the Vegas and Pintos of the time. Honda was really the only one doing something truly game-changing back then with FWD.

    What Japanese cars did better with was quality and execution. In that sense, yes, GM (and all its domestic competitors) missed the mark big-time.

    Flash forward to the 1980’s, and while Ford and Chrysler were enjoying success with FWD compacts, GM stuck with the RWD Chevette, which was a MASSIVE mistake.

  • avatar

    MattPete :
    September 20th, 2009 at 9:17 am

    “What people couldn’t predict, though, was the perfect storm of 2008: the collapse of the capital markets, the collapse of the real estate market, and $4.00 gas.”

    All of those were predicted, and lots of people predicted it. Ignoring all of the blogs that were predicting this/following this at the time (CalculatedRiskBlog, HousingBubbleBlog, and even semi-mainstream media (The Economist), it’s very evident by the action of the markets during that period that quite a few people saw this coming (insider memos).

    The prevailing wisdom at the time was that there would be a downturn, but most economists didn’t see the wholesale disaster that happened. I worked in the homebuilding industry, which was the first one to really collapse, and they certainly didn’t see this coming at all.

    I think that’s a case of minority making predictions that make them look smart now, but were far from certain back then. Ford was one of the minority.

    In essence, any economic prediction is an educated guess, a bet. Some people bet right; most others bet wrong. GM was in the latter group.

  • avatar
    Daniel J. Stern

    @BDB and mtymsi:
    I’m at a loss to think of any really big, category-busting successes along the lines of the Taurus and Chrysler minivans … GM has had not one mainstream hit vehicle that I can think of in the last 50 years.

    I would argue the new-for-’77 B-body, particularly the Caprice/Impala, was such a car for them. It revolutionized the packaging and space-efficiency standards of full-size cars in the American market. It was engineered, designed, styled, executed, and built rather well. It could be had as a bare-bones el strippo or a fully-loaded deluxemobile without leaving the Chevrolet brand (which begs the question of why they insisted on futzing with badge-engineered variants for Olds, Buick and Pontiac which were in most respects not as good, but I digress). It was well liked, well rated, and immediately popular; it really seemed to hit a sweet spot.

    After its introduction there were some substantial stumbles — underspecced transmissions and that abysmal dieselized engine come to mind — and it was greatly cheapened in build and materials quality with the 1980 facelift, but it remained a very popular car right up through 1990 (a fourteen-year run!) after which it was replaced by the bloated upside-down bathtub.

    I have seen GM cars that look like someone made a deliberate decision to cheap the car out

    This actually happened in a meeting to discuss headlight bulb options for a new headlamp (as reported to me by chief OE optical engineer for one of GM’s major headlamp suppliers — he tells me he gets very similar idiocy on a regular basis from Ford and Chrysler, too):

    Headlamp guy: For a headlamp such as you have in mind, giving what you want in terms of beam performance, your best pick is going to be such-and-such a bulb.

    GM guy: What size wire would we feed it with?

    Headlamp guy: We like to see it fed with #14, but if the wire runs are short enough or your control circuitry has relays, #16 is fine.

    GM guy: We’re going to feed the high beam with #18 and the low beam with #20.

    Headlamp guy: That’s not adequate. You’ll have voltage drop and poor headlamp performance, and keep in mind circuit resistance tends to increase with age.

    GM guy: At 100% duty cycle, maybe, but these are headlights. They’re for use at night. It’s only night half the time. That’s a 50% duty cycle, so we don’t have to use the same gauge wire as if it were a 100% duty cycle. It’ll be #18 for the high beam and #20 for the low. We don’t need to worry about age; we build new cars, not old ones.

  • avatar

    Although GM began its long trend towards the crapper in 1958 when short-sighted finance men took over from the engineers, I think the company could have saved itself in 1999 if, and it’s a big if, they had not made Wagoner CEO.

    After Wagoner took over, the writing was on the wall and the slide continued. Even in 2004, before GM lost big, analysts looking at the market share and future liabilities said that GM had to file for bankruptcy. There was simply no way out of the hole that had been dug.

    However, GM only could have been saved if Ross Perot (or some other Robespierre figure) had come in and fired the entire board and most of the company’s white collar, non-engineering talent. The chances of that happening were likely zero. Why just last year the big institutional investors backed Wagoner to stay on, and those are the only votes that count.

    I think you would have to go back and say that not going with Roger Smith, who piddled away $100 billion CASH during his tenure, was the last reasonable chance. GM could have been turned around and had the assets to invest in its future. Before that, DeLorean. And before that, 1958.

  • avatar
    Da Coyote

    I simply do not care about GM any more.

    They can do whatever they want. If I buy “American,” it’ll be Ford. No money of mine goes to anything our thinking-challenged congresscritters ginned up – well, willingly, at least.

  • avatar
    Martin B

    From a TIME article of 1992:

    Perhaps GM’s crowning folly during the ’80s was the reorganization of its North American operations into two clumsy megagroups… While that may have seemed sensible at the time, it created a new level of bureaucracy sandwiched between the automaking divisions and GM’s corporate headquarters. The results ranged from mass confusion to a proliferation of look-alike models. “Everything Roger Smith tried failed,” says Womack. “The screwball capital investment, the screwball reorganization. Smith was a guy who didn’t want to hear the bad news.”

    I believe Roger Smith’s reorganization finally pushed GM over the edge of the cliff. But it found a little bush called NUMMI to hang on to. Then, instead of gritting its teeth and clawing its way back up via the difficult and steep NUMMI path, it decided to let go, and the final splat became inevitable.

  • avatar

    Freedmike: GM enjoyed success with FWD with the Xs, the As and the Js came about because of the popularity of FWD cars like the Civic and Accord.And that started when they offered them as of April 1979 when the Xs were introduced.
    Almost their entire line was FWD by 1986.

    And by 1984 the Chevette was the most popular passenger car sold in America.

    Your argument is correct though:they took a knife to a gun fight that far into the decade with the Chevette.

    But remember:in Oct. 1975 Car and Driver claimed that the Chevette was “The Most Important Car Detroit Has Ever Built”. Right there on the cover. You wouldn’t doubt C&D would you ????

    The homebuilding industry’s gains were built on the credit bubble.

    Who in their right mind wouldn’t think that bubble wouldn’t burst just like it did in the 90s as did commercial/real estate market in the 70s and Florida in the 20s?

    Good grief,one doesn’t need to be clairvoyant to think it wouldn’t happen at some point and set the dominoes falling.

  • avatar

    From a long-time Saab guys perspective it would be the late eighties. The attempt to do WHAT with Saturn? At the expense of the established names.

    The half purchase of Saab in 1989. IIRC a big reason to buy Saab was to avoid paying royalties on the Automatic Performance Control system where by the turbos boost and engine timing is regulated depending on the quality of the gasoline to avoid knocking. This system is still in use today, along with a highly regarded 4-valve head design. In 1994, Saab and GMs first car together was compromised with a craptastic, unnecessary timing belt V6 crammed into it, along with a horrible clutch cable(Saab had ALWAYS had a hydraulic clutch) design. And Im sure there are dozens, hundreds, thousands of engineering and design compromises that ended up biting GM in the market-share.

    There was never a real impetus to go after the German “myth”. The Japanese were coming on strong, the Koreans just arriving. Many of the problems that existed then still face the American industry today.

  • avatar

    Martin B,

    Your post brings back memories.

    The “reorganization” of GM into BOC (Buick/Olds/Cadillac) and CPC (Chevy,Pontiac,the C was for GM’s Canadian operations) was a big deal here in Lansing.

    Everyone who worked for GM in Lansing always said they worked for Fisher Body or Oldsmobile. Of course, it had been a corporate mashup for decades, but that reorg put an end to the Fisher name and GM/BOC signs went up on all the local plants.

    I questioned why BOC vs. CPC when the Lansing plants also built the Pontiac Grand Am, but that reorg never made a bit of sense anyway. A few years later, it was forgotten.

  • avatar

    If the homebuilding industry did not see this coming, then they were negligently clueless. By 2006, I, and many others, had followed the housing bubble back to its source — credit derivatives — and were shocked at what we saw. If non-economists like me can figure it out, then there are a lot of clueless economists out there.

    But, alot of people called it, but were pooh-poohed as doom-and-gloomers or given cutsie nicknames by the cheerleaders at CNBC (e.g. “Dr. Doom”). But, the data was out there for all to see, and to say “hoocoodanode” is a little disingenuous. Heck, the European Central Bank, International Monetary Fund, and the Bank for International Settlements had been raising concerns since the early part of this decade.

    In a more mainstream form, the “Mortgage Lender Implode-o-meter” was started in 2006, and “The Economist” was talking about this back in 2004. Any ‘economist’ who didn’t see this coming was negligently incompetent.

  • avatar

    Lokkii, the thing you overlooked is that accountants also tally up the costs of warranty claims, replacement parts, recalls and product liability lawsuits. So this explains part of my curiosity about specific examples of decisions to make poorly engineered products. I can’t believe managers (whether they started out as engineers or accountants) will blithely accept massive repair charges, recalls, fines or judgments by saying, “Well, I still think the beancounters were right that the cheaper design was best.”

    Now, I know that engineers are pressured to stay within cost targets. But I would expect them to be honest and tell decision-makers, “this design is cheaper to make but will have an awful failure rate.” (Unless the engineers had a misplaced faith in the reliability of the design–in which case their competence, not ethics, is open to question.)

    Again, any specific examples out there? So many people have lost jobs at the D3 you’d think some would be willing to reveal the story about, say, Dexcool or bad head gaskets.

  • avatar

    I agree with Buickman that it was inevitable once they sold GMAC, but the actual sale was just another brick in the wall of lost opportunities, wasn’t it.

    I remember reading an article in some magazine back sometime around the end of the ’70s to the early 80’s, when due to the various oil price spikes of then recent years, small cars, mostly imported from Japan, were starting to really take off sales-wise, and they were eating Detroit’s lunch in that market segment. The writer(s) opined, supposedly on the basis of having interviewed Japanese auto executives, that the only thing the Japanese feared about their business was that General Motors would wake up, smell the coffee, and finally get it’s act together. They supposedly said that were that to happen they wouldn’t be able to withstand GM’s enormous productive capacity. Get this: that the General would be able to undercut them on price and equal or outdo them on quality, in other words, the General could basically re-write the playbook if it only decided to do so.

    Of course they were already so deep into denial even then that there was never really anything for the Asians -or anybody else- to fear.

  • avatar


    No doubt, as someone who worked in the housing industry before and during the crash, I can say they saw a downturn coming. The housing market is cyclical, after all, and the official word was that they were anticipating a good-sized but sustainable downturn.

    The forecasts were 10-15% down from boom-era sales, but since the boom era was so busy, it was almost like a return to sanity. Instead, sales went right off a cliff – down 50% or more.

    If they’d seen THAT coming, then they’d have started selling off land that they’d bought for long-range development plans. No one did that.

  • avatar

    ExtraO :
    September 20th, 2009 at 8:09 pm

    I agree with Buickman that it was inevitable once they sold GMAC, but the actual sale was just another brick in the wall of lost opportunities, wasn’t it.

    True, but considering that GMAC was in the toxic mortgage game, maybe selling them might have been one helluva smart move (albeit unwitting).

  • avatar

    MattPete :
    September 20th, 2009 at 7:20 pm

    If the homebuilding industry did not see this coming, then they were negligently clueless. By 2006, I, and many others, had followed the housing bubble back to its source — credit derivatives — and were shocked at what we saw. If non-economists like me can figure it out, then there are a lot of clueless economists out there.

    MattPete for Fed Chairman? :)

    Seriously, I saw the same predicitons that you did – believe me, I was dependent on the mortgage and housing industries for my living – but there was a huge divergence of opinion on what would happen between 2006 and 2008. Everyone knew a downturn was coming; few knew it would get as bad as it did. That’s because to push the market off a cliff, several things had to happen that were far from sure bets back in 2006: $4 gas, the failure of AIG, and on and on.

    I’m hoping you came out OK from your market research, though… I bet you did.

  • avatar

    1986. That was the year when EVERY GM car except for the carry-over rear drivers (Caprices, Caddy Broughams and the Olds/Buick fullsize wagons) was absolute crap. It started earlier with the J cars but things got really bad with the miniature Eldorado and Riviera in ’86. GM went too far in downsizing, thinking that we would be willing to buy anything if it was small and got good gas mileage. Never mind if it was slow, ugly, plasticky and in the luxury brands chock full of unreliable electronics. By the time GM realized their mistake, several years later, they had destroyed 90% of the brand equity in Cadillac, took the most successful nameplate of the preceding 20 years (Cutlass) and made it meaningless, and turned Chevrolet into a synonym for mediocrity. Things were so bad as a result that it was impossible to resist the quick profits to be found in killing off the last rear drive platform just when they were starting to get it right again (Impala SS and LT-1 Roadmasters) to push buyers into high margin (but bigger and thirstier) trucks and SUV’s. Leaving nothing to attract and retain the buyers who didn’t want SUV’s.

  • avatar
    1600 MKII

    In the late 70s – early 80s, when they tried to counter the attack from Germany and Japan with a series of crap cars and then simply gave in to ennui – they never listened to their dealers or their customers anyway.
    I was there – they were so insular they actually believed that the customers were working for them and would take whatever they put out.

    Ford was doing the same at the time and barely survived, and if it hadn’t been for Iacocca and his (poor execution notwithstanding) decision to try and bring the company into alignment with the new paradigm, Chrysler wouldn’t have made it past 1982.

  • avatar

    Re: 50merc – I don’t think you’ll be able to find a single story about this that covers all facets; after the Ford Pinto debacle it’s rather difficult to trace individual decisions at one point in time all the way through to a highly visible result at the customer level. I would gather that nobody really wants to know the whole story since that opens them to individual/career risk.

    What is more common is that a cost target is established for a whole area of the vehicle based on a desire to make money on each car sold. It’s up to the engineers and purchasing guys to find a combination of parts that come within the target cost as a summation of all parts in that area of the vehicle.

    Also consider that you’ve got armchair captains (both inside and outside the company). These are the people who come up with ideas about the right way to build a good car… but these people don’t have to execute anything. They’ll always criticize anything that “is not best for the customer.”

    So… pretend you’re in charge of seating. You have pressure from marketing/customers who say buyers want some luxurious leather seats in their $25,000 car (before incentives!). It gets worked out by bean counters that for money to be made selling this $25,000 car, the interior can only cost AAAA. Turns out your allocation for seats is AA. You personally think AA bull-crap and you think the bean counters are screwing you. But, in spite of your reservations, you start doing a lot of work. It turns out your suppliers are all quoting costs that would blow up your target and the best you can do is AA + $10. What’s your solution?

    Do you work with your peer engineers to find ways to save $10 elseware in order to fund your all-important seats? This assumes your peers aren’t encountering their own cost problems.

    Do you keep working at the specs where you remove stitching or padding thickness to get those seats cheaper? Hey now – no compromises are allowed by those people blogging on the Internet; they’ll chastise you!

    Do you start working with other seating engineers to try to find ways to share seating items so you get economies of scale by buying a higher volume of stuff from the same supplier? Hey – this sounds good on paper. Except some things are easier said than done.

    Do you introduce “seats with leather seating surfaces” that are basically 10% leather and 90% vinyl? This would put you under target, except it’s not really giving the customer the expensive leather seats that they originally claimed to want to have in their $25,000 car.

    Do you raise the flag with your manager and find a way to get $10 of extra target to work with (after all, your seats are extremely important)? Good luck with that… your manager has more important problems as he’s trying to hit that AAAA target.

    Do you think your suppliers of being lame with you and ask them to get $10 of cost out of those seats? Again, good luck with that.

    Do you pray? Again… good luck.

    Oh – and by the way – the specs just changed on you. Apparently marketing wants to add color-contrast stitching because that looks more sporty. And no, you don’t get more target to play with. Good luck!

  • avatar

    Back when GM launched Saturn, the Japanese tide was strong but not yet a fait accompli. Detroit sedans still dotted the top ten sellers, and people honestly believed that GM was capable of launching “a different kind of car company”. And with customer satisfaction and dealer profitability so well-entrenched in the Saturn philosophy, it seemed for a minute that they just might make it. If only the cars hadn’t turned out to be just a different kind of crappy.

  • avatar

    When they took the 350 from four bearings to two? Seriously, Stu has it right. I’ve owned a ton of Chevvies, but I’m not going to miss this inept shadow of a company at all when it finally craters for good.

  • avatar

    1972 – 30 and out. Basically just about every inept decision since that date has been in direct relation to dealing with it.

  • avatar

    Late 70’s. That’s when they made crazy concessions to the unions. The executives knew that by the time those became a problem, they’d be long gone.

    Aroud the same time, they were putting out low-quality crap. They were resting on their laurels and thought their crap didn’t stink. They considered themselves invincible…too big to fail. Around the same time the company was beginning to be run by bean counters instead of engineers and car guys. That’s when they’d try to save a few bucks using low quality steel, converting gas engines into craptastic diesles, having 5 brands with identical badge-enngineered cars, etc. which totally ruined their reputation and started a 30 year mass exodus to the imports.

    That’s when they went to hell. The last minute they could’ve pulled of some kind of miracle to save themselves? I’m not sure, but the farther from the late 770’s, the lower their chances became.

  • avatar

    GM needed to be where they were in 2004 or so back in 1995. The titanic was sinking long before Lutz got there. Sure, spending less on the big SUVs would’ve helped, but it wouldn’t have been the savior. Hind sight is 20/20 after gas prices double. In my opinion, they really are STILL better than any of the other full size SUVs and they were selling like hot cakes for a while. The previous full size SUVs by GM were about 5 years behind the ball.

  • avatar

    Around 1977-1978. At that point, GM’s brands had been tarnished somewhat, but not irreparably, and the downsizing of the B-bodies and A-bodies (a big gamble) was paying off. The Japanese hadn’t yet been motivated by VRA to go after the higher-priced markets, Volkswagen was starting to stumble in the U.S., and Ford and Chrysler were lurching toward bankruptcy. If GM’s X-body and J-body cars had been world-class efforts instead of mediocre half-measures, and if Roger Smith hadn’t tried to destroy the autonomy (and identity) of the divisions, things might now be very different.

    Even then, it was unlikely. The factors that have contributed to GM’s decline — the unbalanced power of finance, the insularity and arrogance of its leadership, the layers of bureaucracy and politics surrounding every decision — were already formidable even a decade before that.

  • avatar

    GM might have turned it around in 1982 when, under Roger Smith, GM started the W-body (mid-sized) platform design and engineering. Done correctly, GM might have corrected the downward trend that had started.

    Instead, the W-body program was nothing but trouble, and it cost GM plenty – in profits AND customers. They really haven’t recovered.

    The program was so illustrative of GM’s cultural and other problems that Smith decided to start with a “clean slate”, announcing the “Saturn” caper in 1985. That didn’t turn out too well either.

  • avatar

    I think it was around 1980 that the GM magic was gone. Their cars looked like zombies created them. There was little effort in the vast majority of them. When they tried something new, it didn’t work – except for Saturn.

    What would have happened if the X cars were as good as reviewers said they were? What would have happened if the Pontiac Fiero showed that GM could create a space-frame, composite sided, commuter car? They spent a billion and gave us dust-buster mini vans that attempted to find buyers who only sat behind the front seat to see an acre of plastic between them and the windshield to know something was dead wrong with them. Embarrassing mistakes across the board. We have a generation of poor efforts from GM. They dared us, so we walked away.

    But whatever – when could GM have turned it around after years of producing these boring cars?

    When they started crapping on their golden geese SUVs. We saw how they couldn’t get their act together building cars, then we saw stuff like the Pontiac Aztek and it’s Buick counterpart and saw the same zombie-mentality crapping there.

    So, we couldn’t justify a car from them – or an SUV anymore. So, what are we supposed to do? We moved on.

    Answer: About 2001-2002 was the beginning of the end.

  • avatar

    The final nail was the 2nd generation Saturns. Specifically, they looked like their other products (even though they weren’t! WTF!) and coincided with a changed dealership experience. If things had been run differently, I could see Saturn as having become the profit center of the company and a sure sign that the other brands needed to differentiate more.

  • avatar

    holydonut, I think your description of how it works is spot-on. Sure, there are blunders made by managers (e.g., neglecting family sedans), stylists (dustbuster minivans) or engineers (Fiero’s habit of living up to its name). But the beancounters are really just scorekeepers. They say, “adding more soundproofing will put you over budget” or “unless $200 of costs can be removed, the vehicle won’t cover overhead burden at your optimistic sales volume projections.” And the messenger gets blamed.

    Buickman pointed out that selling GMAC (which was keeping the company in the black) was a pivotal event. You have to wonder if any GM executive or director ever said “gee, we could make money if we didn’t make cars”!

  • avatar

    We don’t make cars, we make money . . . .

    Alfred P. Sloan

  • avatar

    How many areas of manufacturing were destroyed in USA because of cheap asian imports?

    Manufacturing in the USA is larger than ever. The “problem” is that productivity is so much higher that it takes fewer people to manufacture the same quantity of goods. The entire bargain that the UAW and GM had worked out was essentially a Ponzi scheme that depended on GM always employing the same number of workers, even though the foreign competition (and domestic manufacturing in other fields) had figured out how to do more with less labor. GM only had a few choices:

    1) Use more labor for the same car than competitors, and make more expensive cars. But this would only work in the luxury segment, and the volume in the luxury segment wasn’t large enough to employ all the UAW workers and factories. GM couldn’t do this without idling tons of workers and losing money.

    2) Try to cut the workers’ benefits. This would lead to strikes.

    3) Try to move out of the country; this would violate contracts and also hurt their “American” appeal.

    4) Try to cut the number of workers employed through attrition. But then the new workers wouldn’t be able to pay for the pensions and benefits of the retirees, leading to massive pension and benefit deficits.

    5) Use more labor for the same car as the competitors, and cut corners, and sell cars to people who wanted cheaper cars and didn’t care about quality, or who cared enough about buying American or their father’s brand to pay the same for $2500 less car. Long term result: slowly alienate buyers and trash your reputation.

    GM chose a combination of 4) and 5), the UAW and GM management agreeing to deal with the problem of 4) by dumping the pension and benefits debts on the US taxpayers.

  • avatar

    1) When the Vega rusted in the showroom and the diesel sounding engine burned oil at less than 10,000 miles, and new fuel pump every 30,000 miles.
    2) When the Corsica/Beretta came with an off-center steering wheel and seatbelts in the doors.
    3) When the Chevette came with an off-center steering wheel (to the right) and slightly left facing seating position.
    4) When my Fiero went through 3 clutches in the first 2 years and not covered under warranty. When the brakes seized after having them serviced by a GM dealer as I drove away from the lot, when I had an engine fire after the GM dealer serviced my car, performing a recall that was supposed to prevent such a thing, and then the dealer trying to charge me to pay for the resulting repairs.
    5) When my dad’s Pontiac 6000 would just shut itself down for no reason while moving.
    6) When my Buick came with a misaligned door and I had to take it back 5 times and had to go in and show the GM service person how to fix it myself. When my Buick’s wheel bolts broke due to poor quality metal only to have GM deny warranty claiming I “must have tampered with them” while the car was under warranty. When the odometer stopped displaying shortly after warranty forcing me costly replacement of the entire dash gauge module. When the light sockets started melting and shorting out lightbulbs.

    You can see, I’ve owned a lot of GM cars in my lifetime. GM probably could have turned it around if they put themselves in their customer’s shoes and took a serious look at how their customers really felt. GM could have easily built better cars. But they didn’t.

  • avatar

    I agree with most of the sentiments here, except for the person who said that GM hasn’t had any bona fide hits in the last 50 years. That is simply untrue. GM owned the industry in the 1960’s and 1970’s. However, the last “hit” I remember was the early-80’s Olds Cutlass. Great style, number one seller, horrible V-6 engine that blew after 60,000 miles.

    Now lets look at something positive:

    This is a never-titled 1987 Buick for sale at Len Immke Buick … here is the description:

    3.8L turbocharged at Mclaren. This GNX ***#415 of #539 in production.*** Believed to be the ONLY ONE IN THE WORLD to be*** UNTITLED*** Just 676 miles and on our showroom floor. MSO goes with car, Gorgeous black with black and gray interior. Automatic transmission, A/C, power windows and locks, dual exhaust, power steering and brakes, tinted windows, 6-way power seats,AM/FM/Cassette, cruise control, tilt wheel and rear defroster.


    Since this car has never been titled, would it sell as a new car AND would the manufacturer’s warranty still be good?

  • avatar

    Could only have turned it around before promising the unions that retirees would make more not working.

    That, and when GM decided to become a mortgage lender that sold cars on the side.

  • avatar

    The mid ’50s through the mid ’60s when GM completed the trashing of the Sloan market-segmentation strategy, went to common platforms and let every division push for volume.

    The 1972 strike, and just about every subsequent UAW contract; no sane company could ever agree to something like the ‘jobs bank’.

    The early 1980s as GM forced the whole company into a lemming-march over the FWD cliff. The 1981 Seville, the boat-tail FWD jokemobile, showed that GM had no understanding whatsoever that the luxury and near-lux market was leaving them behind (I’ll give them a mulligan on the ’75 Nova-Seville; it wasn’t very good but it wasn’t the complete embarrassment the ’81 was.)

    The day they first started using the floppy, sloppy multifunction turn-signal stalk typical of every GM car from the mid ’70s until about five years ago.

  • avatar

    The early 1980s as GM forced the whole company into a lemming-march over the FWD cliff.

    GM was at it’s strongest when its line-up consisted of primarily RWD cars. GM’s most popular vehicles today are also RWD (Trucks, SUV’s, Camaro, G8). GM already has a formula that works, why keep trying to swim upstream building boring, me-too FWD cars??

  • avatar

    My non-expert answer would be the early-1980s, maybe mid-80s at the latest. They HAD to be willing to take a strike to break through the UAW stranglehold on pensions, health costs and work rules, and when they didn’t, by the 1990s they didn’t have the financial slack to take a strike if they wanted to—they were on the tiger’s back and couldn’t get off (or at least couldn’t see how to convince their shareholders and creditors it would be worth it, and in/after the age of Milken and KKR if the shareholders bailed they would be takeover bait)

  • avatar

    “GM Doesn’t make cars, we make money”
    Alfred Sloan.

    There’s no coming back from that.

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