March 22, 2021 • 54 mins
General Motors and the US automotive industry entered a golden age post World War II. But energy crises and changing markets would prove to be terrain so challenging even an SUV might stall out. We round out our series on General Motors.
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Episode Transcript
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Speaker 1 (00:04):
Welcome to tech Stuff, a production from I Heart Radio.
He there, and welcome to tech Stuff. I'm your host,
Jonathan Strickland. I'm an executive producer with iHeart Radio and
I love all things tech. And this is Part three,
the part three and final parts so far of my
(00:26):
series about General Motors. So if you're just tuning in,
you might want to seek out the first two episodes
in this series that published over the last two weeks.
In those episodes, I explain how William C. Durant started
General Motors by first buying Buick, then creating a holding
company called General Motors, and then by buying up a
(00:48):
whole bunch of other car companies like Oldsmobile and Cadillac,
as well as other companies that specialized in making various
parts that were used in cars. I also talked about
how Durant's investors kicked him out of the company for
accruing debt, and how Durant was able to buy his
way back into the company, and then how he got
kicked out of it again. Then I talked about Durant's successor,
(01:12):
Alfred Sloan, who was skilled in reducing costs and increasing
efficiency and maximizing profits, but was very much not interested
in stuff like, you know, worker conditions and compensation. I
also talked about gms controversial activities leading up to World
War Two, and how the company appeared to play at
least some part in helping Hitler's war machine get started
(01:34):
in Germany before doing the same thing in the United States.
So today we're going to pick up post World War Two.
For the most part, we're gonna do some backtracking. I
apologize for that. It's just it's a complicated story. Anyway.
While Sloan definitely had some qualities that I personally find
pretty distasteful, there was no denying that he was brilliant
(01:56):
at managing a company. Sloan had organized General Motors not
by function, so it wasn't like it was organized by
sales and then marketing and then manufacturing across all the
different brands. Instead, he organized it by division, and so
each division would oversee a specific brand of cars. So
the Buick line had its own sales department, its own
(02:18):
marketing department, it's own manufacturing departments, so on, and Cadillac
was the same in Pontiac and Oldsmobile, etcetera. So each
division had its own general manager, who was responsible for
keeping down costs and maximizing profits, and Sloan essentially created
the model that many, if not most, modern big industrial
corporations followed today. Much of the design he brought over
(02:43):
from DuPont. He had kind of picked that up from
DuPont's businesses, but he added his own elements to it
as well. And as such, in business, there are a
lot of people who study Sloan's you know, leadership strategy
and organizational strategy. In fact, if you remove people from
the equation, if you forget that people exist, then Sloan's
(03:06):
models are really effective. It's kind of like looking at
a logic puzzle where you need to reduce one component
in this case that would be you know, loss or cost,
and maximize another component that would be profit. But trouble
starts to pop up when you happen to think of
things like salaries as part of your costs and people
(03:27):
as assets. That kind of thinking where you have removed
yourself from thinking about the human condition. Uh, that doesn't
always end well. It tends to lead to things like
unionization and strikes as people say, hey, we aren't just
numbers on a spreadsheet now. General motors certainly found this
to be true. And while the company didn't employ the
(03:47):
same violent tactics that say Ford did, the disputes with
organized workers were pretty dramatic. But let's push forward, and
that means having to go back a bit. See One
of the really important people in General Motors history whom
I have not mentioned yet is Harley Earl, a professional designer.
He was born in eighteen ninety three in Hollywood, California.
(04:11):
His father, Jacob W. Earl, was a coach builder in
the nineteenth century, and he owned a business called fittingly
enough Earl Coach Works. Oh And while Harley would call
California home, Jacob was actually from somewhere else. He was
from Cadillac, Michigan. Because when we talk about automotive efforts
(04:31):
in the United States, it always comes back to Michigan,
and Jacob's son, Harley, would be a huge influence on
Cadillac's as well as Michigan and other parts of General
Motors as well. So after the turn of the century,
Jacob began to expand his business a little bit. While
he had started out repairing and building horse drawn coaches,
(04:53):
he branched out by working on early automobiles and it
was clear to him that the car was going to
replace the older forms of transportation. So with that in mind,
Jacob founded Earle Automotive Works, a custom shop in Hollywood, California,
where the main customers were producers and movie stars and studios.
(05:13):
In fact, a lot of of the company's early customers
were producers who needed specialty vehicles for the motion pictures,
like horse drawn vehicles, like like like Roman chariots. So
there's nothing like really getting into the early automotive industry
and still having to put aside time to design, you know,
a chariot or two. Harley Earl would work in his
(05:36):
father's shop after school, where he got hands on experience
learning about mechanical systems. But he was also a keen
academic student and he attended Stanford University. Didn't complete it,
but he went there and he had a major in engineering.
He also would occasionally get into a bit of trouble
by apparently borrowing cars as dad had been working on,
(05:57):
and then racing those cars without his dad knowledge, and
frequently winning. There's a story that goes that his dad
found out about this after reading an article in a
local newspaper that detailed Harley Earl's victorious run with a
car that most certainly did not belong to Harley Earl.
(06:17):
By eighteen, Earl's automotive companies business was really booming, and
Harley Earl decided to drop out of college in order
to work at the shop full time. He became known
for working on and designing custom made car bodies that
really stood out, particularly in a world where the model
t Ford had created a sort of uniformity in the
(06:37):
automotive industry. In nineteen nineteen, a man named Don Lee,
the owner of the Don Lee Coach and Body Works company,
acquired the Earl Automotive Company, but he kept Jacob and
Son in charge of it. And now I suddenly want
to sing Andrew Lloyd Weber lyrics for Jacob and Son.
But anyway, Harley Earl became the chief designer for this
(07:01):
branch of Lee's company, and Lee was the leading distributor
of General Motors Cadillac line on the West Coast. So
by the mid nineteen twenties, Harley Earl was quite the
figure in Hollywood. He had made friends with various celebrities
and studio heads through his work on custom car bodies,
and he was kind of living the celebrity lifestyle. One
(07:23):
thing Harley Earl adopted early on that would set him
apart from other designers is that he would design a
car body and then he would sculpt his design in
three dimensions using clay. Now, at this time in car
design that just wasn't standard operating procedure, but Earl proved that,
you know, realizing designs and three dimensions really helped him
create evocative body designs, and no doubt it helped him
(07:46):
close numerous deals as well when clients got a chance
to see the model and then imagine themselves tooling down
Sunset Boulevard and a full sized version. Earl's approach would
be the one that would see widespread adoption throughout the
car industry. Moving forward. In nive Larry Fisher, the head
of the Cadillac division at General Motors, tapped Harley Earl
(08:07):
to design the companion make to the Cadillac. This one
was called the Lassalle. So if you remember, GM had
identified that there were price gaps between their different brands
that they could target, but they didn't want to make
certain brands more expensive or other brands less expensive because
that could change the perception of the brand. So instead
(08:28):
they introduced companion brands to fill in those gaps. Lisalle
was the slightly less expensive version of Cadillac, not really version,
I should say companion to Cadillac. They were distinct. So
Earl agreed and he created four different Clay models. He
had a touring car, a sedan, a roadster, and a coupe,
(08:49):
and Alfred Sloan would approve all four of those models
for production. In ninety seven, Earl joined General Motors as
the head of a design division at that time called
Art and Color. He was one of the earliest, perhaps
first professional designers to work in the automotive industry. Now,
I'm not going to go through all the different designs
(09:10):
that Earl created, because again, that would be an exhaustive podcast.
Also wouldn't be very effective because I don't know if
you noticed, but this is an audio podcast, and you
should really spend your time looking at some pictures of
cars that Earl had a hand in designing. That would
be far more effective. I should also point out that
as his career went on, he spent less time hands
(09:33):
on designing vehicles and more time overseeing teams of designers
who were doing that. Although he still had the authority
to approve or deny any style changes. It's important to
know that it was these designs that Earl came up
with that aligned with Alfred Sloan's vision of bringing new
styles of cars to market year after year, thus creating
(09:55):
almost a kind of planned obsolescence approach to the auto industry. Now,
it wasn't that the cars would just poop out after
a year of operation. They didn't. They were, for the
most part, reliable machines if you maintain them properly. It
was more that by creating a signature style that would
change over time, GM also created an incentive to buy
(10:17):
new cars, at least for the people who could afford
to do that kind of thing. You know, cars have
always been tied to status symbols, and having a car
with a distinctive modern look as a real sort of
social cachet to it. Earl ushered in a new era
in industrial design, creating an approach to integrated design that
used a single team to work on all aspects of
(10:41):
a specific product, from the way it looks to how
it operates and handles, to how it's marketed and priced.
This unified method meant that everyone was on the same
page when it came to the project. There was no
worry about handing this off to a different team and
then seeing all of your hard work get is handled
by them. It was Earl who designed features that would
(11:03):
later become iconic in the automotive world, such as the
curled tail lights on Cadillacs in the late nineteen forties
or the fins on Cadillacs not long after. Those were
from Harley Earl. Earl was also an early pioneer in
concept cars. So, for those unfamiliar with that term, a
concept car is a showcase vehicle. It's not intended to
(11:25):
go into production. It's not meant to be a vehicle
that the common person could purchase at some point, so
you should never expect to see a concept car in
a line in a car dealership, parking lot or anything
like that. Rather, these cars show off design elements and
technologies that might find their way into later production vehicles.
(11:46):
And often these concept cars wouldn't even be street legal
as designed, so it's meant to show possibility, but not
you know, a guarantee that this is what you're going
to see in the dealerships the following year. It's a
way to get ideas off the ground and get the
automotive world excited about those ideas. So one of the
earliest concept cars, in fact, uh it's often cited as
(12:11):
the first concept car was the Buick Wide Job from
nineteen thirty eight. It was one that Hurly Earl worked on.
The Wide Job was a two door convertible, had some
pretty cool features like wrap around bumpers, and even had
electric windows, which was pretty novel for the time, and
many of the cars features would find their way into
(12:32):
future production cars. As for the Wide Job itself, Earle
would drive it around for many many years. Uh it
belongs in the museum and now it's in one. It
is not an exaggeration to say that the big reason
GM was able to overtake and hold onto the number
one car company in the United States was in large
part thanks to Earl's design team. By nineteen forty, that
(12:54):
team had grown large enough to warrant a new facility,
But World War Two changed things dramatically. GM would initially
resist the push to switch over to wartime production, but
once it did, nearly all of the company's manufacturing capabilities
were redirected to building vehicles, engines, and other material for
the US war effort, at least in this country. To
(13:16):
hear about how GM's subsidiary Opal played a part producing
material for the Access Powers, you should listen to the
previous General Motors episode. Harley Earl made waves in the
business world in general, and the automotive industry in particular
when he began hiring women designers starting in the early
nineteen forties. Not at the time such a thing was
(13:37):
unheard of, but Earl insisted on it. And you could
also make at least some argument that a little bit
of this might have been by necessity, because a lot
of male engineers were drafted to support the United States
in World War Two. But Earl's efforts to bring women
onto teams didn't end with World War Two, and he
even formed an all women team of designers to work
(13:58):
on vehicles in the night teen fifties, which was so
newsworthy that it's embarrassing because it just points out how
much of a disparity there was between men and women
in the workplace in the nineteen fifties. He maintained that
including multiple points of view really helps the best ideas
rise to the top, which is a philosophy I happen
(14:20):
to share. It's one of the big reasons that I
feel inclusion and diversity are great things to embrace, because
not only does it help address inequities that have existed
for far too long, but we all benefit when everyone
gets a chance to contribute. Anyway, let's get back to
General Motors, because now we're at the point where World
War two has ended, so we're caught up now. In
(14:41):
nineteen forty six, Alfred P. Sloan stepped down as CEO
of General Motors. He was, however, still chairman of the
board and he would remain so until nineteen fifty six,
and even then he was elected honorary chairman, which was
a position he held until he passed away a decade
later at the age of ninety. In ninety seven, General
(15:02):
Motors opened a new automobile factory in Van Nuys, California. Now,
originally this plant would be in charge of manufacturing trucks
under the Chevrolet brand, but later it would produce iconic
cars like the Camaro, the ol Camino, the Firebird, the
Monte Carlo, and more. The plant remained in operation for
about forty years, but GM would shut it down in
(15:25):
nineteen two. Now, I think we could mark nineteen fifty
as sort of being the beginning of the Golden Age
of automobiles, or at least the automobile industry. Cars represented
the platform upon which most of the cutting edge technology sat.
That's where you would see cool tech was in cars.
That was like the number one spot. Detroit, Michigan was
(15:49):
the technological center of the United States at this point
in history, and it would remain so for a couple
of decades until some eggheads out in California began to
create what would become Silicon Valley. In nineteen fifty, Michigan
had more millionaires in it than any other state in
the United States, mostly thanks to the automotive industry. Cars
(16:11):
were king. When we come back, we'll learn about what
happened to GM over the following decades, with a few
shoutouts to some specific makes and models. But first let's
take a quick break. We're back and heading into the
(16:32):
nineteen fifties. GM was one of the largest employers in
the world at that time. It was certainly the biggest
employer in the United States. It had more than five
hundred seventy five thousand employees in nineteen fifty five. That
meant it employed twice as many people as the next
(16:52):
largest company in the US, which was US Steel. The
next car company on the list that year would top
out at number four, That was Chrysler, with a hundred
sixty seven thousand or so employees. GM was dominating. In fact,
in nineteen fifty five, the company reported that after taxes,
it would take in a profit of more than one
(17:14):
billion dollars, the first U S company to hit a
billion dollar profit in a year. They would also become
the first company to have to pay a billion dollars
in taxes, which will be an interesting fact to reflect
on when we get to the early two thousands and beyond.
That's foreshadowing something else that loomed over GM in the
(17:34):
nineteen fifties was an escalating legal battle. In nineteen forty nine,
the federal government sued the E. I. DuPont, de Nemour
and Company. Now you might remember way back in part
one of this series that the DuPont family was largely
responsible for helping GM founder William Durant return to GM,
(17:56):
only to subsequently forced Durant out once it appeared that
Durant was going to continue accruing debt well the DuPonts
remained major investors in GM, and by nineteen forty nine
they owned around twenty three percent of the company. The
US government alleged that the DuPonts were using this ownership
to leverage GM to purchase paint and fabric primarily from
(18:18):
DuPont owned businesses, meaning that the DuPonts were making use
of anti competitive practices. In fact, by nineteen forty seven,
nearly seventy percent of all the paint GM purchased was
from DuPont and nearly of all the fabric was from
DuPont as well. The lawsuit in nineteen forty eight was
a big publicized deal. Harry Truman's administration had filed the suit,
(18:42):
and nineteen forty eight was an election year in the US,
so Truman's platform included a strong stance against monopolies and trusts,
and GM and DuPont were kind of in his sights. Now,
The initial case failed to bring out any indictments, but
then the US filed a civil case against DuPont in
nineteen forty nine, and GM was a co defendant in
(19:04):
that case. That case didn't actually go to trial until
nineteen fifty two because Justice moves at a certain pace
here in the US. The trial stretched on for more
than a year. It ended in December nineteen fifty three,
and it wasn't until the following year when Judge Walter
Labi ruled in favor of the defendants in favor of
(19:27):
DuPont and GM, but the US government appealed this ruling
to the Supreme Court. By this time we're talking about
the Eisenhower administration. That Truman administration has long gone by now,
and over two days in nineteen fifty six, both sides
got to argue their case in front of the Supreme Court,
and in nineteen fifty seven the court ruled in favor
(19:48):
of the US government, so they reversed the decision. At
that stage, this case went back down to the district courts,
which were now tasked with the duty of figuring out
how were the DuPonts going to extricate themselves from their
ownership of that of General Motors. This trial happened in
nineteen fifty nine. Once again we have Judge Labay overseeing
(20:11):
the case. This included arguments that selling off the large
number of shares of General Motors could cause the value
of the company's stocks to plummet, and because GM was
such a huge employer in the United States, that in
turn could lead to a general recession and layoffs and
essentially doomsday. So Labi ruled that the DuPonts wouldn't have
(20:34):
to get rid of their stake in GM if they
passed the voting rights for their shares to DuPont shareholders
and then maintain a greater distance from GMS activities. But
that wasn't good enough for the US government, which by
this time was going into another election year, and so
the US government appealed this decision to the Supreme Court,
(20:56):
which heard the case again or this new case connected
to the previous one, and the court determined that, contrary
to Laby's ruling, DuPont had to be forced to divest
all GM stocks entirely. Congress, meanwhile, helped ease this a
little bit by scaling back the tax burden on the
sale of stocks, which otherwise could have cost the DuPonts
(21:18):
about a billion dollars just in you know, selling those stocks.
So the DuPonts divested themselves of that stake gradually in
various sales that concluded in nineteen sixty five, with the
final two point three million shares they still owned in GM,
so from start to finish, this whole process took more
(21:40):
than fifteen years. Now in those fifteen years, a lot
was also happening at General Motors. The company introduced the
Corvette at the Motorama Auto Show in nineteen fifty three.
This car had fiberglass body panels, which was new, had
a six cylinder engine under the hood, which is not
(22:00):
as powerful as a lot of people were hoping for.
The original model was at two speed automatic transmission, and
GMS Chevrolet made three hundred of the original Corvettes, all
of them with white exteriors and red interiors. Out of
those three hundred, GM was able to sell one three
of them. The Corvette start wasn't exactly auspicious, but obviously
(22:23):
the company didn't just abandon the idea. Unlike the experience
of driving a later Corvette, it took a while for
the actual brand to get up to speed, and to
be fair, the old six cylinder Corvettes took about eleven
seconds to accelerate to six emiles per hour around seven
kilometers per hour. The following year, GM moved production to
(22:43):
a manufacturing facility in Missouri with the capacity to produce
ten thousand vehicles per year, but due to low demand,
it only produced around three thousand, six hundred cars in
nineteen fifty four. Then GM switched gears, so to speak,
in nineteen fifty five five, and the new Corvettes would
have V eight engines, which boosted the car's horsepower considerably
(23:06):
and also the performance so it drove more like a
true sports car. And the nineteen fifty six model would
have a newly designed front end and sides that had
scalped curves, and it gave the Corvette a really sleek
and futuristic kind of appearance. And each subsequent year the
car would get redesigns, and frequently those redesigns also included
ways to boost the car's horsepower, which transformed the Corvette
(23:29):
from a sub standard sports car to a decent sports
car to one of the premier sports car lines in
the United States in general, the nineteen fifties saw GM
introduce a lot of daring and iconic designs thanks to
Harley Earl's teams. Those tail fins we associate with the
nineteen fifties come from there. In fact, my favorite car
(23:49):
from GM ever came out during this time period. It's
the nineteen fifty nine Cadillac Fleetwood Series SEV. This ing
is an enormous monster of a vehicle. Huge, it's heavy,
it's got the fins. But the reason why I love
it is because it happens to be Doc Hopper's car.
(24:12):
In the Muppet movie. Doc Hopper was the bad guy,
and I always thought his Cadillac was just the most
incredible looking car anyway. Harley Earl retired from General Motors
in nineteen fifty eight when he reached the age of
sixty five. It was a mandatory retirement, and his successor
was William or Bill Mitchell. Mitchell had joined Harley's team
(24:34):
of designers in the nineteen thirties. He had become a
director level executive in the nineteen fifties and became a
vice president in charge of all styling at GM in ninety.
Under Mitchell's guidance, GM began to move a little away
from the more flashy and ornamental aspects that had become
part of various car designs under Earl's leadership. Not that
(24:55):
all the cars produced during his tenure ended up being
purely utilitarian. I don't want to give you that impression.
There were some standout flashy cars, like the nineteen sixty
three Corvette sting Ray, which is quite the profile if
you ever look it up. The Corvette Stingray three one
also has a split back windscreen, so the back windshield
(25:17):
is is split. There's a divider, a metal divider in
the center um, which looks really cool, but you know,
it's probably not the most convenient feature if you want
an unfettered rear view out of your rear view mirror.
Later models would ditch that split windshield. It would go
for a single piece wind shield instead. One of the
things that GM vehicles were built upon was the fact
(25:38):
that fuel in the fifties and sixties was cheap and plentiful.
You could have these huge cars that guzzled gas because
gas was easy to come by and it didn't cost
very much. And so American car companies were churning out
these big, inefficient cars through the fifties and sixties and
into the seventies. And GM was not the only manufacturer
(25:59):
to do this. It was pretty common across the industry
in America. Well, that would all change due to a
massive energy crisis. And to understand that crisis, we have
to learn about a conflict in nineteen seventy three that
had several names. It was called the Arab Israeli War
of October nineteen seventy three. Sometimes it's called the yam
(26:20):
Kapoor War, and sometimes it's called the Ramadan War. The
primary nations involved were in Egypt and Syria on one
side and Israel on the other. But of course the
allies of these countries were kind of pulled in at
least at a diplomatic level and a support level, and
that ended up being pretty intense because those allies included
(26:41):
the Soviet Union, which was allied with Egypt and Syria,
and the United States, which was allied with Israel. At
the heart of the matter was that the Arabic nations
wanted to have land that Israel had claimed in a
previous war. Released they wanted Israel to rule enguish those
territories that it had occupied after a previous war from
(27:04):
a few years earlier, and Israel declined to acquiesce to
the request. Now, the war lasted most of that October
while the United Nations was putting pressure on all parties
to stop the hostilities. While the countries signed a ceasefire
agreement in November of that year, tensions remained high. The
(27:25):
U n sent in a peacekeeping force to kind of
act as a buffer between Israel and Egypt, and ultimately,
in nineteen seventy nine, Israel and Egypt came to an
agreement that saw Israel withdraw from the Sinai Peninsula. Anyway,
one of the many consequences of these hostilities is that
the Arabic nations in the Organization of the Petroleum Exporting
(27:48):
Countries or OPAQUE, decided to penalize countries like the United
States and much of Western Europe. You know, these were
parties that had aligned with Israel. The Arab countries voted
to prohibit exports oil exports to those countries, which plunge
that part of the world into an oil shortage. This
(28:09):
coincided with a general market recession crisis and made it,
let me check my notes here, um, a billion times
worse for those countries. Now that's hyperbole, it's my hyperbole,
but you get the point. All of a sudden, it
became imperative for countries like the United States to change course.
No longer could the country just burn through oil without reservation.
(28:33):
Oil was hard to come by there were gas shortages
across the United States. It was suddenly a very bad
idea to be in the business of building fuel hungry automobiles.
As such, companies like GM had to make a hard pivot.
While OPEC would lift the oil embargo in nineteen four,
the economic damage had already been done. The value of
(28:55):
the US dollar was down, oil prices remained really high,
So while the US could import oil, it was expensive.
So gone were the days of plentiful and cheap oil
of the fifties and sixties. This is also when you
started seeing national security strategists point out that a heavy
dependence on outside entities for fuel is a pretty enormous
(29:17):
security flaw, always in hindsight right. A secondary oil crisis
in nineteen seventy nine really reinforced this problem. This one
was a crisis brought about due to a revolution in Iran.
So what was going on with the car companies. Well,
one thing that happened in nineteen seventy three at GM
was that one of the company's executives was leaving, not
(29:39):
specifically due to the crisis, although he would later say
that he felt that GM had kind of sealed its
own fate by not pursuing projects that would involve producing
more small and midsized vehicles. He had headed up the
Pontiac and then later the Chevrolet divisions in the late
nineteen six He was also thought to be a potential
(30:02):
contender for the CEO position in the future. But the
funny thing about the future is that it's impossible to
predict unless you happen to have been to the future already. That,
by the way, is my coy way of saying. This
particular GM executive was John Z. DeLorean, the same man
who would be behind the d m C twelve a
(30:22):
k a. The Dolorean used in the Back to the
Future movies. Yep, he was a GM executive before he
moved on. He was also part of the team that
had made the g t O in the early sixties,
which ushered in the era of the muscle car. And again,
muscle cars not really viable in a world where you
can't just feed them endless amounts of gasoline. So when
(30:45):
de Lorean left, he said that one of the things
that convinced him to go, And I should add there
are some accounts that say he didn't actually have a
choice in the matter, that he was forced to leave
GM as opposed to he chose to leave, but that's
a story on its own anyway. He said that one
of the reasons he left was because he felt that
GM had stopped innovating. He claimed that there had been
(31:06):
no real significant technological innovation since power steering had been
introduced in the late nineteen forties, and that the company
was just focused on styling changes from year to year,
and it was more about moving little pieces of metal
around on a car in order to try and sell
the same thing the following year, but just change up
(31:27):
the appearance, and not about actual innovation. But GM's problems
extended beyond the oil crisis and a flamboyant executive leaving
the nest. The U s. Automotive industry was about to
face some pretty big competition from overseas. I'll explain more
after we take this quick break. In nineteen seventy four,
(31:54):
The New York Times published an article that said, quote,
probably no American company has offered so swift and stunning
a blow from the energy crisis as the General Motors
Corporation end quote. The article stated that GM had seen
a thirty five percent decline in sales and had fallen
from being the most profitable industrial company in the US. Instead,
(32:16):
taking its place was the Exon Corporation, an oil company
that's probably another company I should cover at some point
in the future. So GM shut down most of its
assembly plants, and partly this was a cost saving measure,
but mostly it was because the company needed to do
some serious retooling of its manufacturing lines in order to
(32:39):
switch over to producing smaller, more fuel efficient vehicles. Since
the nineteen fifties, the German auto company Volkswagen had found
success exploring the Volkswagen Type one, better known as the
Volkswagen Beetle or bug here in the US and Japanese
companies began to join the club in the early nineteen seventies,
(33:01):
but by nine seventy two, all foreign cars added up
together made up only share of the US automotive market.
The cars were mostly smaller, and many of them were
less expensive than American cars, but they didn't get much
attention in general until we had an oil crisis. People
(33:21):
still needed to get around, but they didn't want frequent
stops at gas stations siphoning away their cash. Imports from
Germany and Japan began to see greater success in the
US market, and they really established themselves, and now American
companies suddenly had competitors that up to that point hadn't
really been all that competitive. GM rushed to try and
(33:42):
make small cars, but the results weren't always successful. This
is around the time where people would start pointing out
some production quality issues with GM vehicles in general in
the various lines uh And I think we can attribute
that to a lot of different factors, but a big one,
I would say, is this incredibly rushed need to completely
(34:05):
change the way you went about making cars in order
to make cars that would would be in line with
new fuel economy standards that the US government had set.
It was one of those things that really put the
company on notice. Now, I want to be clear, this
same thing was true for all American car manufacturers, not
(34:29):
just GM. The U S Government had passed these laws
to create new fuel economy standards, so everyone had to
rush in order to try and meet them as best
they could or else pay really big fines. But this
meant that the real innovations that would emerge due to
these new restrictions would be a few years down the road.
(34:49):
As engineers tackled the problem and began to work up solutions.
So in the meantime, companies were really just cutting corners
anywhere they could to either meet these standards or they
would have to pony up and pay fines. So GM's
leadership was making some questionable decisions. For example, in order
to create a smaller sedan marketed towards a prospective Cadillac buyer,
(35:11):
which is you know again, Cadillac is the luxury end
of the GM brands. GM introducing model called the Cimarron
in the early nineteen eighties. That's c I M A
R R O N. I always want to say cinnamon
when I see it. But the Cimarron looked a lot
like a Chevrolet Cavalier. Now, if you've been listening to
(35:33):
all these episodes, you know that GM's brands, Chevrolet is
the lower tier. That's kind of like the entry level.
It's it's the the budget priced vehicles. That that was
that brand, Chevrolet, and then Cadillac is on the opposite
end of the spectrum, right, that's supposed to be the
luxury brand. This led several journalists to compare the Cimarron
(35:54):
to the Cavalier and say that there was effectively very
little difference, at least externally, but doing the two besides
a several thousand dollar stick at price jump for the Cadillac,
Like they say, well, you could buy a Cavalier for
several thousand dollars less and it looks the same as
as the cimer On. That's what they were essentially saying.
(36:16):
It didn't fare very well in reviews, and the sales
were not great either. Cadillac would end the line of
the cimar On in and it became one of those
examples that people would cite when they wanted to talk
about the missteps that General Motors made during this era.
In N one, Roger B. Smith became the CEO of
(36:37):
General Motors. Smith would lead GM for a decade, stepping
down in n So how did he do well? Let
me put it to you this way. When people make
top ten lists of the worst CEOs of all time,
Roger Smith frequently secures a spot on that list. While
he was in charge, GM went from hold nearly half
(37:00):
the automotive market in the US down to thirty five percent.
So what the heck happened? Well, a lot of those
decisions didn't necessarily look terrible at the time, and some
of them might have actually been pretty good decisions, but
they were executed poorly. One huge decision, however, was to
reverse Alfred Sloan's organizational design of having each brand under
(37:24):
GM operating autonomously. So you might remember Sloan set it
up so Buick operated almost like it was an independent
company compared to say Oldsmobile, compared to say Cadillac, and
so on. Smith reorganized the company, bringing things back to
a more centralized approach. You could argue kind of the
way Durant had it going when things were messy and
(37:46):
difficult to manage. Smith essentially declared that Chevrolet and Pontiac,
as well as GM's Canadian arm, would end up focusing
on building smaller cars, and that the u Wick, Oldsmobile,
and Cadillac brands would focus on building larger cars. But
Smiths approach to reorganizing disrupted processes that had decades of
(38:10):
momentum behind them, and just like with a physical object
in motion, if you disrupt something that has a lot
of momentum, it frequently leads to a big, crashed mess.
The reorganization was supposed to streamline processes, but it often
had the opposite effect. Things got far more complicated, and
more layers of managerial staff were thrown into the mix
(38:33):
in order to sort things out. But I think a
lot of us have had experience in corporate America where
adding more managers is like the opposite of a solution.
It just makes the problem even more complex. Uh So,
the company became really bloated, at least on the managerial level,
and the company began sharing more parts and designs between divisions.
(38:55):
That led to very similar cars coming out marketed as
different makes and models. So at a casual glance, you
could have three or four different cars in front of you,
and when you look at them, just you know, casually,
they may all seem to be the same vehicle. And
then you go around the back and you see that
every single one of them has a different badge on them,
(39:18):
a different brand. So one's a Buick, and one's a Cadillac,
and one's an Oldsmobile, but they all kind of look
the same. That was a problem that GM was running into,
and it hurt the company's image. It was that whole
Simmern and Cavalier problem from earlier writ large. Smith also
wanted to modernize and automate assembly plants, which isn't necessarily
(39:40):
a bad idea. That the goal was to create a
really efficient process that would cut down on costs and
it would eliminate the need for as many employees, which
was something that the Auto Union wasn't too keen on
for obvious reasons. The company would end up spending billions
of dollars in an effort to modernize their areous assemblies,
(40:01):
but the move was a little bit ahead of its time.
The robots didn't work out so well. There are some
famous stories about robots failing to perform up to expectation,
and these ended up being very costly mistakes that didn't
just impede progress, they hurt the company in general. Smith
also saw GM acquire the company Electronic Data Systems from
(40:23):
former presidential candidate Ross Perou. That was a deal that
costs more than two and a half billion dollars. Pero
also would become a major stakeholder in General Motors as
part of this deal. In fact, he owned more shares
than any other single shareholder in the company. Then, Pero,
in his unique style, spent a good deal of time
(40:46):
dragging Smith's name in the mud in the media, criticized
various executive level decisions, which I mean it sounds like
there was a lot of AMMO there to use. Pero
and Smith would have many battles in the press and
in board rooms. In nineteen Smith and the board of
directors were able to buy out Perot's share of General Motors,
(41:08):
but Pero would still comment on the progress or lack thereof,
of the company for the next couple of years. Smith
also oversaw another big acquisition, the Hughes Aircraft Company. That
one cost five point two billion dollars, and these moves
led people to say that he was paying far too
much attention to diversifying GM's businesses, but not enough to
(41:31):
the core automotive business, which was really in kind of
a mess. Smith did see the formation of a new
line of cars marketed as Saturn. That brand developed a
kind of cult like following, which isn't a joke. Our
first new car, my partner and I our first car
was a Saturn, and the experience of buying it felt
(41:52):
kind of like we were being indoctrinated. It didn't stick
with us because it turns out we're too lazy to
be good cult members, So we just drove the car
until I want to say the alternator gave out and
we got rid of it anyway. Smith's leadership led to
Michael Moore releasing a documentary. It was his first film.
(42:13):
This film focused on the impact of Smith's decisions on
the automotive industry in general and on Flint, Michigan in particular.
That film is called Roger and Me, and it includes
scenes of GM workers calling for Smith's resignation, which would
actually happen the following year. The year after Roger and
Me came out, Smith voluntarily resigned as CEO. In the
(42:36):
movie also focuses on how GM was shifting more work
to Mexico, so more jobs were going to Mexican assembly
plants where GM vehicles were being made. That way, the
company didn't have to deal with unions. They didn't have
unions in Mexico, whereas that's something that was kind of
a thorn in the company's side here in America. This
(42:57):
was not a good look for Generals. Smith left a CEO,
but he stayed on with the Board of directors until nineteen.
His successor, Robert Stemple, had been with GM since nineteen.
He had begun as an engineer with Oldsmobile, but General
Motors was in really bad shape, and it was exacerbated
(43:19):
by the oil crisis of the seventies. Smith's leadership in
the eighties, and then there was an economic recession in
the early nineties. As a result, GM was losing money,
so Smith led the board into voting Stemple out in
nineteen I don't know if Stimple was actually doing a
bad job or not. There's not a whole lot I've
(43:41):
seen written about him. I'm sure there are books on
the subject, but I didn't encounter them in my research.
But it seems to me like there were a lot
of external factors that were impacting General Motors, and it
might not have mattered who was in leadership at that moment,
it still would have been a really rough time for
the company because of those external factors. But that's just
(44:04):
me kind of armchair analyzing based on the research I
came in contact with. It could be totally inaccurate, and
I acknowledge that anyway. Roger Smith would actually step down
from the board of directors in nineteen and at that point,
the fourteen member board of directors only had two people
(44:24):
on it who actually worked for General Motors. The new
CEO of the company was John Jack Smith, Jr. And
he would remain CEO for the rest of the nineties.
In that time, General Motors began to recover from the
various recessions and problems of the seventies, eighties, and early nineties.
(44:45):
A dispute with unions would lead to another big strike
in which had economic group percussions beyond the automotive industry itself.
But the next really truly big crisis to hit GM
came in the way of a developing economic recession and
the terrorist attacks on September eleventh, two thousand one. At
(45:07):
that point, the head of GM was Richard Wagoner Jr.
He succeeded Jack Smith when Jack Smith stepped down in
two thousand. Now remember when I said that Roger Smith,
the guy from the eighties, often gets put down on
a top ten worst CEO list. Well, Wagoner often gets
on those lists as well. See it was while Wagoner
(45:28):
was CEO that GM hit a truly low point. It
lost nine percent of its market valuation under his leadership
and in fact went bankrupt. It lost more than eighty
two billion dollars, so the US government had to come
in and bail it out, effectively nationalizing General Motors, which
(45:49):
means that for a while GM was a state run
business here in the United States. At the same time,
Wagoner pushed GM to adopt higher standards of vehicle quality.
He also pushed for improvements to operational processes. He did
oversee some pretty massive layoffs and plant closures at the
same time. Based on things I've read, it sounds like
(46:12):
he really resisted making harder decisions, bigger cuts, which some
analysts say he just didn't have what it takes to
keep the business afloat. He didn't have the the guts
to make those hard decisions. But I would also posit
that these decisions were really super hard, particularly if you're
actually thinking about the impact they have on people and communities.
(46:36):
I mean, Flint, Michigan was hit incredibly hard during the eighties,
and Smith's run as CEO contributed a great deal to that.
So it must have been a pretty hefty responsibility to
be in charge of this massive company that affects so
many people's livelihoods, not just the people who worked directly
for General Motors, but their families and the communities they
(46:58):
live in. But whether Gonna deserves to be listed as
one of the worst CEO s or not, The fact
is that General Motors entered into a downward spiral. In
two thousand four. GM chose to discontinue the Oldsmobile brand
because oldsmobili kind of slid into unprofitability. I think a
lot of people just established it as that's a car
(47:20):
for old people. It's called Oldsmobile, forgetting that it was
named after Ransom Old's the guy who founded the company.
But that legacy car brand had to drive off into
the sunset in two thousand four. The financial crisis of
two thousand seven, the hits just keep on coming. It
had a domino effect that also hit the automotive industry
(47:42):
about a year later. Another energy crisis earlier on had
shifted the market toward favoring fuel efficient cars, which hurt
big American companies that had kind of gone really hard
with big trucks and suv models which are known for,
you know, not being fuel efficient. The financial recession also
affected prices of raw materials that in turn took a
(48:04):
big bite out of profit margins. Now you could try
to deal with that by adjusting the asking price for
vehicles and making them more expensive, but then you're in
danger of pricing yourself out of the market, so it
was really rough. The US government then steps in. Now
it wasn't just to rescue a company, but also the
people who depended upon that company as an employer. GM
(48:26):
was not the only company to get bailed out by
the US government. Chrysler was another one, and Ford got
a line of credit. Although Ford had already gone through
some major restructuring, it wasn't a better financial position to
whether the crisis compared to General Motors or Chrysler. As
part of this streamlining process to get things back under control,
(48:47):
General Motors discontinued to other brands. One was Saturn, which
had been around in some forms it's though it had
never really been profitable despite all the cult stuff, And
the other was Pontiac, the companion brand to the old
Oakland line, which itself had long since been discontinued. Oh In,
General Motors had been the company behind the Hummer brand
(49:10):
of SUVs based off the military hum V that was
first introduced in the two thousand nine. Changes led GM
to pursue selling off the brand to another company, but
ultimately all of those deals fell through, so General Motors
instead mothbawled the brand in though last year the company
(49:31):
began to show teasers of a truck and an SUV
with the Hummer name attached to them. Uh not separately
branded as Hummer. They are GMC branded vehicles, but they
have Hummer in the name. While GM initially explored divesting
itself of Opal back in two thousand nine, that actually
wouldn't happen until, along with Vauxhall, the UK based car
(49:56):
company that GM had also owned for decades, the Group
p S, a company, acquired both of those in seventeen.
The US government invested more than fifty billion dollars into
GM in order to bail it out for this crisis
in the U s. Treasury Department began to sell off
the stake it had purchased in General Motors and eventually
(50:18):
netted thirty nine point seven billion dollars as a results.
So it spent fifty billion to acquire those shares and
made thirty nine point seven billion selling them off, which
is a net loss of eleven point three billion dollars.
Along with the other bailouts, it would turn out that
around ten and a half billion dollars would get passed
(50:39):
on to taxpayers. That's what the average citizen was helping
pay for with their taxes, their federal taxes. Uh. Was
those bailouts of those big companies. That whole process actually
stretched on for several years. The bailout didn't conclude until fourteen.
GM emerged from bankruptcy as two separate companies. The old
(51:01):
GM was the one that was saddled with all the debt.
So this blows my mind that you can do this
and and business. You can have two new companies or
two companies come out of it. You know, one company enters,
two companies leave. One of those two companies is the
one that actually has all that massive debt that caused
(51:22):
you to go into bankruptcy in the first place. The
newer GM had all the assets, although it also did
have seventeen billion dollars in debt itself. So yeah, there
was a lot of debt going on here. But the
new GM was able to get rid of most of
that debt and it was able to move forward with
just four brands at that point, Chevrolet, Cadillac, Buick, and
(51:45):
the GMC truck and suv lines. One of the consequences
of all that debt is the effect on general motors
requirement to pay federal taxes, so it largely doesn't, at
least again not on the federal and that's because the
company can actually count the losses against all earnings, and
(52:05):
so it frequently pays very little in federal tax even
if the company has had a really profitable year, which
might not seem fair, but it gives GM the chance
to set a new foundation for its business without those
extra costs in the form of taxes, and that tax
relief doesn't last forever. I mean, we were talking about
(52:27):
losses of eight two billion dollars that provided a lot
of cushioning for GM too, you know, kind of get
things moving again. So by two or three these those
past losses will have essentially been accounted for and GM
will effectively be working with a blank slate. So there's
(52:48):
a lot more that we could say about General Motors. UH.
For example, the company is, like many automotive companies, really
focusing on hybrids and electric vehicles at this stage, which
is really cool, really exciting stuff. It's also interesting to
point out that previous GM executives have often said that
(53:09):
one of the biggest mistakes they made was not making
an earlier, you know, investment in electric vehicles. Some of
them have said, well, yeah, I wish we had done it,
not because I think it would have moved the bottom line,
because it probably wouldn't, but it would have been a
much better image issue, UM, which also matters. It's crazy
to think that sometimes you do things just because it
(53:30):
looks good for the optics. In other words, a phrase
that I hate, but in our world it does make
a difference. So like it or not, it's the world
we live in. But that wraps up our series on
general motors. UM. There's probably stuff that we could dive
much deeper into, Like I didn't even talk about how
power steering works. I just mentioned it, but we'll leave
(53:52):
that for future episodes. If there are any specific things
you would like me to really dive into, let me
know I'll consider it. Or there's some other topic you
would love for me to tackle in a future episode
of tech Stuff, drop me a line on Twitter. The
handle I use is text stuff hs W, and I'll
talk to you again really soon. Tech Stuff is an
(54:17):
I Heart Radio production. For more podcasts from I Heart Radio,
visit the I Heart Radio app, Apple Podcasts, or wherever
you listen to your favorite shows.
Welcome to tech Stuff, a production from I Heart Radio.
He there, and welcome to tech Stuff. I'm your host,
Jonathan Strickland. I'm an executive producer with iHeart Radio and
I love all things tech. And this is Part three,
the part three and final parts so far of my
(00:26):
series about General Motors. So if you're just tuning in,
you might want to seek out the first two episodes
in this series that published over the last two weeks.
In those episodes, I explain how William C. Durant started
General Motors by first buying Buick, then creating a holding
company called General Motors, and then by buying up a
(00:48):
whole bunch of other car companies like Oldsmobile and Cadillac,
as well as other companies that specialized in making various
parts that were used in cars. I also talked about
how Durant's investors kicked him out of the company for
accruing debt, and how Durant was able to buy his
way back into the company, and then how he got
kicked out of it again. Then I talked about Durant's successor,
(01:12):
Alfred Sloan, who was skilled in reducing costs and increasing
efficiency and maximizing profits, but was very much not interested
in stuff like, you know, worker conditions and compensation. I
also talked about gms controversial activities leading up to World
War Two, and how the company appeared to play at
least some part in helping Hitler's war machine get started
(01:34):
in Germany before doing the same thing in the United States.
So today we're going to pick up post World War Two.
For the most part, we're gonna do some backtracking. I
apologize for that. It's just it's a complicated story. Anyway.
While Sloan definitely had some qualities that I personally find
pretty distasteful, there was no denying that he was brilliant
(01:56):
at managing a company. Sloan had organized General Motors not
by function, so it wasn't like it was organized by
sales and then marketing and then manufacturing across all the
different brands. Instead, he organized it by division, and so
each division would oversee a specific brand of cars. So
the Buick line had its own sales department, its own
(02:18):
marketing department, it's own manufacturing departments, so on, and Cadillac
was the same in Pontiac and Oldsmobile, etcetera. So each
division had its own general manager, who was responsible for
keeping down costs and maximizing profits, and Sloan essentially created
the model that many, if not most, modern big industrial
corporations followed today. Much of the design he brought over
(02:43):
from DuPont. He had kind of picked that up from
DuPont's businesses, but he added his own elements to it
as well. And as such, in business, there are a
lot of people who study Sloan's you know, leadership strategy
and organizational strategy. In fact, if you remove people from
the equation, if you forget that people exist, then Sloan's
(03:06):
models are really effective. It's kind of like looking at
a logic puzzle where you need to reduce one component
in this case that would be you know, loss or cost,
and maximize another component that would be profit. But trouble
starts to pop up when you happen to think of
things like salaries as part of your costs and people
(03:27):
as assets. That kind of thinking where you have removed
yourself from thinking about the human condition. Uh, that doesn't
always end well. It tends to lead to things like
unionization and strikes as people say, hey, we aren't just
numbers on a spreadsheet now. General motors certainly found this
to be true. And while the company didn't employ the
(03:47):
same violent tactics that say Ford did, the disputes with
organized workers were pretty dramatic. But let's push forward, and
that means having to go back a bit. See One
of the really important people in General Motors history whom
I have not mentioned yet is Harley Earl, a professional designer.
He was born in eighteen ninety three in Hollywood, California.
(04:11):
His father, Jacob W. Earl, was a coach builder in
the nineteenth century, and he owned a business called fittingly
enough Earl Coach Works. Oh And while Harley would call
California home, Jacob was actually from somewhere else. He was
from Cadillac, Michigan. Because when we talk about automotive efforts
(04:31):
in the United States, it always comes back to Michigan,
and Jacob's son, Harley, would be a huge influence on
Cadillac's as well as Michigan and other parts of General
Motors as well. So after the turn of the century,
Jacob began to expand his business a little bit. While
he had started out repairing and building horse drawn coaches,
(04:53):
he branched out by working on early automobiles and it
was clear to him that the car was going to
replace the older forms of transportation. So with that in mind,
Jacob founded Earle Automotive Works, a custom shop in Hollywood, California,
where the main customers were producers and movie stars and studios.
(05:13):
In fact, a lot of of the company's early customers
were producers who needed specialty vehicles for the motion pictures,
like horse drawn vehicles, like like like Roman chariots. So
there's nothing like really getting into the early automotive industry
and still having to put aside time to design, you know,
a chariot or two. Harley Earl would work in his
(05:36):
father's shop after school, where he got hands on experience
learning about mechanical systems. But he was also a keen
academic student and he attended Stanford University. Didn't complete it,
but he went there and he had a major in engineering.
He also would occasionally get into a bit of trouble
by apparently borrowing cars as dad had been working on,
(05:57):
and then racing those cars without his dad knowledge, and
frequently winning. There's a story that goes that his dad
found out about this after reading an article in a
local newspaper that detailed Harley Earl's victorious run with a
car that most certainly did not belong to Harley Earl.
(06:17):
By eighteen, Earl's automotive companies business was really booming, and
Harley Earl decided to drop out of college in order
to work at the shop full time. He became known
for working on and designing custom made car bodies that
really stood out, particularly in a world where the model
t Ford had created a sort of uniformity in the
(06:37):
automotive industry. In nineteen nineteen, a man named Don Lee,
the owner of the Don Lee Coach and Body Works company,
acquired the Earl Automotive Company, but he kept Jacob and
Son in charge of it. And now I suddenly want
to sing Andrew Lloyd Weber lyrics for Jacob and Son.
But anyway, Harley Earl became the chief designer for this
(07:01):
branch of Lee's company, and Lee was the leading distributor
of General Motors Cadillac line on the West Coast. So
by the mid nineteen twenties, Harley Earl was quite the
figure in Hollywood. He had made friends with various celebrities
and studio heads through his work on custom car bodies,
and he was kind of living the celebrity lifestyle. One
(07:23):
thing Harley Earl adopted early on that would set him
apart from other designers is that he would design a
car body and then he would sculpt his design in
three dimensions using clay. Now, at this time in car
design that just wasn't standard operating procedure, but Earl proved that,
you know, realizing designs and three dimensions really helped him
create evocative body designs, and no doubt it helped him
(07:46):
close numerous deals as well when clients got a chance
to see the model and then imagine themselves tooling down
Sunset Boulevard and a full sized version. Earl's approach would
be the one that would see widespread adoption throughout the
car industry. Moving forward. In nive Larry Fisher, the head
of the Cadillac division at General Motors, tapped Harley Earl
(08:07):
to design the companion make to the Cadillac. This one
was called the Lassalle. So if you remember, GM had
identified that there were price gaps between their different brands
that they could target, but they didn't want to make
certain brands more expensive or other brands less expensive because
that could change the perception of the brand. So instead
(08:28):
they introduced companion brands to fill in those gaps. Lisalle
was the slightly less expensive version of Cadillac, not really version,
I should say companion to Cadillac. They were distinct. So
Earl agreed and he created four different Clay models. He
had a touring car, a sedan, a roadster, and a coupe,
(08:49):
and Alfred Sloan would approve all four of those models
for production. In ninety seven, Earl joined General Motors as
the head of a design division at that time called
Art and Color. He was one of the earliest, perhaps
first professional designers to work in the automotive industry. Now,
I'm not going to go through all the different designs
(09:10):
that Earl created, because again, that would be an exhaustive podcast.
Also wouldn't be very effective because I don't know if
you noticed, but this is an audio podcast, and you
should really spend your time looking at some pictures of
cars that Earl had a hand in designing. That would
be far more effective. I should also point out that
as his career went on, he spent less time hands
(09:33):
on designing vehicles and more time overseeing teams of designers
who were doing that. Although he still had the authority
to approve or deny any style changes. It's important to
know that it was these designs that Earl came up
with that aligned with Alfred Sloan's vision of bringing new
styles of cars to market year after year, thus creating
(09:55):
almost a kind of planned obsolescence approach to the auto industry. Now,
it wasn't that the cars would just poop out after
a year of operation. They didn't. They were, for the
most part, reliable machines if you maintain them properly. It
was more that by creating a signature style that would
change over time, GM also created an incentive to buy
(10:17):
new cars, at least for the people who could afford
to do that kind of thing. You know, cars have
always been tied to status symbols, and having a car
with a distinctive modern look as a real sort of
social cachet to it. Earl ushered in a new era
in industrial design, creating an approach to integrated design that
used a single team to work on all aspects of
(10:41):
a specific product, from the way it looks to how
it operates and handles, to how it's marketed and priced.
This unified method meant that everyone was on the same
page when it came to the project. There was no
worry about handing this off to a different team and
then seeing all of your hard work get is handled
by them. It was Earl who designed features that would
(11:03):
later become iconic in the automotive world, such as the
curled tail lights on Cadillacs in the late nineteen forties
or the fins on Cadillacs not long after. Those were
from Harley Earl. Earl was also an early pioneer in
concept cars. So, for those unfamiliar with that term, a
concept car is a showcase vehicle. It's not intended to
(11:25):
go into production. It's not meant to be a vehicle
that the common person could purchase at some point, so
you should never expect to see a concept car in
a line in a car dealership, parking lot or anything
like that. Rather, these cars show off design elements and
technologies that might find their way into later production vehicles.
(11:46):
And often these concept cars wouldn't even be street legal
as designed, so it's meant to show possibility, but not
you know, a guarantee that this is what you're going
to see in the dealerships the following year. It's a
way to get ideas off the ground and get the
automotive world excited about those ideas. So one of the
earliest concept cars, in fact, uh it's often cited as
(12:11):
the first concept car was the Buick Wide Job from
nineteen thirty eight. It was one that Hurly Earl worked on.
The Wide Job was a two door convertible, had some
pretty cool features like wrap around bumpers, and even had
electric windows, which was pretty novel for the time, and
many of the cars features would find their way into
(12:32):
future production cars. As for the Wide Job itself, Earle
would drive it around for many many years. Uh it
belongs in the museum and now it's in one. It
is not an exaggeration to say that the big reason
GM was able to overtake and hold onto the number
one car company in the United States was in large
part thanks to Earl's design team. By nineteen forty, that
(12:54):
team had grown large enough to warrant a new facility,
But World War Two changed things dramatically. GM would initially
resist the push to switch over to wartime production, but
once it did, nearly all of the company's manufacturing capabilities
were redirected to building vehicles, engines, and other material for
the US war effort, at least in this country. To
(13:16):
hear about how GM's subsidiary Opal played a part producing
material for the Access Powers, you should listen to the
previous General Motors episode. Harley Earl made waves in the
business world in general, and the automotive industry in particular
when he began hiring women designers starting in the early
nineteen forties. Not at the time such a thing was
(13:37):
unheard of, but Earl insisted on it. And you could
also make at least some argument that a little bit
of this might have been by necessity, because a lot
of male engineers were drafted to support the United States
in World War Two. But Earl's efforts to bring women
onto teams didn't end with World War Two, and he
even formed an all women team of designers to work
(13:58):
on vehicles in the night teen fifties, which was so
newsworthy that it's embarrassing because it just points out how
much of a disparity there was between men and women
in the workplace in the nineteen fifties. He maintained that
including multiple points of view really helps the best ideas
rise to the top, which is a philosophy I happen
(14:20):
to share. It's one of the big reasons that I
feel inclusion and diversity are great things to embrace, because
not only does it help address inequities that have existed
for far too long, but we all benefit when everyone
gets a chance to contribute. Anyway, let's get back to
General Motors, because now we're at the point where World
War two has ended, so we're caught up now. In
(14:41):
nineteen forty six, Alfred P. Sloan stepped down as CEO
of General Motors. He was, however, still chairman of the
board and he would remain so until nineteen fifty six,
and even then he was elected honorary chairman, which was
a position he held until he passed away a decade
later at the age of ninety. In ninety seven, General
(15:02):
Motors opened a new automobile factory in Van Nuys, California. Now,
originally this plant would be in charge of manufacturing trucks
under the Chevrolet brand, but later it would produce iconic
cars like the Camaro, the ol Camino, the Firebird, the
Monte Carlo, and more. The plant remained in operation for
about forty years, but GM would shut it down in
(15:25):
nineteen two. Now, I think we could mark nineteen fifty
as sort of being the beginning of the Golden Age
of automobiles, or at least the automobile industry. Cars represented
the platform upon which most of the cutting edge technology sat.
That's where you would see cool tech was in cars.
That was like the number one spot. Detroit, Michigan was
(15:49):
the technological center of the United States at this point
in history, and it would remain so for a couple
of decades until some eggheads out in California began to
create what would become Silicon Valley. In nineteen fifty, Michigan
had more millionaires in it than any other state in
the United States, mostly thanks to the automotive industry. Cars
(16:11):
were king. When we come back, we'll learn about what
happened to GM over the following decades, with a few
shoutouts to some specific makes and models. But first let's
take a quick break. We're back and heading into the
(16:32):
nineteen fifties. GM was one of the largest employers in
the world at that time. It was certainly the biggest
employer in the United States. It had more than five
hundred seventy five thousand employees in nineteen fifty five. That
meant it employed twice as many people as the next
(16:52):
largest company in the US, which was US Steel. The
next car company on the list that year would top
out at number four, That was Chrysler, with a hundred
sixty seven thousand or so employees. GM was dominating. In fact,
in nineteen fifty five, the company reported that after taxes,
it would take in a profit of more than one
(17:14):
billion dollars, the first U S company to hit a
billion dollar profit in a year. They would also become
the first company to have to pay a billion dollars
in taxes, which will be an interesting fact to reflect
on when we get to the early two thousands and beyond.
That's foreshadowing something else that loomed over GM in the
(17:34):
nineteen fifties was an escalating legal battle. In nineteen forty nine,
the federal government sued the E. I. DuPont, de Nemour
and Company. Now you might remember way back in part
one of this series that the DuPont family was largely
responsible for helping GM founder William Durant return to GM,
(17:56):
only to subsequently forced Durant out once it appeared that
Durant was going to continue accruing debt well the DuPonts
remained major investors in GM, and by nineteen forty nine
they owned around twenty three percent of the company. The
US government alleged that the DuPonts were using this ownership
to leverage GM to purchase paint and fabric primarily from
(18:18):
DuPont owned businesses, meaning that the DuPonts were making use
of anti competitive practices. In fact, by nineteen forty seven,
nearly seventy percent of all the paint GM purchased was
from DuPont and nearly of all the fabric was from
DuPont as well. The lawsuit in nineteen forty eight was
a big publicized deal. Harry Truman's administration had filed the suit,
(18:42):
and nineteen forty eight was an election year in the US,
so Truman's platform included a strong stance against monopolies and trusts,
and GM and DuPont were kind of in his sights. Now,
The initial case failed to bring out any indictments, but
then the US filed a civil case against DuPont in
nineteen forty nine, and GM was a co defendant in
(19:04):
that case. That case didn't actually go to trial until
nineteen fifty two because Justice moves at a certain pace
here in the US. The trial stretched on for more
than a year. It ended in December nineteen fifty three,
and it wasn't until the following year when Judge Walter
Labi ruled in favor of the defendants in favor of
(19:27):
DuPont and GM, but the US government appealed this ruling
to the Supreme Court. By this time we're talking about
the Eisenhower administration. That Truman administration has long gone by now,
and over two days in nineteen fifty six, both sides
got to argue their case in front of the Supreme Court,
and in nineteen fifty seven the court ruled in favor
(19:48):
of the US government, so they reversed the decision. At
that stage, this case went back down to the district courts,
which were now tasked with the duty of figuring out
how were the DuPonts going to extricate themselves from their
ownership of that of General Motors. This trial happened in
nineteen fifty nine. Once again we have Judge Labay overseeing
(20:11):
the case. This included arguments that selling off the large
number of shares of General Motors could cause the value
of the company's stocks to plummet, and because GM was
such a huge employer in the United States, that in
turn could lead to a general recession and layoffs and
essentially doomsday. So Labi ruled that the DuPonts wouldn't have
(20:34):
to get rid of their stake in GM if they
passed the voting rights for their shares to DuPont shareholders
and then maintain a greater distance from GMS activities. But
that wasn't good enough for the US government, which by
this time was going into another election year, and so
the US government appealed this decision to the Supreme Court,
(20:56):
which heard the case again or this new case connected
to the previous one, and the court determined that, contrary
to Laby's ruling, DuPont had to be forced to divest
all GM stocks entirely. Congress, meanwhile, helped ease this a
little bit by scaling back the tax burden on the
sale of stocks, which otherwise could have cost the DuPonts
(21:18):
about a billion dollars just in you know, selling those stocks.
So the DuPonts divested themselves of that stake gradually in
various sales that concluded in nineteen sixty five, with the
final two point three million shares they still owned in GM,
so from start to finish, this whole process took more
(21:40):
than fifteen years. Now in those fifteen years, a lot
was also happening at General Motors. The company introduced the
Corvette at the Motorama Auto Show in nineteen fifty three.
This car had fiberglass body panels, which was new, had
a six cylinder engine under the hood, which is not
(22:00):
as powerful as a lot of people were hoping for.
The original model was at two speed automatic transmission, and
GMS Chevrolet made three hundred of the original Corvettes, all
of them with white exteriors and red interiors. Out of
those three hundred, GM was able to sell one three
of them. The Corvette start wasn't exactly auspicious, but obviously
(22:23):
the company didn't just abandon the idea. Unlike the experience
of driving a later Corvette, it took a while for
the actual brand to get up to speed, and to
be fair, the old six cylinder Corvettes took about eleven
seconds to accelerate to six emiles per hour around seven
kilometers per hour. The following year, GM moved production to
(22:43):
a manufacturing facility in Missouri with the capacity to produce
ten thousand vehicles per year, but due to low demand,
it only produced around three thousand, six hundred cars in
nineteen fifty four. Then GM switched gears, so to speak,
in nineteen fifty five five, and the new Corvettes would
have V eight engines, which boosted the car's horsepower considerably
(23:06):
and also the performance so it drove more like a
true sports car. And the nineteen fifty six model would
have a newly designed front end and sides that had
scalped curves, and it gave the Corvette a really sleek
and futuristic kind of appearance. And each subsequent year the
car would get redesigns, and frequently those redesigns also included
ways to boost the car's horsepower, which transformed the Corvette
(23:29):
from a sub standard sports car to a decent sports
car to one of the premier sports car lines in
the United States in general, the nineteen fifties saw GM
introduce a lot of daring and iconic designs thanks to
Harley Earl's teams. Those tail fins we associate with the
nineteen fifties come from there. In fact, my favorite car
(23:49):
from GM ever came out during this time period. It's
the nineteen fifty nine Cadillac Fleetwood Series SEV. This ing
is an enormous monster of a vehicle. Huge, it's heavy,
it's got the fins. But the reason why I love
it is because it happens to be Doc Hopper's car.
(24:12):
In the Muppet movie. Doc Hopper was the bad guy,
and I always thought his Cadillac was just the most
incredible looking car anyway. Harley Earl retired from General Motors
in nineteen fifty eight when he reached the age of
sixty five. It was a mandatory retirement, and his successor
was William or Bill Mitchell. Mitchell had joined Harley's team
(24:34):
of designers in the nineteen thirties. He had become a
director level executive in the nineteen fifties and became a
vice president in charge of all styling at GM in ninety.
Under Mitchell's guidance, GM began to move a little away
from the more flashy and ornamental aspects that had become
part of various car designs under Earl's leadership. Not that
(24:55):
all the cars produced during his tenure ended up being
purely utilitarian. I don't want to give you that impression.
There were some standout flashy cars, like the nineteen sixty
three Corvette sting Ray, which is quite the profile if
you ever look it up. The Corvette Stingray three one
also has a split back windscreen, so the back windshield
(25:17):
is is split. There's a divider, a metal divider in
the center um, which looks really cool, but you know,
it's probably not the most convenient feature if you want
an unfettered rear view out of your rear view mirror.
Later models would ditch that split windshield. It would go
for a single piece wind shield instead. One of the
things that GM vehicles were built upon was the fact
(25:38):
that fuel in the fifties and sixties was cheap and plentiful.
You could have these huge cars that guzzled gas because
gas was easy to come by and it didn't cost
very much. And so American car companies were churning out
these big, inefficient cars through the fifties and sixties and
into the seventies. And GM was not the only manufacturer
(25:59):
to do this. It was pretty common across the industry
in America. Well, that would all change due to a
massive energy crisis. And to understand that crisis, we have
to learn about a conflict in nineteen seventy three that
had several names. It was called the Arab Israeli War
of October nineteen seventy three. Sometimes it's called the yam
(26:20):
Kapoor War, and sometimes it's called the Ramadan War. The
primary nations involved were in Egypt and Syria on one
side and Israel on the other. But of course the
allies of these countries were kind of pulled in at
least at a diplomatic level and a support level, and
that ended up being pretty intense because those allies included
(26:41):
the Soviet Union, which was allied with Egypt and Syria,
and the United States, which was allied with Israel. At
the heart of the matter was that the Arabic nations
wanted to have land that Israel had claimed in a
previous war. Released they wanted Israel to rule enguish those
territories that it had occupied after a previous war from
(27:04):
a few years earlier, and Israel declined to acquiesce to
the request. Now, the war lasted most of that October
while the United Nations was putting pressure on all parties
to stop the hostilities. While the countries signed a ceasefire
agreement in November of that year, tensions remained high. The
(27:25):
U n sent in a peacekeeping force to kind of
act as a buffer between Israel and Egypt, and ultimately,
in nineteen seventy nine, Israel and Egypt came to an
agreement that saw Israel withdraw from the Sinai Peninsula. Anyway,
one of the many consequences of these hostilities is that
the Arabic nations in the Organization of the Petroleum Exporting
(27:48):
Countries or OPAQUE, decided to penalize countries like the United
States and much of Western Europe. You know, these were
parties that had aligned with Israel. The Arab countries voted
to prohibit exports oil exports to those countries, which plunge
that part of the world into an oil shortage. This
(28:09):
coincided with a general market recession crisis and made it,
let me check my notes here, um, a billion times
worse for those countries. Now that's hyperbole, it's my hyperbole,
but you get the point. All of a sudden, it
became imperative for countries like the United States to change course.
No longer could the country just burn through oil without reservation.
(28:33):
Oil was hard to come by there were gas shortages
across the United States. It was suddenly a very bad
idea to be in the business of building fuel hungry automobiles.
As such, companies like GM had to make a hard pivot.
While OPEC would lift the oil embargo in nineteen four,
the economic damage had already been done. The value of
(28:55):
the US dollar was down, oil prices remained really high,
So while the US could import oil, it was expensive.
So gone were the days of plentiful and cheap oil
of the fifties and sixties. This is also when you
started seeing national security strategists point out that a heavy
dependence on outside entities for fuel is a pretty enormous
(29:17):
security flaw, always in hindsight right. A secondary oil crisis
in nineteen seventy nine really reinforced this problem. This one
was a crisis brought about due to a revolution in Iran.
So what was going on with the car companies. Well,
one thing that happened in nineteen seventy three at GM
was that one of the company's executives was leaving, not
(29:39):
specifically due to the crisis, although he would later say
that he felt that GM had kind of sealed its
own fate by not pursuing projects that would involve producing
more small and midsized vehicles. He had headed up the
Pontiac and then later the Chevrolet divisions in the late
nineteen six He was also thought to be a potential
(30:02):
contender for the CEO position in the future. But the
funny thing about the future is that it's impossible to
predict unless you happen to have been to the future already. That,
by the way, is my coy way of saying. This
particular GM executive was John Z. DeLorean, the same man
who would be behind the d m C twelve a
(30:22):
k a. The Dolorean used in the Back to the
Future movies. Yep, he was a GM executive before he
moved on. He was also part of the team that
had made the g t O in the early sixties,
which ushered in the era of the muscle car. And again,
muscle cars not really viable in a world where you
can't just feed them endless amounts of gasoline. So when
(30:45):
de Lorean left, he said that one of the things
that convinced him to go, And I should add there
are some accounts that say he didn't actually have a
choice in the matter, that he was forced to leave
GM as opposed to he chose to leave, but that's
a story on its own anyway. He said that one
of the reasons he left was because he felt that
GM had stopped innovating. He claimed that there had been
(31:06):
no real significant technological innovation since power steering had been
introduced in the late nineteen forties, and that the company
was just focused on styling changes from year to year,
and it was more about moving little pieces of metal
around on a car in order to try and sell
the same thing the following year, but just change up
(31:27):
the appearance, and not about actual innovation. But GM's problems
extended beyond the oil crisis and a flamboyant executive leaving
the nest. The U s. Automotive industry was about to
face some pretty big competition from overseas. I'll explain more
after we take this quick break. In nineteen seventy four,
(31:54):
The New York Times published an article that said, quote,
probably no American company has offered so swift and stunning
a blow from the energy crisis as the General Motors
Corporation end quote. The article stated that GM had seen
a thirty five percent decline in sales and had fallen
from being the most profitable industrial company in the US. Instead,
(32:16):
taking its place was the Exon Corporation, an oil company
that's probably another company I should cover at some point
in the future. So GM shut down most of its
assembly plants, and partly this was a cost saving measure,
but mostly it was because the company needed to do
some serious retooling of its manufacturing lines in order to
(32:39):
switch over to producing smaller, more fuel efficient vehicles. Since
the nineteen fifties, the German auto company Volkswagen had found
success exploring the Volkswagen Type one, better known as the
Volkswagen Beetle or bug here in the US and Japanese
companies began to join the club in the early nineteen seventies,
(33:01):
but by nine seventy two, all foreign cars added up
together made up only share of the US automotive market.
The cars were mostly smaller, and many of them were
less expensive than American cars, but they didn't get much
attention in general until we had an oil crisis. People
(33:21):
still needed to get around, but they didn't want frequent
stops at gas stations siphoning away their cash. Imports from
Germany and Japan began to see greater success in the
US market, and they really established themselves, and now American
companies suddenly had competitors that up to that point hadn't
really been all that competitive. GM rushed to try and
(33:42):
make small cars, but the results weren't always successful. This
is around the time where people would start pointing out
some production quality issues with GM vehicles in general in
the various lines uh And I think we can attribute
that to a lot of different factors, but a big one,
I would say, is this incredibly rushed need to completely
(34:05):
change the way you went about making cars in order
to make cars that would would be in line with
new fuel economy standards that the US government had set.
It was one of those things that really put the
company on notice. Now, I want to be clear, this
same thing was true for all American car manufacturers, not
(34:29):
just GM. The U S Government had passed these laws
to create new fuel economy standards, so everyone had to
rush in order to try and meet them as best
they could or else pay really big fines. But this
meant that the real innovations that would emerge due to
these new restrictions would be a few years down the road.
(34:49):
As engineers tackled the problem and began to work up solutions.
So in the meantime, companies were really just cutting corners
anywhere they could to either meet these standards or they
would have to pony up and pay fines. So GM's
leadership was making some questionable decisions. For example, in order
to create a smaller sedan marketed towards a prospective Cadillac buyer,
(35:11):
which is you know again, Cadillac is the luxury end
of the GM brands. GM introducing model called the Cimarron
in the early nineteen eighties. That's c I M A
R R O N. I always want to say cinnamon
when I see it. But the Cimarron looked a lot
like a Chevrolet Cavalier. Now, if you've been listening to
(35:33):
all these episodes, you know that GM's brands, Chevrolet is
the lower tier. That's kind of like the entry level.
It's it's the the budget priced vehicles. That that was
that brand, Chevrolet, and then Cadillac is on the opposite
end of the spectrum, right, that's supposed to be the
luxury brand. This led several journalists to compare the Cimarron
(35:54):
to the Cavalier and say that there was effectively very
little difference, at least externally, but doing the two besides
a several thousand dollar stick at price jump for the Cadillac,
Like they say, well, you could buy a Cavalier for
several thousand dollars less and it looks the same as
as the cimer On. That's what they were essentially saying.
(36:16):
It didn't fare very well in reviews, and the sales
were not great either. Cadillac would end the line of
the cimar On in and it became one of those
examples that people would cite when they wanted to talk
about the missteps that General Motors made during this era.
In N one, Roger B. Smith became the CEO of
(36:37):
General Motors. Smith would lead GM for a decade, stepping
down in n So how did he do well? Let
me put it to you this way. When people make
top ten lists of the worst CEOs of all time,
Roger Smith frequently secures a spot on that list. While
he was in charge, GM went from hold nearly half
(37:00):
the automotive market in the US down to thirty five percent.
So what the heck happened? Well, a lot of those
decisions didn't necessarily look terrible at the time, and some
of them might have actually been pretty good decisions, but
they were executed poorly. One huge decision, however, was to
reverse Alfred Sloan's organizational design of having each brand under
(37:24):
GM operating autonomously. So you might remember Sloan set it
up so Buick operated almost like it was an independent
company compared to say Oldsmobile, compared to say Cadillac, and
so on. Smith reorganized the company, bringing things back to
a more centralized approach. You could argue kind of the
way Durant had it going when things were messy and
(37:46):
difficult to manage. Smith essentially declared that Chevrolet and Pontiac,
as well as GM's Canadian arm, would end up focusing
on building smaller cars, and that the u Wick, Oldsmobile,
and Cadillac brands would focus on building larger cars. But
Smiths approach to reorganizing disrupted processes that had decades of
(38:10):
momentum behind them, and just like with a physical object
in motion, if you disrupt something that has a lot
of momentum, it frequently leads to a big, crashed mess.
The reorganization was supposed to streamline processes, but it often
had the opposite effect. Things got far more complicated, and
more layers of managerial staff were thrown into the mix
(38:33):
in order to sort things out. But I think a
lot of us have had experience in corporate America where
adding more managers is like the opposite of a solution.
It just makes the problem even more complex. Uh So,
the company became really bloated, at least on the managerial level,
and the company began sharing more parts and designs between divisions.
(38:55):
That led to very similar cars coming out marketed as
different makes and models. So at a casual glance, you
could have three or four different cars in front of you,
and when you look at them, just you know, casually,
they may all seem to be the same vehicle. And
then you go around the back and you see that
every single one of them has a different badge on them,
(39:18):
a different brand. So one's a Buick, and one's a Cadillac,
and one's an Oldsmobile, but they all kind of look
the same. That was a problem that GM was running into,
and it hurt the company's image. It was that whole
Simmern and Cavalier problem from earlier writ large. Smith also
wanted to modernize and automate assembly plants, which isn't necessarily
(39:40):
a bad idea. That the goal was to create a
really efficient process that would cut down on costs and
it would eliminate the need for as many employees, which
was something that the Auto Union wasn't too keen on
for obvious reasons. The company would end up spending billions
of dollars in an effort to modernize their areous assemblies,
(40:01):
but the move was a little bit ahead of its time.
The robots didn't work out so well. There are some
famous stories about robots failing to perform up to expectation,
and these ended up being very costly mistakes that didn't
just impede progress, they hurt the company in general. Smith
also saw GM acquire the company Electronic Data Systems from
(40:23):
former presidential candidate Ross Perou. That was a deal that
costs more than two and a half billion dollars. Pero
also would become a major stakeholder in General Motors as
part of this deal. In fact, he owned more shares
than any other single shareholder in the company. Then, Pero,
in his unique style, spent a good deal of time
(40:46):
dragging Smith's name in the mud in the media, criticized
various executive level decisions, which I mean it sounds like
there was a lot of AMMO there to use. Pero
and Smith would have many battles in the press and
in board rooms. In nineteen Smith and the board of
directors were able to buy out Perot's share of General Motors,
(41:08):
but Pero would still comment on the progress or lack thereof,
of the company for the next couple of years. Smith
also oversaw another big acquisition, the Hughes Aircraft Company. That
one cost five point two billion dollars, and these moves
led people to say that he was paying far too
much attention to diversifying GM's businesses, but not enough to
(41:31):
the core automotive business, which was really in kind of
a mess. Smith did see the formation of a new
line of cars marketed as Saturn. That brand developed a
kind of cult like following, which isn't a joke. Our
first new car, my partner and I our first car
was a Saturn, and the experience of buying it felt
(41:52):
kind of like we were being indoctrinated. It didn't stick
with us because it turns out we're too lazy to
be good cult members, So we just drove the car
until I want to say the alternator gave out and
we got rid of it anyway. Smith's leadership led to
Michael Moore releasing a documentary. It was his first film.
(42:13):
This film focused on the impact of Smith's decisions on
the automotive industry in general and on Flint, Michigan in particular.
That film is called Roger and Me, and it includes
scenes of GM workers calling for Smith's resignation, which would
actually happen the following year. The year after Roger and
Me came out, Smith voluntarily resigned as CEO. In the
(42:36):
movie also focuses on how GM was shifting more work
to Mexico, so more jobs were going to Mexican assembly
plants where GM vehicles were being made. That way, the
company didn't have to deal with unions. They didn't have
unions in Mexico, whereas that's something that was kind of
a thorn in the company's side here in America. This
(42:57):
was not a good look for Generals. Smith left a CEO,
but he stayed on with the Board of directors until nineteen.
His successor, Robert Stemple, had been with GM since nineteen.
He had begun as an engineer with Oldsmobile, but General
Motors was in really bad shape, and it was exacerbated
(43:19):
by the oil crisis of the seventies. Smith's leadership in
the eighties, and then there was an economic recession in
the early nineties. As a result, GM was losing money,
so Smith led the board into voting Stemple out in
nineteen I don't know if Stimple was actually doing a
bad job or not. There's not a whole lot I've
(43:41):
seen written about him. I'm sure there are books on
the subject, but I didn't encounter them in my research.
But it seems to me like there were a lot
of external factors that were impacting General Motors, and it
might not have mattered who was in leadership at that moment,
it still would have been a really rough time for
the company because of those external factors. But that's just
(44:04):
me kind of armchair analyzing based on the research I
came in contact with. It could be totally inaccurate, and
I acknowledge that anyway. Roger Smith would actually step down
from the board of directors in nineteen and at that point,
the fourteen member board of directors only had two people
(44:24):
on it who actually worked for General Motors. The new
CEO of the company was John Jack Smith, Jr. And
he would remain CEO for the rest of the nineties.
In that time, General Motors began to recover from the
various recessions and problems of the seventies, eighties, and early nineties.
(44:45):
A dispute with unions would lead to another big strike
in which had economic group percussions beyond the automotive industry itself.
But the next really truly big crisis to hit GM
came in the way of a developing economic recession and
the terrorist attacks on September eleventh, two thousand one. At
(45:07):
that point, the head of GM was Richard Wagoner Jr.
He succeeded Jack Smith when Jack Smith stepped down in
two thousand. Now remember when I said that Roger Smith,
the guy from the eighties, often gets put down on
a top ten worst CEO list. Well, Wagoner often gets
on those lists as well. See it was while Wagoner
(45:28):
was CEO that GM hit a truly low point. It
lost nine percent of its market valuation under his leadership
and in fact went bankrupt. It lost more than eighty
two billion dollars, so the US government had to come
in and bail it out, effectively nationalizing General Motors, which
(45:49):
means that for a while GM was a state run
business here in the United States. At the same time,
Wagoner pushed GM to adopt higher standards of vehicle quality.
He also pushed for improvements to operational processes. He did
oversee some pretty massive layoffs and plant closures at the
same time. Based on things I've read, it sounds like
(46:12):
he really resisted making harder decisions, bigger cuts, which some
analysts say he just didn't have what it takes to
keep the business afloat. He didn't have the the guts
to make those hard decisions. But I would also posit
that these decisions were really super hard, particularly if you're
actually thinking about the impact they have on people and communities.
(46:36):
I mean, Flint, Michigan was hit incredibly hard during the eighties,
and Smith's run as CEO contributed a great deal to that.
So it must have been a pretty hefty responsibility to
be in charge of this massive company that affects so
many people's livelihoods, not just the people who worked directly
for General Motors, but their families and the communities they
(46:58):
live in. But whether Gonna deserves to be listed as
one of the worst CEO s or not, The fact
is that General Motors entered into a downward spiral. In
two thousand four. GM chose to discontinue the Oldsmobile brand
because oldsmobili kind of slid into unprofitability. I think a
lot of people just established it as that's a car
(47:20):
for old people. It's called Oldsmobile, forgetting that it was
named after Ransom Old's the guy who founded the company.
But that legacy car brand had to drive off into
the sunset in two thousand four. The financial crisis of
two thousand seven, the hits just keep on coming. It
had a domino effect that also hit the automotive industry
(47:42):
about a year later. Another energy crisis earlier on had
shifted the market toward favoring fuel efficient cars, which hurt
big American companies that had kind of gone really hard
with big trucks and suv models which are known for,
you know, not being fuel efficient. The financial recession also
affected prices of raw materials that in turn took a
(48:04):
big bite out of profit margins. Now you could try
to deal with that by adjusting the asking price for
vehicles and making them more expensive, but then you're in
danger of pricing yourself out of the market, so it
was really rough. The US government then steps in. Now
it wasn't just to rescue a company, but also the
people who depended upon that company as an employer. GM
(48:26):
was not the only company to get bailed out by
the US government. Chrysler was another one, and Ford got
a line of credit. Although Ford had already gone through
some major restructuring, it wasn't a better financial position to
whether the crisis compared to General Motors or Chrysler. As
part of this streamlining process to get things back under control,
(48:47):
General Motors discontinued to other brands. One was Saturn, which
had been around in some forms it's though it had
never really been profitable despite all the cult stuff, And
the other was Pontiac, the companion brand to the old
Oakland line, which itself had long since been discontinued. Oh In,
General Motors had been the company behind the Hummer brand
(49:10):
of SUVs based off the military hum V that was
first introduced in the two thousand nine. Changes led GM
to pursue selling off the brand to another company, but
ultimately all of those deals fell through, so General Motors
instead mothbawled the brand in though last year the company
(49:31):
began to show teasers of a truck and an SUV
with the Hummer name attached to them. Uh not separately
branded as Hummer. They are GMC branded vehicles, but they
have Hummer in the name. While GM initially explored divesting
itself of Opal back in two thousand nine, that actually
wouldn't happen until, along with Vauxhall, the UK based car
(49:56):
company that GM had also owned for decades, the Group
p S, a company, acquired both of those in seventeen.
The US government invested more than fifty billion dollars into
GM in order to bail it out for this crisis
in the U s. Treasury Department began to sell off
the stake it had purchased in General Motors and eventually
(50:18):
netted thirty nine point seven billion dollars as a results.
So it spent fifty billion to acquire those shares and
made thirty nine point seven billion selling them off, which
is a net loss of eleven point three billion dollars.
Along with the other bailouts, it would turn out that
around ten and a half billion dollars would get passed
(50:39):
on to taxpayers. That's what the average citizen was helping
pay for with their taxes, their federal taxes. Uh. Was
those bailouts of those big companies. That whole process actually
stretched on for several years. The bailout didn't conclude until fourteen.
GM emerged from bankruptcy as two separate companies. The old
(51:01):
GM was the one that was saddled with all the debt.
So this blows my mind that you can do this
and and business. You can have two new companies or
two companies come out of it. You know, one company enters,
two companies leave. One of those two companies is the
one that actually has all that massive debt that caused
(51:22):
you to go into bankruptcy in the first place. The
newer GM had all the assets, although it also did
have seventeen billion dollars in debt itself. So yeah, there
was a lot of debt going on here. But the
new GM was able to get rid of most of
that debt and it was able to move forward with
just four brands at that point, Chevrolet, Cadillac, Buick, and
(51:45):
the GMC truck and suv lines. One of the consequences
of all that debt is the effect on general motors
requirement to pay federal taxes, so it largely doesn't, at
least again not on the federal and that's because the
company can actually count the losses against all earnings, and
(52:05):
so it frequently pays very little in federal tax even
if the company has had a really profitable year, which
might not seem fair, but it gives GM the chance
to set a new foundation for its business without those
extra costs in the form of taxes, and that tax
relief doesn't last forever. I mean, we were talking about
(52:27):
losses of eight two billion dollars that provided a lot
of cushioning for GM too, you know, kind of get
things moving again. So by two or three these those
past losses will have essentially been accounted for and GM
will effectively be working with a blank slate. So there's
(52:48):
a lot more that we could say about General Motors. UH.
For example, the company is, like many automotive companies, really
focusing on hybrids and electric vehicles at this stage, which
is really cool, really exciting stuff. It's also interesting to
point out that previous GM executives have often said that
(53:09):
one of the biggest mistakes they made was not making
an earlier, you know, investment in electric vehicles. Some of
them have said, well, yeah, I wish we had done it,
not because I think it would have moved the bottom line,
because it probably wouldn't, but it would have been a
much better image issue, UM, which also matters. It's crazy
to think that sometimes you do things just because it
(53:30):
looks good for the optics. In other words, a phrase
that I hate, but in our world it does make
a difference. So like it or not, it's the world
we live in. But that wraps up our series on
general motors. UM. There's probably stuff that we could dive
much deeper into, Like I didn't even talk about how
power steering works. I just mentioned it, but we'll leave
(53:52):
that for future episodes. If there are any specific things
you would like me to really dive into, let me
know I'll consider it. Or there's some other topic you
would love for me to tackle in a future episode
of tech Stuff, drop me a line on Twitter. The
handle I use is text stuff hs W, and I'll
talk to you again really soon. Tech Stuff is an
(54:17):
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TechStuff News
Hosts And Creators
Oz Woloshyn
Karah Preiss
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