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Published: Friday, 9/19/2008

GM s future cloudy as automaker celebrates 100th birthday

DETROIT General Motors celebrated its first century this week. It was a century in which it sold 450 million cars, became the largest corporation in the world, and stood for decades as the symbol of American innovative and technical power.

More than a half-century s worth of classic Corvettes were on display. The company won praise for its surprise unveiling of the car to which it has pinned its future hopes, the plug-in electric Chevy Volt, which it hopes to have on sale by 2010. (If it can just get the batteries to work right.)

Yet even as the celebration swirled around the company s Renaissance Center headquarters, there were whispers of unwelcome reminders that this wasn t your father s GM.

That General Motors was so powerful it didn t beat the competition so much as it ignored it. In 1954, when Detroit itself still had nearly 2 million people and was bustling and prosperous, GM made 54 percent of all the vehicles made in America.

The year before, the firm s CEO, Charles Wilson, had left his job to join the Eisenhower cabinet as Secretary of Defense. In a famous and telling moment, one senator had asked, during his confirmation hearing, what Charlie would do if he needed to make a national defense decision that might be contrary to GM s interests.

Impossible to imagine, Wilson snorted. As he had always seen it, What was good for General Motors was good for the country, and vice versa. Much of corporate America probably would have agreed.

But as time went on, things slowly started to slip. Small European cars began to arrive. American Motors introduced the subcompact Rambler, which they intended to counter GM s gas-guzzling dinosaurs.

General Motors became fat, lazy, and arrogant. And so, to a large extent, did the United Auto Workers union. Large increases in pay and benefits were routinely granted. GM came out with the Corvair in 1960, in an attempt to compete with the European subcompacts.

Its problems were so notorious they led to the book Unsafe at Any Speed and launched the career of its author, Ralph Nader.

And then came the oil shocks of the 1970s. When the Iranians seized the U.S. Embassy in Tehran in 1979, General Motors had about 618,000 workers in this country, an all-time high.

Today, fewer than 100,000 remain. There were many factors for General Motors decline, one of which was that the competitors simply got better. But those who know the industry say a smug, insular, and inbred culture also hurt.

Forbes Magazine s Jerry Flint, who has covered the industry for half a century, told me last year he thought the worst thing that could happen to GM at this point was a burst of success that could give their executives an excuse to become arrogant again.

This week, General Motors celebration came on the heels of a year in which the company had lost a record $39 billion. Instead of selling more than half the cars in America, General Motors was selling less than one out of every four.

Worldwide, Toyota seemed likely to eventually pass GM in total vehicle sales. At home, General Motors executives were waiting impatiently for Congress to approve $25 billion in once-scorned loan guarantees.

For the first time, people were whispering the unthinkable, even if they didn t really believe it. Renowned University of Michigan business historian David Lewis told the Associated Press:

This is the worst crisis they [GM] have ever faced, because they are really in danger of failing.

Not many industry experts really expect General Motors to die. David E. Davis, the legendary founder of Automobile Magazine and other publications, said, It is really hard to imagine a world without GM. They are, I think, too big and too important a corporation to fail.

But even he acknowledged serious problems. The company eliminated the Oldsmobile nameplate a few years ago. It s really hard to see what kind of a future Pontiac has, Mr. Davis said.

Others think Buick may be first to fall, though the corporation hasn t said that any more consolidation is under way. Auto writers have long ripped into GM for a culture of complacency.

Mr. Davis is more optimistic. They really have some tremendous intellectual resources, he said, but added I think they are too dependent on processes and systems.

The company has suffered financially in recent years, he thinks, in large part because of an inability to see that people weren t going to want to buy trucks and sport utility vehicles forever.

All this would have amazed William C. Billy Durant (1861-1947), the man who created GM a hundred years ago, started Chevrolet, and had the brilliance to see the potential of combining a group of different nameplates under the same corporate umbrella.

He was a genius, but lacked the managerial skills to make it work. He was ousted twice as GM chairman, became irrelevant to the car industry, and in an only-in-America story, spent the last decades of his life running a bowling alley in Flint.

A century later, the company he created is itself fighting to stay relevant. The next five years may go far to determine how many more anniversaries the company Billy built will be around to see.



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