Colossus of roads | Business Facilities - Area Economic Development, Site Selection & Workforce Solutions

General Motors is collapsing under its own weight.
General Motors is collapsing under its own weight.

Colossus of roads

Colossus of roads | Business Facilities - Area Economic Development, Site Selection & Workforce Solutions

In September, General Motors launched a Web site it called ”General Motors — Fact or Fiction?” The purpose of this site, GM said, was to help defend the company against the ”rumor factories” predicting its demise.

Well, it’s beginning to look like the Web site will outlive General Motors.

By the time you read this, the biggest of Detroit’s fabled Big 3 automakers may already have filed for bankruptcy protection. The company began preparing the public for this — and jittery investors, who have driven GM’s share price down below the price of a gallon of gasoline — in the annual report it filed this week with the SEC.

GMÕs auditors, Deloitte & Touche, delicately stated in the annual report that the auto giant ”may not have the resources to continue as a going concern.” This red flag was followed by a statement from GM that it ”could potentially be forced to seek relief through a filing under the U.S. Bankruptcy Code.”

At this point, a bankruptcy filing is merely a formality. Even Helen Keller can see that GM is belly up, like those rusting Cadillacs an avant garde artist buried in the desert all those years ago.

According to reports, the only thing holding GM back from its date at the bankruptcy court is its concern that car buyers might not purchase vehicles from a bankrupt car maker.

Memo to GM: car buyers are not buying cars from solvent car makers right now.

While we wait for the formalities, let’s ponder how the management of General Motors managed to destroy the greatest car company on a planet in which every human being aspires to own a motor vehicle. This was not an easy thing to do, and it is quite an accomplishment.

GM established a commanding position of dominance in the post-WWII world by focusing on market share and marketing. It overwhelmed the competition by creating redundant brands, redundant assembly lines, and a vast universe of local dealerships that put a GM outpost within walking distance of just about every American.

For 30 years, the company was fat and happy. Production lines were geared to produce at least a million vehicles per model, and new models were unveiled like Sports Illustrated swimsuit divas every fall.

GM’s marketing gurus managed to finesse the obvious fact that most of the nameplates were simply higher-priced knockoffs of its cheapest model, Chevrolet. Any nosy customer who pointed out that an Oldsmobile was simply a Chevy with a bit more chrome was silenced with some free undercoating and $20 off on the air-conditioning option.

GM’s notorious pricing policies introduced the term ”sticker shock” to the lexicon: its vehicles were tagged with fake base prices to lure in the masses, who were then whacked with add-ons as they requested basics like power steering and power brakes.

GM for decades didn’t guarantee the quality of its products for more than three years — and that was only the engines and drivetrains — and was not concerned that its cars turned into rust buckets after five years, because planned obsolescence was part of its business model. It assumed that the lemmings who bought the cars would keep bringing their junk heaps back to its dealers, who would then pressure them to ”trade up” to the ”new” model, the only element of which that was really new was a slightly modified grille.

Then the world changed, and GM didn’t change with it.

Our friends from Asia arrived on the scene and offered fully loaded, fuel-efficient vehicles with galvanized rust-proof steel, 10-year warranties and one-size-fits-all non-negotiable pricing.

The Japanese started building cars in America in efficient plants outside of the realm of the United Auto Workers union that had relentlessly driven up GM’s costs. They geared their assembly lines to produce 50,000 units at a time, so they could quickly retool and offer fully upgraded new models at any time during the model year.

GM had ample opportunity to see what was coming and either adapt to it or even head it off. In the late 1970s, when Honda was still primarily a motorcycle producer, it could have purchased the emerging Japanese company for a song.

But, like U.S. Steel and the British Empire before it, General Motors was blinded by an imperial arrogance that refused to concede that it might ever do anything less than rule the world.

Sure, it repeatedly told us it was changing, that we would soon see a new, lean GM that would reclaim its rightful place at the top of the automotive pecking order. Any doubt that this was pure fiction imploded last fall with the revelation that GM’s financial arm, GMAC, had taken huge positions in toxic sub-prime mortgages in a desperate effort to pump money into the failing behemoth.

By the time GM realized that the game was up, it was too late. Now, even a massive, government-funded Heimlich maneuver cannot disgorge the overcapacity and larded contracts that are choking GM to death.

When the corporate obituaries are written, no doubt we will hear GM’s failed executives crying in their soup that they were done in by unfair foreign competition.

It says here that it wasn’t the Japanese transplants that caused the demise of the King Kong of U.S. automakers.

It was hubris killed the beast.

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