The road that was not taken
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The road that was not taken

The bailout will help GM emerge leaner from the wreckage. It must now reinvent itself.

india Updated: Jun 03, 2009 22:23 IST
Hindustan Times

What does it take to wreck a company that symbolised modern capitalism for most of the previous century? Irrelevance, it turns out, has finally caught up with General Motors, the US carmaker that has been top of the heap for 37 of the 54 years — even as late as 2000 — on the Fortune 500 survey has been in existence. Founded in 1908, the achievements of what was the keystone of the US economy are breathtaking: GM made money every year during the Great Depression, it supplied a tenth of American war materiel during World War II; and it contributed 3 per cent of the US GDP during the 1950s. “What’s good for GM is good for the US” was not an empty phrase.

In the mid-1960s, half of all vehicles sold in North America rolled out of GM’s factories. By the late 1970s, however, the fissures that eventually would lay the colossus low were already visible: legacy labour costs, competition from cheaper Asian carmakers, and rising fuel prices. The world, and America, has been steadily losing interest in the guzzlers rolling out of Detroit. A sharp spike in oil prices in 2008 scalped SUV sales by 30 per cent and GM made a loss of $18.8 billion by June. By October its stock dropped 76 per cent. By December it was almost out of cash—the biggest failure of a company in US history.

As the Obama administration takes over GM, lessons long overdue will have been learnt. The leaner GM that will emerge from under the mountain of debt after the bankruptcy proceedings will have shed some of the more gasoline-hungry product lines like the Hummer and will have retooled some of its plants to produce smaller, fuel-efficient cars. The lessons, however, don’t end there. GM’s managers will need to the bridge the chasms that have opened up with customers, with shareholders, with workers, with the public, and with reality. The disconnect was made infamous by Rick Wagoner’s use of a corporate jet to go to Washington to beg for money from the government. Some of the deeper insights of the new science of business management owe themselves to practices at GM and its legendary bosses like Alfred P Sloan, who between 1918 and 1957 built the largest private industrial enterprise in the world. In reinventing itself, GM will also be reinventing the American way of doing business.

First Published: Jun 03, 2009 22:22 IST