General Motors, Decline and Fall,

1980 – 2009

William Sundwick

Founded in Flint, Michigan in 1908, the corporation that ushered in the automobile age in America and came to dominate the nation’s industrial economy by the 1970s, declared Chapter 11 bankruptcy just after celebrating its centennial.

What happened?

In 1980, journalist/folklorist Ed Cray published his history of that corporation, Chrome Colossus: General Motors and Its Times. GM then held a 46 per cent share of the domestic U.S. auto market. Cray notes it had been over 50 per cent in the early to mid-1960s, inviting threats of anti-trust action from Congress, amplifying anger at GM manufacturing decisions concerning safety and lethargic pursuit of emissions reduction. The Boards of Directors in those days were confident they could ride over these assaults. They were right -- so long as sales and employment were strong and stock valuation high. I certainly felt no insecurity growing up as a teenager in a Flint GM family!

But there was an unseen threat building, starting in the 1970s, which should have foretold a deepening challenge to GM’s place in the automotive market.

It came from Japan, with its much younger automobile industry looking toward export markets, not just in the U.S., but around the world. The first Toyotas and Datsuns appeared on the West Coast in the late 1950s. A curiosity at first with little penetration even in California. But that penetration grew and went nationwide by the mid-70s. GM management did recognize that there was something peculiarly competitive about Japanese manufacturing. They sought to learn more about it via partnership with Toyota. NUMMI (New United Motors Manufacturing, Inc.) was formed in the early ‘80s at a closed GM plant in Fremont, California (since sold to Tesla). It produced both Chevrolets and Toyotas side-by-side on the same assembly line.

But NUMMI failed to change “The General.” What General Motors couldn’t understand was that the secret of Japanese manufacturing, and growing preference of U.S. consumers, had nothing to do with efficiency of the machinery in the plant. It was not the “culture” of employees (the old GM workers were rehired in Fremont). Instead, it was mainly the culture of management. The Fremont plant was run differently from other GM assembly plants, following the Japanese model. But apparently, corporate management failed to notice a fundamentally different job design. Workers in Fremont rotated among many different jobs, rather than simply tightening the same bolt every day for an eight-hour shift on thousands of cars.

GM had advance warning of this problem from the wildcat strike at Lordstown, Ohio in the early ‘70s – where sabotage led to slowdowns and generally low production quality of the new “import killer” small car launched there, the Chevrolet Vega. Production rates were punishing, workers took it out on the product. Yet corporate management took no notice. After the “experiment” at NUMMI, Japanese style “relational management” never spread to other plants. The Vega’s design was considered flawed, too, not merely its manufacturing quality. General Motors could not see its employees as anything more than cost centers, whether hourly and salaried engineers. The public could see the effects.

“Corporate culture” has become a popular trope over the last thirty years. It probably had its origin in the sad story of General Motors’ decline. The corporation had its beginning in the early days of the automobile, in an environment analogous to how we thought of Silicon Valley in the 1980s. It was where entrepreneurial ventures based on engineering advances were the foundation of economic growth. Billy Durant, the founder of the corporation, was the embodiment of that entrepreneurial, risk-all, American myth that surrounded figures like Steve Jobs in later times. Durant’s genius (some would call it recklessness) was his willingness to take a chance on a bevy of garage tinkerers he met in Michigan. The first of them was Flint mechanic David Buick, struggling with his own version of a horseless carriage. His Buick automobile was the brand that started General Motors. Durant, however, did not build the GM corporate culture. The myth of that industrial spirit was, instead, created by Alfred P. Sloan. Sloan led an ever more centralizing corporate Board through the 1920s and 1930s. The stable of brands assembled by Durant and his early associates had all been managed independently at the engineering and production level. They always had shared technology and parts, but Sloan made them mere “divisions,” subservient to the General Motors Board of Directors, directed jointly from Detroit and Wall Street. Sloan was the archetype modern corporatist.

Sloan organized the corporation around profit centers and marketing concepts. Any original ideas for products or engineering had to clear rigorous financial hoops – the “bean counters.” The overwhelming strength of the industrial engine this strategy created caused General Motors to be perceived as a key factor for allied victory when World War II came. Its then-president, William S. Knudsen, became FDR’s head of the War Production Board.

But, after the war, that old, inherently conservative, midwestern corporate culture returned -- unable to focus its marketing on anything but the ego-enhancing product differentiation that Sloan had pioneered starting in the 1920s. The five automotive brands that GM successfully hawked during the postwar years (Chevrolet, Pontiac, Buick, Oldsmobile, and Cadillac) were distinguished mostly by size and flash – what would today be called “bling.” All were built on a similar platform with more engineering in common than unique. Chevrolets and Cadillacs were built during the period to be fundamentally the same, different enough only to make a convincing argument that the higher-priced brand was somehow “better.” This was, of course, illusion – manufacturing standards and quality control were identical at all GM plants.

GM corporate culture could not grasp the reason for the increasing success of Japanese imports through the 1970s and ‘80s. It was not their cars’ designs, but a combination of several factors. There was the above-mentioned relational style of management in plants (and with suppliers); the uncomfortable fact that legacy costs were low at the much younger Japanese firms (not as many retirees collecting pensions and benefits); and, yes, a less risk-averse product-planning style, greater willingness to take chances on new designs without the relentless bottom-line calculations, the Wall Street side, that dominated GM decision-making. It was the old company, Toyota the young company!

When the UAW chose to strike General Motors in 2007, the walkout lasted three days. But three days lost production was not enough to change GM’s ways. Market share in the U.S. by then was down to only 20 per cent, a far cry from thirty years earlier. The public had caught on, even if management had not. GM was a global enterprise, but European market share was declining as well, and China was just getting started. South American (primarily Brazilian) operations were significant, but not on the scale of North American or European. When Wall Street was hit by the 2008 crash, the General finally took off his stars and filed for Chapter 11 bankruptcy in 2009, the corporation’s 101^st anniversary. Only a massive U.S. government bailout saved GM from liquidation.

Arising from the ashes, the “new” General Motors, General Motors Company, LLC, promised to be leaner and better – not necessarily meaner. But global market share, even after selling off subsidiaries, and shuttering brands (Hummer, Opel, Pontiac, Saab, Saturn, others), has not revived over the ensuing decade. By 2019, U.S. market share had eroded even further, to about 17 per cent. Had the General learned anything?

CEO Mary Barra has flirted with new products, especially electric vehicles, and claims the company will transition completely to EVs (well, 70 per cent by 2040), but we’ll see. The plug-in hybrid Chevy Volt was discontinued in 2019, with no replacement named. Lordstown, site of the painful wildcat strike decades earlier, was not reconfigured, but closed – then sold to a start-up who will manufacture all-electric pickup trucks there soon. Will the GM Cruise Division, formed to manufacture autonomous vehicles at its Hamtramck plant, ever see the light of day?

If I were a prudent investor, I would not buy GM stock.

New data from Bloomberg -- sales of ICE vehicles has already peaked in world, will represent 40% of U.S. new car sales by 2025 (50% in Europe and China), reason: cheaper batteries! (reference: "Drive Better Electrically" March 21, 2019)

Update from CR on new EVs (BEVs) for sale next year -- but, sadly, not nationwide -- YET!

Drive Better Electrically

EVs, Past, Present, Future

William Sundwick 

Electricity as a means of propulsion for self-contained road vehicles is as old, or older, than the internal combustion engine (ICE). But EV market share declined to zero for a large chunk of motor vehicle history.

There were a variety of reasons for the demise. They were expensive, while the Model T was bringing motoring to the masses. Battery technology was limited. Baker Electrics and Detroit Electrics, “popular” in the first two decades of the 20^th century featured luxurious closed bodies, but had a range of less than 40 miles, and top speed of less than 20 mph. But when ICE-powered cars needed to be cranked to start, electrics could be started with a button. They were thought to be aimed at urban women, especially. Henry Ford bought a Detroit Electric for his wife, Clara. And, Baker Electric manufactured 800 cars in 1906 alone. Peak sales occurred in the second decade of the century. Altogether, by the end of the electric era in the early 1920s, there had been 33,842 electrics registered in the United States. No other country had as many EVs, although there were manufacturers in Europe, too. The explosion of demand for the Model T, and associated massive improvements in the national road network, tended to leave those early EVs to an affluent urban niche market.

Shortages of gasoline during World War II did cause some renewed interest in electric vehicles in Europe, especially Britain, which invented its famous commercial “milk floats,” and the Wehrmacht experimented with, but was unable to produce, hybrid electric armored vehicles, under the direction of Ferdinand Porsche.

Further experiments were carried out around the world during the fuel scarce 1970s and 1980s, but not enough market incentives existed to attempt series production of any electric. By 1997, Toyota took the gamble with its hybrid electric Prius, based on regenerative braking technology, manufacturing it in limited numbers for the domestic Japanese market. Plug-in hybrid design was pioneered in France, where Renault introduced the Elect’Road version of the Kangoo minivan in 2003. It used “blended” technology, where despite an AC charger, the battery electric drive and gasoline engine worked in tandem much of the time – much like the hybrid electric Prius.

In the U.S., General Motors was forced to offer electric driving. It’s novel EV-1 was leased, not sold, in California, in 1999 -- an answer to the CARB (California Air Resources Board) mandate for more fuel-efficient vehicles. GM famously de-activated and destroyed all examples except for a few survivors in museums. The film, “Who Killed the Electric Car?” offers a better, if more sinister, explanation for GM’s decision.

The CARB mandate was reversed when that happened, at the end of the non-renewable lease period. GM’s official explanation was that there was insufficient consumer demand for the relatively short-range EV (~80 mi.) – but, by 2011, Nissan began successfully selling its Leaf, with only a 90-mile range. 

Tesla’s emergence in 2008 marked a serious benchmark for EVs worldwide. Tesla’s market-changing invention was the Lithium-ion battery. Storage capacity, thus range, could now be far greater than any previous attempts at electric propulsion. As battery technology continues to improve, the need for hybrid gasoline engines will decrease. An all-electric future may eventually come. But, will it come fast enough? And, what about continued reliance on an electric grid mainly fed by coal and natural gas?

While California leads the nation in the adoption of EVs (and plug-in hybrids), other nations lead the U.S. By the end of 2018, 49% of all cars sold in Norway were electric. China has marshaled massive state intervention to manufacture EVs for its growing motoring population, with some projections as high as 46% of the domestic market by 2020. However, thanks mostly to California, the U.S. still has more registered electric and hybrid vehicles than any other country, despite a lowly 1% market share for EVs.

How do electric vehicles work? There are three different kinds of electric propulsion available in the marketplace today:

1) Battery-electric vehicles (BEV) like Tesla, Chevrolet Bolt, and Nissan Leaf. These cars have no ICE at all. They rely entirely on their electric motors and battery storage, which can be replenished externally (i.e., “plug-in”) in three modes: 120-volt household circuit, 240-volt “level 2” charger, or 480-volt “level 3” fast DC charging.

2) For the more range-anxious consumer, there are plug-in hybrids (PHEV), which rely on battery storage until it’s depleted, then seamlessly switch to a “range extending” gasoline engine. All-electric range for PHEVs varies from about 10 miles up to more than

50. Total range depends on the size of the gas tank. My Chevy Volt has a small 9.5-gallon tank which gives it a total range in excess of 200 miles. I’ve filled the tank only about five or six times in the 4 ½ years I’ve owned the car – and, several of those times was because of the automatic “fuel maintenance cycle” that burns old, stale gasoline.

3)  Gasoline-electric hybrids (HEV) like the Prius, which continue to be popular, especially in the United States, where gas is relatively cheap and plentiful. Many consumers think the 50-60 mpg that they can get with their Prius is sensational. But it doesn’t compare to 100-120 mpg-e (equivalent) for a PHEV or a Leaf.

Teslas are fast, too! Indeed, one performance characteristic of electric motors is they produce a great deal of torque at lower speeds, hence your 0-60 mph acceleration is likely to be quite good. Currently, there is a preponderance of luxury brands in the list of BEV and PHEV vehicles available in the U.S. That is mostly attributable to the phenomenal success of Tesla. While concept-to-production cycle times are longer than Tesla’s recent dominance of luxury-segment sales, many of the world’s luxury brands had been working on electric propulsion for some time. Tesla’s success moved competitors into crash programs.

How green are EVs, really? It is true that the connection to the nationwide electric grid is a limiting factor on how much CO2 and other greenhouse gases (GHG) can be saved with plug-in electric vehicles. However, it has now finally come to pass that everywhere in the United States, the net carbon footprint of driving an electric or hybrid vehicle is positive. It will be better in places that have higher renewable infrastructure. But nowhere is the impact negative. This has been true only for the last year. All-electric BEVs are best, PHEVs next best, HEVs third.

The only remaining question: will the market move fast enough without massive state intervention like China’s? Rural areas in the U.S. will, of course, be the last to convert. Electric long-distance trucks are under development. And BEV or PHEV pickups are coming within the next year or so. But It may ultimately depend on political will, on getting behind a Green New Deal.

In the 1950s, General Electric and Westinghouse collaborated on a massive media campaign called “Live Better Electrically” (LBE). It had the support of utilities, the U.S. government, and state and local governments. Its sole purpose was to pump up profits for all the participants, selling appliances as costs of the grid were dropping dramatically.

Now, however, it may be time to think of your grandchildren more than your commuting convenience. Is America up to the challenge? 

How Painful Can a 5-mile-per-hour Collision Be?

Wrestling with GEICO and Koons Body Shop

William Sundwick

This is a No Good Deed Goes Unpunished (NGDGU) story. One sunny, thoroughly pleasant, Sunday afternoon in October, near the end of the fall election campaign, I was eager to get my Arlington Dems canvassing commitments behind me. I had signed up for a three-hour shift that afternoon, showed up at the staging home, collected my turf map, clipboard, pen, and (I thought) my handout materials. It was the same routine I had followed the day before, from the same home base. I checked Google Maps for directions to the turf neighborhood, threw everything in my car, and headed out.

Reaching the neighborhood, not unfamiliar to me in North Arlington, I found a parking space on the street.

As I collected my clipboard, turf map, and began to walk toward the first door on my map, I realized that I FORGOT the handouts! I would have nothing to leave at most of the houses (canvassing always seems to find the bulk of voters not home, or just refusing to answer their door). I knew going back would delay my mission. But, after evaluating how long I thought it would take to cover the turf, I decided to do it anyway to collect my packet of handouts.

That was my fatal error. The delay was long enough for me to feel rushed, and embarrassed, when I retraced my route back to the base. Also, it used up battery range on my Chevy Volt EV, something which inexplicably still causes me anxiety (it shouldn’t, as the Volt has an “auxiliary” gasoline engine which extends range to 200+ miles). In any case, I impatiently set out again for the turf neighborhood following a slightly different route. The sun was getting lower now. It was the 4-way stop at Little Falls Road and Harrison Street that got me.

I was southbound on Harrison. I stopped, let the car to my right, heading northeast on Little Falls, proceed through the intersection. There was a second vehicle behind that one, a late model Toyota Highlander (bigger than me). Its driver had the bright sunlight obscuring her view to her left (me). Virginia rules of the road, which I have always followed, allow for only one car at a stop sign at a time. If vehicles are queued up at the sign, they must advance only to the sign, not proceed into the intersection without stopping. The Highlander behaved as if it were in tow behind the first car and didn’t stop. But I had proceeded into the intersection after that first car. Collision resulted: Highlander front bumper connected to Volt front passenger door and right front wheel well.

Speeds probably didn’t exceed five miles per hour. There were no injuries, no air bags deployed. But, lots of damage to little Volt, very little to big Highlander! 

As we moved out of the intersection, we became aware that a witness had also kindly stopped to assist. This was good for me, not so good for the other driver. As I tried to reach somebody at GEICO, the witness (an attorney with the firm of a family friend) said he “saw it all” and called the police. But they would not send a car. I needed a tow, the Highlander did not.

We were all very polite. I made sure the other driver was all right. Her husband then arrived. After we exchanged information, including a business card from the witness, they all drove away. I called my wife, then waited for my tow. 

GEICO has a desk at Koons Body Shop in Falls Church, within easy walking distance of my house. But it was a Sunday afternoon. So, I rode along, filled out a form, sealed it with my keys in an envelope, dropped it in the after-hours slot. I collected my canvassing materials, walked home, then took them all back to the base in our other car – no canvassing from me that bright October Sunday!

Next day I was contacted by Koons and my GEICO insurance adjuster. By Tuesday, I walked back to Koons, picked up my estimate -- $9000 (Yipes!). I had a $500 deductible, and the adjuster initially indicated a shared liability, meaning I would be out the $500. GEICO allows me $900 for car rental while my vehicle is being repaired. The adjuster did some math in his head estimating how many days that would last. Seemed like I had plenty of time, he thought. He was wrong.

The next serious miscalculation was caused by my own vulnerability in this stressful situation. The Enterprise rental agent managed to sell me a $20/day insurance policy for the rental car. After my experience of the last two days, I felt I couldn’t say no – despite her assurances that the decision was mine, entirely optional. Also, my GEICO adjuster failed to calculate fees and taxes added onto the per day Enterprise rental (which he also underestimated). That $900 allowance would only last a month. I didn’t see my Volt again for seven weeks.

Costs were mounting fast. The first break in my favor came when I insisted that GEICO contact my witness – they had not done so previously. This resulted in the liability adjuster (the other driver was also insured by GEICO) declaring the liability to be entirely on the other driver. Victory! Now, the $500 deductible, at least, would be against her policy. Witnesses are good.

I was left to struggle with Koons Body Shop. Why was it taking so long? Well, they said, the parts had to be shipped piecemeal. Many front suspension components were needed. This took time. But my $900 rental allowance would be running out soon, not to mention the daily rate insurance that I was paying.

All the parts were received and installed, including a new battery for the electric drive. But then the system had to be fully charged (it doesn’t come that way, apparently). This led to another delay when Koons couldn’t seem to charge it. They towed it to Koons Chevrolet at Tysons Corner, where a certified Volt technician could give it a try. But I knew from previous service experience there, the circuit-riding Volt technician is only at their dealer two days per week. When he arrived, he was able to charge the vehicle. Koons Chevy then towed the still unassembled, still unpainted car back to the Body Shop in Falls Church. When I complained about the delays, that I was now paying a daily rate for my Enterprise Ford Fusion Hybrid (economical, yes – but not zero gas like my Volt), Koons offered me a “loaner” (technically another rental, but free). I accepted.

All this time, I had been unable to speak with the Koons estimator who failed to return any of the phone messages I left her. She was “very busy” said her manager, and updates on the status of my car were not forthcoming.

While waiting for completion of all the work on my Volt, I will admit to enjoying that loaner. The Ford Escape with the optional “big” EcoBoost engine was a blast to drive! Of course, the penalty for that fun driving was reduced fuel efficiency compared to the Fusion, but it was just temporary.

One day, returning from an errand on Lee Highway, I was felled by one of those “traffic calming” protruding curbs. Both left tires destroyed! Perhaps this wouldn’t have happened on a car I was more familiar with. It happened to me driving a loaner.  I had long suspected that someday I would be caught by those fiendish safety features Arlington traffic engineers were installing around the county.

I called AAA for a tow to the AAA Service Center not more than a block-and-a-half from Koons Body Shop. They accommodated me with the cheapest tires that would fit, no alignment. I was still out $380. I read the fine print of my “rental” contract only after the tires were already installed. It said I was supposed to return the car to Koons after any such incident – they wanted the money for repairs!

In the end, there was no additional cost to me for violating the terms of my contract. I believe I had extracted enough contrition and apology from the Koons Body Shop manager that he felt he couldn’t lean on me. So, after seven weeks, I finally reclaimed my beloved Chevy Volt. It appeared none the worse for wear. I was out only about $1100 for an accident that was not my fault, but which would have been truly catastrophic without the insurance coverage.

The whole experience did enlighten me about new car choices when I start shopping again later this year. I learned that bigger cars crush smaller cars in collisions. I learned that fun-to-drive dynamics may come with a penalty in fuel economy. But despite the greater fuel efficiency of that rental Ford Fusion Hybrid, and its safety advantage, I’m not too thrilled by big cars. Give me small and maneuverable over hulking tank or limo, any day.

These things I’ve learned. But, venturing out by car to do good works. That remains sacred.

Jaguar Land Rover makes two (after Volvo) major European automakers to jettison ICE and diesel from 2020 ...

Many feel that we need to focus more attention (and resources) on adaptation: it's already too late to reverse climate change apocalypse.

Details of Volvo's plans, 2019-2021 -- three types of power train, mild hybrid (48 volt, twin engine), plug-in hybrid (also twin engine), and all electric

Amory Lovins: nuclear is a money loser, renewables will continue to advance despite Trump, EVs are here now -- will soon dominate, carbon removal is mostly about agriculture (put it back into soil), and natural gas may be worse than coal (stop that fracking!)

It starts with the prestige makes, like Volvo, Tesla, BMW, then filters down to the mass market ... note: Volvo's first all-electric vehicle will be made in China (they are now owned by China's Geely)

First electric hypercar: Rimac Concept One, built in Croatia ... sells for less than $2M! Only eight made ... so far.
Check out Road & Track photo shoot in NYC

Hard to imagine U.S. not participating in worldwide shift to EVs over next several years, but that seems to be exactly what Trump administration has in mind! American workers, as well as planet, will only be worse off as result ...

Michael Moore's 10-point plan -- I especially like the idea of "Rapid Response Teams"