The Looming Bankruptcy of General Motors

No company epitomized America’s industrial might, its wealth, and its freedom like General Motors. It was the world’s largest company, generating more revenue than the GNP of most nations. It churned out the cars people around the world aspired to own. At its peak, it was the largest private employer in the world; the company engaged nearly 500,000 Americans in the enterprise of making automobiles.  (Fast-forward to present, America’s largest employer is Wal-Mart, a company dedicated to selling cheap Chinese goods sold through a poorly-paid workforce.) The story of General Motors decline is epic and tragic.  It is a story of how hubris and incompetence can bring down even the mightiest. It is a story of how those on top, losing vigilance amid plenty over time, become fat and complacent. It is a lesson we Americans, especially in view of the serial blunderings of the Bush Administration, should take to heart.  In 1980, GM dominated the global automobile business, with nearly 50% share of the US market and a third of the world overall. Only seven years ago, GM tried, and failed, to hold market share at 30%. Today, it is struggling to maintain a 20% market share. That is a 33% decline within a decade.  Last year, GM lost its standing as the world’s largest car maker to Toyota.  By the end 2008, the once-mighty company will not even remain largest seller of cars in its home base of the United States. Pathetic. And sad. In 1953, GM’s CEO declared “What’s good for GM is good for the country.” It was true then and it true now. It IS good for America to be the home of the world’s largest industrial firm, and it is bad for America for that firm to go bust and be bought piecemeal by the Chinese in bankruptcy. How did this happen? It is not the fault of the Japanese carmakers. It is not the fault of the UAW, although that union made matters much worse.  High oil prices are not to blame. GM will go bankrupt because of arrogance and incompetence. Like the hubris of the Bush Administration, GM management felt that it’s financial and market power were so great, that they were invincible. They felt that whatever they built the people would buy - and for a long time they were right. They built junk Vega’s, diesel engines, and Citations, to name a few gems, by the millions. Now, although they have turned their quality and styling around, Americans look abroad for quality and prestige, and GM is in a death spiral. GM cannot possibly turn itself around without a bankruptcy restructuring. It will emerge a mere shadow of its former self.  Let us hope that much of their valuable technology and sophisticated manufacturing techniques are not purchased for pennies on the dollar by the Chinese who will take the factories home and re-export to us the cars we once made. Putting aside for a moment that bankruptcy of GM is emblematic of the industrial decline of America and our ability to make things outside of cheeseburgers and movies, the lessons of GM are lessons of which the next President of the United States should be well aware: Even the mightiest, after decades of arrogant and stupid decisions, can fall. A million little cuts, untended, can bleed you dead. The demise of GM is indeed a sad event in American history, let is resolve that the fate of GM will not be the fate of America.