An Explanation of the GM Collapse

In 1952, the year when the president of General Motors declared “what is good for General Motors is good for America,” my father bought his first car, a shining Buick that was so new it was the envy of the whole village of Saint-Prosper de Champlain, where he was the mayor. The Buick, as well as the 1957 Pontiac station wagon that replaced it, were real tanks. They put up a good fight against the harshest of tests; that is, the mad antics of three adolescents (my two brothers and myself) who were not bothered about subjecting the vehicles to the worst abuse. During this time, General Motors was setting out its philosophy.

From the middle of the seventies, my confidence in General Motors crumbled until it reached the unimaginable: European purchase. For me, General Motors represented the past. The only question in my mind was finding out if the car giant would overcome its difficulties and could adapt to the twenty-first century. Today, the soap opera ends in shame.

The Goliath of yesteryear is a mere shadow of its former self. I will leave it to others to analyze the negative financial aspects of this venture and I will discuss the lack of strategic vision which sunk General Motors, much more so than money. Here, in my opinion, are the four factors which are at the root of today’s collapse:

1. – In the seventies, Chevrolets, Pontiacs, Oldsmobiles, Buicks and even Cadillacs lost their own personality when, to reduce costs, General Motors decided to produce them all from the same mold. The inevitable happened: the quality was reduced and the major differences between the makes, with the exception of aesthetic differences, disappeared. A Buick was simply a glorified Chevrolet.

2. – When the first small Japanese automobiles arrived on the market, General Motors refused to follow suit so that its profitability would not be damaged. General Motors concluded that, at the time, it was a passing trend. When they decided they had no other choice but to enter this sector of the market, it was notably with the Citron, which gave birth to the Ralph Nader phenomenon.

3. – When the Japanese decided to flood the market with luxury cars (Acura, Lexus and Infiniti), General Motors did not believe they would be successful. It was the preferred domain of General Motors and the Japanese were simply going to get a kick in the teeth. GM thus slowly lost what they had left of the profitable market of luxury cars. When the bosses woke up, the average age of Cadillac owners exceeded 65.

4. – In the nineties, GM observed that Americans were once again favoring large cars, but rather than preparing for its future by developing small economic cars, the company headed at full speed into profitable sectors such as sports utility vehicles (SUVs) with engines that consumed large amounts of gas. In the short term it was a great success, but in the medium and long term it clearly sowed the seed of failure.

For a long time, General Motors offset its North American losses thanks to its European and Australian activities and even the profitability of its financial division GMAC. But when the house of cards collapsed on a global scale, it became impossible to continue hiding the inevitable.