General Motors’ Road Ends in Bankruptcy

By webadmin on 11:43 pm May 31, 2009
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John Porretto

Houston. For generations, General Motors fueled America’s love affair with the automobile, building cars that defined their owners’ status in life and the industrial might of the nation. But less than a year after entering its second century, the company that survived wars, international rivalry and even the Great Depression is being driven by the government into bankruptcy court.

The GM that helped move the world from horses to Chevys and Cadillacs is expected to file for bankruptcy protection today. The new GM that emerges in the future will be leaner — unsaddled from much of its debt and labor costs that contributed to tens of billions of dollars of losses. It will be almost three-quarters owned by US taxpayers.

It will be a fraction of what was once the mightiest corporation in the world.

“We throw around the word iconic way too much these days, but General Motors really does deserve that name,” said Robert Thompson, a Syracuse University professor who studies American popular culture. “GM has become a metaphor for the industrial era of the United States.”

The company that Billy Durant started on Sept. 16, 1908, with the Buick nameplate quickly absorbed other carmakers — Oldsmobile, Cadillac, GMC, Chevrolet and what is now Pontiac — within three years. Saturn, Hummer, Saab and other brands were added over the years.

GM introduced the fully automatic transmission, dropped the first V-8 engine into Chevy and put tailfins on the Cadillac. The ultimate muscle car, the Corvette, was introduced in 1953. Its engineers even developed the first mechanical heart-lung machine.

GM inspired crooners to sing, “In My Merry Oldsmobile” and “GTO.” When Burt Reynolds outfoxed Jackie Gleason’s bumbling southern Sheriff Buford T. Justice in the 1977 movie “Smokey and the Bandit,” he did it in a black Pontiac Trans Am with a gold firebird on the hood. And Don McClean drove a Chevy to the levee in “American Pie.”

GM sold dreams to drivers of all ages. The first Cadillac, for many, was a watermark of success, and the brand became the metaphor for top-quality goods.

“Your lifestyle, and how well you were achieving, could often be measured by what kind of GM car you were driving at a given time,” Thompson said. “Cadillac meant luxury, it meant you’d achieved the American dream.”

For Tim Barnes, the American dream is still the Corvette, the car that he fell in love with as a 15-year-old grocery clerk. The first Corvette rolled off the Chevrolet assembly line on June 30, 1953, in Flint, Michigan. The car, now made in Bowling Green, Kentucky, has starred in movies, inspired singers and endured for 50 years.

The Corvette’s sleek, low-profile carbon fiber ­— and steel-body still turns heads on roads dominated by cookie-cutter sedans.

“It was the shape, it was the aura, it was the performance,” said Barnes, 55, of Thornton, Colorado. “It was the epitome of what a sports car should be.”

His first was a 1967 convertible — “I still know the VIN [vehicle identification number], and if I ever come across it, I’ll buy it again.”

He met and married his first wife while working on Corvettes with a friend. His first son was brought home from the hospital in a Corvette, and he expects a Corvette will be parked in his garage when he dies.

For retiree Chuck Lippmann, 66, of Bergenfield, New Jersey, it is the 1955 Chevy sedan, a two-door, red-and-white model he has owned for about five years. It reminded him of his youth and was the only brand that he liked.

“Growing up, my father always had GM products,” he said. “I just kind of latched onto the Chevy.”

In 1979, GM employed 618,000 Americans, more than any other company. It became so ingrained in American culture that its late 1980s advertising boasted that Chevrolet was “The Heartbeat of America.”

By then, though, Americans had become suspect of its quality. GM cars broke down. They rusted. There were stories of workers building cars with Coke bottles in the doors. At the same time, Honda and Toyota put out cars that seemed to hum along forever, almost maintenance-free.

GM and the rest of Detroit started neglecting their cars, instead focusing on pickup trucks and sport utility vehicles with profit margins high enough to cover the ever-growing cost of former workers’ pensions and health care.

During the late 1990s, when the economy was booming, GM sold more trucks and SUVs than ever before, and its profit hit a record $6.7 billion in 1997.

Perhaps the demise of GM’s storied Oldsmobile brand is indicative of the company’s problems.

Oldsmobile was among the pioneers in using chrome-plated trim and the mass production of automatic transmissions. It gave drivers the Eighty Eight series, the front-wheel-drive Toronado and the Cutlass.

The brand grew over the years, and in 1977 it became the first GM division outside Chevrolet to sell more than 1 million cars. Its high point was 1985, when it built 1,168,982 vehicles.

As baby boomers aged, GM got older, too. Lacking entry-level small cars that would attract younger buyers, the average age of the company’s customer skyrocketed. In 2003, the average Oldsmobile owner was 50 years old. GM tried to counter the stereotype with an ad campaign that this was “not your father’s Oldsmobile.”

It did not work. Sales began to fall and GM was unable to make a profit with the aging brand. GM ended Oldsmobile production with the 2004 model year.

GM still hasn’t shed the problem of aging buyers, and marketing campaigns and new products have done little to change that. Last year, the average buyer of a Buick sedan was 66.

By the turn of the millennium, GM had grown too large, with too many employees, factories, brands and models. Like crosstown rival Chrysler, which is already reorganizing under bankruptcy protection, GM had a loyal truck following, but the image of its cars had been tarnished.

Even in years where Americans bought more than 16 million vehicles, the companies both lost billions.

When gas prices crept up to $4 per gallon, GM scrambled to roll out more fuel-efficient cars, but it didn’t shift quickly enough. Add the wide-reaching recession, and US auto sales fell by nearly half. GM and Chrysler collapsed under the tremendous weight of their fixed costs.

GM’s US employment amounted to just 88,000 earlier this year, and that number is likely to shrink even more as the company continues to reshape itself.

Herb Chambers, who has sold GM and other vehicles in New England for 25 years, said the company certainly has to take much of the blame. He says GM underestimated the potential of Japanese automakers when they began to grab US market share in the 1970s and’ 80s with smaller, more fuel-efficient vehicles.

The numbers speak for themselves: GM’s US market share has fallen from a peak of more than 50 percent in 1962 to about 19 percent these days.

“Costs got out of control, they weren’t staying up to date with technology and they weren’t delivering quality,” said Chambers, whose Boston-based company is one of the nation’s largest car dealers. “Meanwhile, that’s what the Japanese do.”

A big concern about a bankruptcy filing is whether it would taint the company and damage sales. So far, Chrysler’s foray into bankruptcy hasn’t driven customers away.

Chambers certainly is not counting GM out yet. Detroit automakers have a history of making comebacks during hard times in the past.

“If I were going to make a statue of American industry, and I had choose one company, I suppose US Steel would be a candidate,” Syracuse’s Thompson said. “AT&T would be a candidate. IBM would be a candidate. But in the end it would have to be a car company, and it would have to be Ford or GM, and I’d have to give it to GM.”