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Monday, 1 June 2009
Decades of mistakes, missteps led to downfall
The downfall of General Motors (GM) comes after decades of mistakes and missteps chipped away at the reputation and market share of the once mighty carmaker and buried the Detroit giant in debt.
(CHICAGO) The downfall of General Motors (GM) comes after decades of mistakes and missteps chipped away at the reputation and market share of the once mighty carmaker and buried the Detroit giant in debt.
‘It’ll have a huge impact in the United States because it’s more than just a corporation - it’s an icon,’ said Gary Chaison, a professor of labour relations at Clark University.
‘It represented manufacturing supremacy and good jobs for American workers. That’s gone.’
GM, which only months ago lost the title of the world’s biggest carmaker to Toyota after holding it for 77 years, had made huge steps in recent years to revitalise its products and slash its bloated structural costs.
But the restructuring cost billions and the debt-laden carmaker has fought hard to survive the collapse of car sales last autumn amid a credit crunch and deepening recession.
GM racked up nearly US$88 billion in losses from 2005 till the first quarter of 2009.
It managed to keep its operations afloat in recent months with US$19.4 billion in loans from the US Treasury but is now expected to seek bankruptcy protection in the coming days.
‘GM’s problems go back at least three decades,’ said Terrence Guay, a professor at Penn State’s business school.
‘The company became complacent in terms of products and customers, assuming that American car-buyers would choose GM vehicles,’ he told AFP.
‘They didn’t take the Japanese threat seriously; and consequently, steadily lost market share to Toyota, Honda, Nissan, and other imports.’
GM was a giant in its chrome-detailed heyday, employing more than 600,000 people worldwide and 464,000 in the US back in 1962 when it sold more than half the cars in America.
Founded in 1908, GM grew to be the largest private US employer, the world’s biggest company, had revenues higher than the gross domestic product of most nations, and currently operates in 140 countries.
After transforming its plants to make planes, tanks and munitions during World War II, GM expanded far beyond cars in the decades to follow, building everything from trains and rockets to home air conditioners.
GM also helped expand the American middle class with the standard-setting high wages and solid benefit packages won by hundreds of thousands of unionised car workers.
The phrase ‘what’s good for GM is good for the country’ became commonplace.
‘Between 1921 and 1980, they never lost money,’ said Sean McAlinden, chief economist at Michigan’s Center for Automotive Research.
‘The target was a 20 per cent return on capital every year, no matter what. And they did it.’
But GM and its Detroit neighbours, Ford and Chrysler, let their quality slip and fumbled the shift to smaller, more fuel efficient vehicles in the wake of the oil crises of the 1970s.
‘The baby boom generation has never forgiven them for the defects of the 1970s and 80s,’ Mr. McAlinden told AFP. ‘They will go to their graves without buying a GM vehicle.’
Japanese carmakers Toyota and Honda steadily gained market share, first with the low cost of their vehicles and then with their reputation for higher quality.
Plant closures became a part of the American motif and GM shed most of its subsidiaries.
The Detroit Three were able to revive their fortunes in the 1990s with the development of sport utility vehicles (SUVs) and the rising popularity of trucks, but the profits were short-lived.
Japanese carmakers responded to Detroit’s hulking truck-based SUVs with smaller, more efficient car-based crossover SUVs and once again, GM was slow to follow suit.
When fuel prices began to rise and consumers shifted away from petrol guzzlers, GM’s sales - and profits - crashed.
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Decades of mistakes, missteps led to downfall
AFP
1 June 2009
(CHICAGO) The downfall of General Motors (GM) comes after decades of mistakes and missteps chipped away at the reputation and market share of the once mighty carmaker and buried the Detroit giant in debt.
‘It’ll have a huge impact in the United States because it’s more than just a corporation - it’s an icon,’ said Gary Chaison, a professor of labour relations at Clark University.
‘It represented manufacturing supremacy and good jobs for American workers. That’s gone.’
GM, which only months ago lost the title of the world’s biggest carmaker to Toyota after holding it for 77 years, had made huge steps in recent years to revitalise its products and slash its bloated structural costs.
But the restructuring cost billions and the debt-laden carmaker has fought hard to survive the collapse of car sales last autumn amid a credit crunch and deepening recession.
GM racked up nearly US$88 billion in losses from 2005 till the first quarter of 2009.
It managed to keep its operations afloat in recent months with US$19.4 billion in loans from the US Treasury but is now expected to seek bankruptcy protection in the coming days.
‘GM’s problems go back at least three decades,’ said Terrence Guay, a professor at Penn State’s business school.
‘The company became complacent in terms of products and customers, assuming that American car-buyers would choose GM vehicles,’ he told AFP.
‘They didn’t take the Japanese threat seriously; and consequently, steadily lost market share to Toyota, Honda, Nissan, and other imports.’
GM was a giant in its chrome-detailed heyday, employing more than 600,000 people worldwide and 464,000 in the US back in 1962 when it sold more than half the cars in America.
Founded in 1908, GM grew to be the largest private US employer, the world’s biggest company, had revenues higher than the gross domestic product of most nations, and currently operates in 140 countries.
After transforming its plants to make planes, tanks and munitions during World War II, GM expanded far beyond cars in the decades to follow, building everything from trains and rockets to home air conditioners.
GM also helped expand the American middle class with the standard-setting high wages and solid benefit packages won by hundreds of thousands of unionised car workers.
The phrase ‘what’s good for GM is good for the country’ became commonplace.
‘Between 1921 and 1980, they never lost money,’ said Sean McAlinden, chief economist at Michigan’s Center for Automotive Research.
‘The target was a 20 per cent return on capital every year, no matter what. And they did it.’
But GM and its Detroit neighbours, Ford and Chrysler, let their quality slip and fumbled the shift to smaller, more fuel efficient vehicles in the wake of the oil crises of the 1970s.
‘The baby boom generation has never forgiven them for the defects of the 1970s and 80s,’ Mr. McAlinden told AFP. ‘They will go to their graves without buying a GM vehicle.’
Japanese carmakers Toyota and Honda steadily gained market share, first with the low cost of their vehicles and then with their reputation for higher quality.
Plant closures became a part of the American motif and GM shed most of its subsidiaries.
The Detroit Three were able to revive their fortunes in the 1990s with the development of sport utility vehicles (SUVs) and the rising popularity of trucks, but the profits were short-lived.
Japanese carmakers responded to Detroit’s hulking truck-based SUVs with smaller, more efficient car-based crossover SUVs and once again, GM was slow to follow suit.
When fuel prices began to rise and consumers shifted away from petrol guzzlers, GM’s sales - and profits - crashed.
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