General Motors: 30 Years On And Still Clueless

I trace the beginning of General Motors’ downturn from innovative colossus to the maker of boring rental cars that it is today back to 1976 when a peppy little import called the Honda Accord first arrived in the U.S.

I trace the fact that GM is nearly as clueless today as it was in 1976 back to 1992, when Rick Wagoner, then GM’s 39-year-old chief financial officer, was promoted and given orders to shake up the moribund giant.

I believe that the only way that GM can be revived is for Wagoner, GM's president and CEO, to be fired. Now.

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The 1976 Accord had just everything that the GM cars of that era didn’t.

It was attractive, albeit in a cute sort of way. It was larger on the inside than it appeared from the outside, not the other way around. It had a rear hatch that opened to a collapsible back seat, offering lots of storage space. It handled well, had oomph and was economical, which was no small thing arriving as it did between the twin 1970s oil crises. A practical friend who had owned GM cars forever bought a silver '76 Accord and was hooked. I drove it and was hooked, too.

GM’s response to the Accord and successive waves of hot selling offerings from Honda and later Toyota and Datsun (Nissan) was to continue churning out formulaicly unattractive and uneconomical cars of dubious quality. In fact, GM’s only direct response to the so-called Japanese Invasion was an abomination called the Chevette.

The General’s fortunes briefly improved after Wagoner took over and GM's share price soared to a record $90. But beneath the gloss the same fundamental problems persisted, eating into the huge corporation like rust spreading through the underbody of a Cadillac Coupe de Ville.

These problems included overcapacity – too many assembly plants and not enough orders -- and except for 1998, when there was a seven-week strike, sweetheart contracts with the United Auto Workers union.

But the biggest problem was that Wagoner’s GM was coasting along with that same tired product line as much of the rest of the automotive world was stealing a march on GM with attractive and innovative products.

One GM brand was virtually undistinguishable from another. Calls to cut back on the duplication of models between brands and to even fold the lesser selling brands went unheeded until Oldsmobile was belatedly put out of its misery in 2004. Most ominously for GM, Japanese automakers were opening U.S. plants and turning out cars (and later small trucks) that were as well made as those at their vaunted home plants while GM’s U.S. plants continued to produce poorly made vehicles.

In 1992, the year Wagoner took over, GM sold 35 percent of all cars sold in the U.S. Today it sells 29 percent. Last year it suffered its biggest loss ($10.6 billion) since the Depression and earlier this month said that it is inviting its heart and soul -- its 113,000 hourly workers -- to take a hike through incentives of up to $140,000 apiece. It is increasingly difficult to see how Chapter 11 bankruptcy can be avoided as Toyota, which already has overtaken Ford as the No. 2 worldwide seller, sets its sights on the General.

The question is not whether Toyota will become top dog, but when.

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Hindsight being what it is, it’s easy now to see that Wagoner was the wrong choice to turn GM around. Wall Street knows that. The car dudes who write for Motor Trend and Automobile know that. Consumers know that. Wagoner and the GM board just happen to be the last people to know that.

Wagoner came up through GM’s financial division rather than manufacturing or sales, which may explain why he has been slow to recognize virtually every major automotive trend that has occurred on his watch.

These trends include minivans, smaller SUVs (Wagoner bought the Hummer brand just as the mega-SUV bubble was bursting) and an increased environmental awareness. GM has been ridiculously slow to embrace now popular gas-electric hybrid vehicles. It has no hybrids in showrooms today, while Toyota/Lexus has 12 models, including the Lexus GS450h, a $70,000 green sports luxury machine. Toyota/Lexus will soon have 20.

GM has survived because it still makes a heck of a lot of cars -- and trucks. It just doesn’t make money. (Its ossified dealer network is in even worse shape than the mother ship, but that's another story.)

In flailing around for a way out of its torpor, GM has become addicted to big rebates and zero-interest financing plans. Things got so bad last spring that it offered deep employee discounts to the general public. Sales perked up, but plummeted when the discounts ended. GM even ran a national ad campaign apologizing for its lousy performance and promised a return to the glory years. The background music was the sound of my GM-proud father spinning in his grave.

There have been successes on Wagoner's watch, but I can count only three of consequence.

He has cut costs and manufacturing capacity. Whoopie! He also has encouraged the near-death Cadillac division to shed its Geritol image. It now caters to the Led Zeppelin crowd and offers a line of trendy and well-made models, which while not my cup of tea, show that there’s life yet in the General.

But Cadillac is a niche brand and GM has yet to offer a mainstream success remotely approaching the VW Passat or Toyota Camry, which is the best selling car in America. Or the still hot selling Honda Accord. (My mother bought an Accord in the mid-1990s with the money she got from selling her GM stock. Ha!)

No, make that only two successes on Wagoner's watch.

After successfully nurturing Saturn as the un-GM brand, Wagoner has allowed the once innovative spinoff to be dumbed down into the rest of the corporation. Saturn sales have tanked.

At this point, it's not a matter of General Motors emerging from its long self-inflicted nightmare smaller and leaner. It's a matter of surviving, which makes bankruptcy actually look pretty good since Wagoner is pinning GM's hopes on, of all things, a new line of big SUVs like the Cadillac Escalade and ChevyTahoe.

Wagoner has had 14 years to fix GM’s problems. He has only added to them, and the proof is that it still makes an enormous amount of crap.

It’s time to go, Rick. And don’t let the door hit you in the ass on the way out.

Oh, by the way, GM’s share price closed at $22.75 yesterday.