Editorial: GM Goes Bankrupt

Culprits in GM's collapse aren't sitting in the White House or standing on assembly lines; they're in the corporate executive suites, abetted by zealous dealers and a gullible motoring public

by James M. Flammang


Ousted GM chairman Rick Wagoner,
speaking at Detroit's 2009 auto show

And then there was one. Among domestic automakers, only Ford remains outside the bailout/bankruptcy fold. As of June 1, General Motors went into Chapter 11 bankruptcy. If all goes well, GM could emerge after several months in a new form - or, merely a modification of its old form, though shrunken significantly in size and scope. Chrysler was already in bankruptcy, looking ahead to a tie with Fiat that could keep the company afloat.

Listening to many auto-industry observers comment on the GM bankruptcy, you'd think President Obama and his Task Force boldly blazed their way into Detroit to confiscate an unwilling industry. They make it sound almost like President Truman taking over the steel industry during the Korean War. In their frenzied estimation, those big, bad government functionaries leaped in with a heavy foot to rule an industry they know nothing about, simply because they could; and to some frantic eyes, because they ultimately sought to destroy the capitalist system.

Have we forgotten so easily those harried days last fall, when GM executives and their compatriots at Chrysler and Ford flew privately into Washington, virtually hat in hand, to plead for government funds? Neither then-President Bush nor anyone in government, then or later, invited them to accept bailout billions, much less ordered them to do so. Having watched their corporations sink close to the breaking point, they went to Washington as an act of desperation, seeking infusions of cash to stave off the financial vultures for a while longer.

Despite the moans and wails about the federal government taking over the auto industry, nothing tangible changed as the Obama Adminstration moved into the White House. With one exception, that is: part of the requirement for federal help, which GM agreed to, was a change in top management. That meant the removal of GM CEO Rick Wagoner. To hear the critics and the apologists for the domestic auto companies, you'd think President Obama had practially lopped off Mr. Wagoner's head, personally.

Now that Rick Wagoner has been ousted from his CEO's chair at GM, his contribution to the disaster has slipped into the hazy mist of history. Even while still in power, Wagoner and his fellow GM executives managed to deflect criticism of their own culpability, subtly shifting the blame for the corporation's rapid decline to the financial crisis, the retiree "legacy" costs, the United Auto Workers - everywhere except the true culprit, which was themselves.

For years - indeed for decades - each season GM tossed out a long stream of high-powered V-8 guzzlers, of ever-bigger SUVs and pickups, of performance machines meant for an earlier, less troubled era. When criticized for this "bigger is better" and "more power" approach, their response was always the same: That's what Americans want. Americans, they insisted, demanded big cars (and trucks), with burly V-8 engines that let them accelerate to cruising speed in a flash - or in many cases, to beat the rival in the next lane at impromptu street-racing contests. Advertising promoted a modern-day horsepower race, more charged up than the one in the 1950s. TV commercials regularly featured adrenaline-laden vignettes of overpowered automobiles screeching and spinning to a halt, after defying logic - and the law - as they roared down public roads, evidently oblivious to public safety.

Sadder yet, GM's recent history contains a litany of empty promises, questionable claims, and hazy half-truths. Just a few years back, GM hosted more than one news conference featuring a collection of alternative-fuel vehicles. Nothing was promised directly, but the implication was clear: vehicles like these would be reaching dealerships before long. A handful managed to reach reality in some low-production form, but none has delivered on the promise. GM's fuel cells, for instance, sounded like they were only a few years away.

Now, the hydrogen fuel-cell future, from GM or elsewhere, seems farther off than it was back then. Electrics are trickling back toward reality - maybe - in the form of plug-in hybrids, if not full battery power. Hybrids are on sale, but not in significant numbers; and several are gasoline/electric renditions of big, gas-guzzling SUVs. GM regularly promotes the number of its vehicles that earn high gas-mileage estimates from the Environmental Protection Agency (EPA). That's good news, at least for highway driving (city figures typically are considerably lower). Of course, nothing is said about the many that continue to fall well short of satisfying fuel economy.

At Detroit's North American International Auto Show in 2007, vice-chairman Robert Lutz unveiled the Volt concept, dubbing it an "inconvenient truth." Why that terminology? His remark was an obvious dig at former vice-president Al Gore, whose documentary film of that title had only recently been released into theaters. At that time, the Volt was a half-truth at best, most convenient for GM's publicity writers.

Without stating a due date, Lutz made the Volt sound like the instant answer to everyone's environmental concerns. Some months later, though, he uttered a notorious mocking comment to journalists, stating that global warming was "a crock of s___." While the Volt continues to promise impressive fuel economy, Lutz's scornful comment about imminent climate change makes one wonder about the seriousness of the company's professed interest in the Volt's environmental-friendliness.

Even though the Volt is still a year away from production, it's been reworked to lose the allure of the original show car, and the price (if it actually reaches dealerships) is thought likely to approach $40,000. GM has used the Volt to reap scads of favorable environmentally-conscious publicity. Countless commentators have used it as the prime example of alternative-fuel success from a domestic automaker, thereby suggesting that GM must be a corporation highly concerned about the environment and sustainable fuels.

Despite his status as one of the culprits in GM's debacle, Mr. Lutz is treated by journalists and the automotive community as more of a wise oracle than an impediment to progress. Why? Because he's an outspoken "car guy," eager to deliver exciting, high-powered vehicles to enthusiasts, even if that means dismissing or defying the government or contrary public opinion.

Mr. Lutz occupies his executive seat only because GM gave him a pass around its otherwise draconian mandatory retirement age (65). Now long past that age marker, Lutz will be leaving later this year, doubtless to wide acclaim in the auto world - regardless of his role in perpetuating, indeed applauding, the imprudent product-creation course that resulted in the current disaster.

Is the new CEO, Fritz Henderson, an improvement over Rick Wagoner and Robert Lutz? Probably so, but it may not really matter anymore. The damage was unleashed three, four, five decades back, when the leaders of GM (and its rivals) at that time chose to emphasize power and performance - and bigness, of course - over common sense. Enthusiasts loved it; consumer advocates warned otherwise. It's easy to see who won that little battle, and carried the victory all the way into the 21st century.

Americans, it's true, loved their muscle machines and, later, their mammoth SUVs. Most of us bought the whole line, and many of us continue to buy into it, despite what's happened to sales and the corporations. Those big trucks and potent sedans brought sizable profits to the manufacturers, and to the dealers - far more than would have accrued if they'd concentrated instead on developing and selling sensibly-sized automobiles with prudent powertrains.

A year or so ago, the first whispers of bankruptcy and General Motors began to heard in the same breath. Most observers scoffed at the very idea. As even President Obama has noted, GM is "too big to fail."

Or is it? Perhaps one century of life is all that can be expected from a corporation that drags its heels repeatedly, denying the need to change even as the bright future turns into the bleak present.

Comparable criticism can be leveled at Chrysler, but that will wait for another editorial - after the connection to Fiat is established and a bit of fresh direction can be observed.

Attention Editors: This complete editorial is available now for your publication. Please contact us at JF@tirekick.com for details.


© All contents copyright 2009 by Tirekicking Today
Text and photos by James M. Flammang
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