General Motors Corporation

300 Renaissance Center
Detroit, Michigan 48265-3000
U.S.A.
Telephone: (313) 556-5000
Fax: (313) 556-5108
Web site: http://www.gm.com

Public Company
Incorporated: 1916
Employees: 693,000
Sales: $176.56 billion (1999)
Stock Exchanges: New York Chicago Pacific Philadelphia Montreal Toronto Frankfurt Diisseldorf Brussels Paris London
Ticker Symbol: GM
NAIC: 336111 Automobile Manufacturing; 336112 Light Truck and Utility Vehicle Manufacturing; 336211 Motor Vehicle Body Manufacturing; 336350 Motor Vehicle Transmission and Power Train Parts Manufacturing; 336510 Railroad Rolling Stock Manufacturing; 421110 Automobile and Other Motor Vehicle Wholesalers; 441110 New Car Dealers; 522220 Sales Financing; 522291 Consumer Lending; 522292 Real Estate Credit; 524126 Direct Property and Casualty Insurance Carriers; 532112 Passenger Cars Leasing; 334220 Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing; 334290 Other Communications Equipment Manufacturing; 513220 Cable and Other Program Distribution; 513340 Satellite Telecommunications

General Motors Corporation (GM) is the world’s largest full-line vehicle manufacturer and marketer. Its North American nameplates include Chevrolet, Pontiac, GMC, Oldsmobile, Buick, Cadillac, and Saturn. Opel, Vauxhall, Holden, Isuzu, Saab, Buick, Chevrolet, GMC, and Cadillac comprise General Motors’ international nameplates. Through its system of global alliances, GM holds a 49 percent stake in Isuzu Motors Limited, 20 percent each of Fuji Heavy Industries Ltd. and Fiat S.p.A.’s Fiat Auto S.p.A. unit, and ten percent of Suzuki Motor Corporation. Other principal businesses include Hughes Electronics Corporation, a provider of digital entertainment, information, and communications services; and General Motors Acceptance Corporation and its subsidiaries, providers of financing and insurance to GM customers and dealers.

19th-Century Origins

The beginning of General Motors can be traced back to 1892, when R.E. Olds collected all of his savings to convert his father’s naval and industrial engine factory into the Olds Motor Vehicle Company to build horseless carriages. For a number of years, however, the Oldsmobile (as the product came to be known) did not get beyond the experimental stage. In 1895 the first model, a four-seater with a petrol engine that could produce five horsepower and reach 18.6 mph, went for its trial run.

Olds proved himself not only an innovative engineer but also a good businessman and was very successful with his first model, of which relatively few were built. As a result of his success, he founded the first American factory in Detroit devoted exclusively to the production of automobiles. The first car was a luxury model costing $1,200, but the second model was introduced at a list price of $650 and was very successful. Two years later, at the turn of the century, Olds had sold more than 1,400 cars.

That same year, an engineer named David Buick founded a factory under his own name in Detroit. A third factory for the Cadillac Automobile Company also was built in Detroit. This company was founded by Henry Leland, who was already building car engines with experience gained in the Oldsmobile factory, where he worked until 1901. By the end of 1902 the first Cadillac had been produced—a car distinguished by its luxurious finish. In the following year, tiller steering was re-placed by the steering wheel, the reduction gearbox was introduced, and some cars were fitted with celluloid windscreens. Oldsmobile also reached its projected target of manufacturing 4,000 cars in one year.

By 1903, a time of market instability, so many different manufacturers were operating that the financially weakest disappeared and some of the remaining companies were forced to form a consortium. William Durant, a director of the Buick Motor Company, was the man behind the merger. The nephew of a Michigan governor, and a self-made millionaire, Durant believed that the only way for the automobile companies to operate at a profit was to avoid the duplication that occurred when many firms manufactured the same product. General Motors Corporation was thus formed, bringing together Olds-mobile and Buick in 1903, and joined in 1909 by Cadillac and Oakland (renamed Pontiac). Positive financial results were immediately seen from the union, although the establishment of the company drew little attention.

Other early members of the General Motors family were Ewing, Marquette, Welch, Scripps-Booth, Sheridan, and Elmore, together with Rapid and Reliance trucks. General Motors’ other U.S. automotive division, Chevrolet, became part of the corporation in 1918. Only Buick, Oldsmobile, Cadillac, and Oakland continued making cars for more than a short time after their acquisition by GM. By 1920 more than 30 companies had been acquired through the purchase of all or part of their stock. Two were forerunners of major GM subsidiaries, the McLaughlin Motor Company of Canada (which later became General Motors of Canada Limited) and the Fisher Body Company, in which GM initially acquired a 60 percent interest.

By 1911 the company set up a central staff of specialists to coordinate work in the various units and factories. An experimental or “testing” laboratory also was established to serve as an additional protection against costly factory mistakes. General Motors’ system of administration, research, and development became one of the largest and most complex in private industry.

About the same time that General Motors was establishing itself in Detroit, an engineering breakthrough was taking place in Dayton, Ohio: the electric self-starter, designed by Charles F. Kettering. General Motors introduced Kettering’s invention in its 1912 Cadillacs, and with the phasing out of the dangerous and unpredictable hand crank, motoring became much more popular. Kettering’s Dayton Engineering Laboratories were merged into General Motors during 1920 and the laboratories were relocated in Detroit in 1925. Kettering later became the scientific director of General Motors, in charge of its research and engineering programs.

During World War I General Motors turned its facilities to the production of war materials. With no previous experience in manufacturing military hardware, the U.S. automobile industry completed a retooling from civilian to war production within 18 months. Between 1917 and 1919, 90 percent of General Motors’ truck production was for the war effort. Cadillac supplied army staff cars, V-8 engines for artillery tractors, and trench mortar shells, while Buick built Liberty airplane motors, tanks, trucks, ambulances, and automotive parts.

It was at this time that Alfred Sloan, Jr., who went on to guide General Motors as president and chairman until 1956, first be-came associated with the company. In 24 years, Sloan had built a $50,000 investment in the Hyatt Roller Bearing Company to assets of about $3.5 million. When Hyatt became part of General Motors, Sloan joined the corporate management, becoming president in 1923. Overseas expansion soon commenced, with the 1925 purchase of U.K. automaker Vauxhall Motors and the 1931 acquisition of Germany’s Adam Opel.

Mid-Century: Surviving the Depression and Contributing to the War Effort

General Motors suffered greatly under the effects of the Great Depression, but it emerged with a new, aggressive management. Coordinated policy control replaced the undirected efforts of the prior years. As its principal architect, Sloan was credited with creating not only an organization that saved General Motors, but a new management policy that was adopted by countless other businesses. Fundamentally, the policy involved coordination of the enterprise under top management, direction of policy through top-level committees, and delegation of operational responsibility throughout the organization. Within this framework management staffs conducted analysis of market trends, advised policy committees, and coordinated administration. For a company comprised of many varied divisions, such a system of organization was crucial to its success.

By 1941 General Motors accounted for 44 percent of the total U.S. automotive sales, compared with 12 percent in 1921. In preparation for America’s entry into World War II, General Motors retooled its factories. After Japan struck at Pearl Harbor in 1941, the industrial skills that General Motors had developed were applied with great effectiveness. From 1940 to 1945 General Motors produced defense materiel valued at a total of $12.3 billion. Decentralized and highly flexible local managerial responsibility made possible the almost overnight conversion from civilian production to wartime production. General Motors’ contribution included the manufacture of every conceivable product from the smallest ball bearing to large tanks, naval ships, fighting planes, bombers, guns, cannons, and projectiles. The company manufactured 1,300 airplanes and one-fourth of all U.S. aircraft engines.

Postwar Expansion

Car manufacturing resumed after the war, and postwar expansion resulted in increased production. The decade of the 1950s was characterized by automotive sales records and innovations in styling and engineering. The public interest in automatic gears convinced General Motors to concentrate their research in this field; by 1950, all of the models built in the United States were available with an automatic gearbox. Car body developments proceeded at the same time and resulted in better sight lines and improved aerodynamics.

Company Perspectives

Vision: To be a world leader in transportation products and related services. We will earn our customers’ enthusiasm through continuous improvement driven by the integrity, teamwork, and innovation of GM people.

During the Korean war, part of the company’s production capacity was diverted into providing supplies for the United Nations forces (although to a smaller extent than during World War II). The reallocation reached 19 percent and then leveled off at about five percent from 1956 onward. Between 1951 and 1955 the five divisions of General Motors—Buick, Chevrolet, Pontiac, Oldsmobile, and Cadillac—all began to feature a new V-8 engine with a higher compression ratio. Furthermore, the electrical supply was changed from six to the more reliable 12 volts. Power-assisted steering and brakes appeared on all car models and the window dimensions were increased to further enhance visibility. Interior comfort was improved by the installation of the first air conditioning systems. Also during this period General Motors completely redesigned its classic sedans and introduced front seat safety belts.

The period between 1950 and 1956 was particularly prosperous in the United States, with a rise in demand for a second car in the family. Americans, however, were beginning to show real interest in smaller European cars. By 1956, a year of decreasing sales, Ford Motor Company, Chrysler Corporation, and General Motors had lost some 15 percent in sales while imports were virtually doubling their market penetration. The longer Detroit’s automobiles grew, the more popular imports became. In 1957 the United States imported more cars than it exported, and despite a recession, imports accounted for more than eight percent of U.S. car sales. Although General Motors promised that help was on its way in the form of smaller compact cars, the new models failed to generate much excitement; the company’s market share slipped to just 42 percent of 1959’s new car sales.

The 1960s were difficult years in Detroit. The 1967 riot in the ghettos surrounding General Motors’ facilities forced management to recognize the urban poverty that had for so long been in their midst and they began to employ more workers from minority groups. Much of the new hiring was made possible by the expansionist policies of the Kennedy and Johnson administrations. General Motors prospered and diversified; its interests now included home appliances, insurance, locomotives, electronics, ball bearings, banking, and financing. By the late 1960s after-tax profits for the industry in general reached a 13 percent return on investment, and General Motors’ return increased from 16.5 percent to 25.8 percent.

Declining Fortunes from the 1970s Through the Early 1990s

Like the rest of the industry, General Motors had ignored, in large part, the importance of air pollution control, but new, costly federal regulations were mandated. By the early 1970s, however, the high cost of developing devices to control pollution was overshadowed by the impact of the oil embargo. General Motors’ luxury, gas-guzzling car sales were down by 35 percent in 1974, but the company’s compacts and subcom-pacts rose steadily to attain a 40 percent market share. Ford, Chrysler, and General Motors had been caught unaware by a vast shift in consumer demand, and General Motors suffered the greatest losses. The company spent $2.25 billion in 1974 and 1975 to meet local, state^and federal regulations on pollution control. By the end of 1977 that figure had doubled.

Key Dates

1892:

R.E. Olds founds the Olds Motor Vehicle Company.

1895:

The first Oldsmobile model is taken on its trial run.

1900:

David Buick founds a factory in Detroit.

1902:

Henry Leland produces the first Cadillac.

1903:

William Durant forms General Motors Corporation, bringing together Oldsmobile and Buick.

1909:

Cadillac and Oakland (renamed Pontiac) join GM.

1912:

GM introduces the electric self-starter in its Cadillacs.

1918:

Chevrolet becomes part of GM.

1923:

Alfred Sloan, Jr., is named president.

1925:

U.K. automaker Vauxhall Motors is acquired.

1931:

Germany’s Adam Opel is acquired.

1940–45:

GM produces defense materiel valued at $12.3 billion.

1950:

All U.S. models are available with an automatic gearbox.

1971:

GM acquires a 34 percent stake in Isuzu Motors.

1981:

Company purchases a three percent stake in Suzuki Motor Corporation.

1984:

GM acquires Electronic Data Systems.

1986:

Hughes Aircraft is acquired.

1990:

Company acquires a 50 percent stake in Swedish carmaker Saab Automobile AB; Saturn Corporation is created as a subsidiary.

1994:

Hughes Electronics introduces Direct TV.

1996:

EDS is spun off.

1997:

Hughes sells its defense electronics operations to Raytheon and merges its Delco Electronics unit into GM’s auto parts subsidiary, Delphi Automotive Systems.

1998:

Stake in Suzuki is increased to ten percent.

1999:

Stake in Isuzu is increased to 49 percent; GM acquires a 20 percent stake in Fuji Heavy Industries, maker of Subaru cars; Delphi is spun off to share-holders.

2000:

GM gains a 20 percent stake in Fiat S.p.A.’s Fiat Auto S.p.A. unit and takes full control of Saab; Hughes sells satellite manufacturing unit to Boeing.

Under the leadership of President F. James McDonald and Chairman Roger Smith, General Motors reported earnings declines from 1985 to 1992. The only respite came from an accounting change in 1987, which effected an earnings in-crease. McDonald and Smith attempted to place these losses in perspective by arguing that they were necessary if General Motors was to develop a strong and secure position on the worldwide market. Since the start of the 1980s, General Motors had spent more than $60 billion redesigning most of its cars and modernizing the plants that produce them. The company also acquired two major corporations, Hughes Aircraft, in 1986, and Electronic Data Systems (EDS), in 1984. Though expensive, the EDS purchase provided General Motors with better, more centralized communications and backup systems, as well as a vital profit center. GM also purchased a 50 percent stake in Saab Automobile AB, a Sweden-based maker of premium cars, in 1990. That same year Saturn Corporation was created as a subsidiary to produce compact cars in a Japanese-influenced factory in Tennessee; Saturns became popular because of their quality and the no-haggle method employed to sell them.

General Motors’ market share dropped steadily from 1982 to 1992. In 1987 Ford’s profits exceeded GM’s for the first time in 60 years. From 1990 to 1992, the corporation suffered successive and devastating annual losses totaling almost $30 billion. Problems were myriad. Manufacturing costs exceeded competitors’ due to high labor costs, overcapacity, and complicated production procedures. GM faced competition from 25 companies, and its market share fell from almost 50 percent to about 35 percent.

Mid-1990s and Beyond: Profits Despite U.S. Market Share Erosion

In 1992 Jack Smith, Jr. advanced to General Motors’ chief executive office. He had earned respect as the engineer of GM Europe’s late 1980s turnaround, and he quickly applied those strategies to the parent, focusing on North American Operations (NAO). During 1993, Smith simplified the NAO, cut the corporate staff, pared product offerings, and began to divest GM’s parts operations. He was hailed for his negotiations with the United Auto Workers. In 1993 he pledged $3.9 billion in jobless benefits, which raised the blue-collar payroll costs about 16 percent over three years. But at the same time the contract gave Smith the ability to cut 65,000 blue-collar jobs by 1996 in conjunction with the closure of nearly 24 plants. Salaried positions were not exempted from Smith’s job-cutting scalpel: staffing at the corporate central office was slashed from 13,500 to 2,300 in 1992.

In the early 1990s GM began to recapture the automotive vanguard from Japanese carmakers, with entries in the van, truck, and utility vehicle markets and the launch of Saturn. GM also gained an advantage in the domestic market because the weak dollar caused the price of imported cars to increase much faster than domestics. Market conditions along with Smith’s strategies effected a stunning reversal in 1993, when GM re-corded net income of $2.47 billion on sales of $138.22 billion. Riding the booming economy, the company recorded record profits of $6.88 billion on record sales of $163.86 billion in 1995. Despite the improved financial performance, General Motors’ share of the U.S. car market continued its steady decline, falling to slightly more than 31 percent by 1995. The company’s North American operations continued to be criticized by observers for its inability to produce innovative models, the glacial speed of its new product development, and the inefficiencies inherent in running six separate car divisions and a GMC truck division.

The mid-to-late 1990s saw a number of important initiatives in GM’s non-automaking operations. In 1994 the renamed Hughes Electronics unit introduced Direct TV, a satellite-based direct-to-home broadcast service. The 1995 sale of the company’s National Car Rental business was followed by the spinoff of EDS the following year. One year later, Hughes Electronics was revamped through the sale of its defense electronics operations to Raytheon Company and the merging of its auto-motive electronics activities (Delco Electronics) into GM’s auto parts subsidiary, Delphi Automotive Systems. Hughes began concentrating on digital entertainment, information, and communications services and made a key acquisition in 1999 when it paid $1.3 billion for the direct-to-home satellite business of Primestar. In early 2000 Hughes made a further divestment of a now noncore unit when it sold its satellite manufacturing operations to the Boeing Company for about $3.75 billion. Delphi, meanwhile, was completely separated from GM through a May 1999 spinoff to shareholders.

General Motors remained profitable through the end of the decade, but its U.S. market share dipped below 30 percent by 1999—at times GM’s share was less than that of the combined share of all Asian automakers, an unprecedented development. While continuing to attempt to reverse the now three-decades-long fall, GM began looking for future growth from Asia, where early 21st-century growth in car sales was expected to surpass both North America and Europe. Instead of attempting to directly sell its own models, GM began assembling a network of alliances with key Asian automakers for its push into that emerging continent, aiming to increase its market share across Asia from its late 1990s level of four percent to ten percent by 2005. The company already had a 34 percent stake in Isuzu Motors Limited, which it had bought in 1971, and a three percent stake in Suzuki Motor Corporation, obtained in 1981. In 1998 GM increased its stake in Suzuki to ten percent and agreed to build cars with the Japanese automaker. The following year General Motors increased its stake in Isuzu to 49 percent; acquired a 20 percent stake in Fuji Heavy Industries Ltd., maker of Subaru all-wheel-drive vehicles; and entered into an alliance with Honda Motor Co., Ltd. involving Honda producing lowemissions gasoline engines for GM and Isuzu producing diesel engines for Honda. In May 2000 GM, Fuji, and Suzuki agreed to develop compact cars for the European market. Another deal involving Europe was reached in early 2000, when GM agreed to acquire a 20 percent stake in the Fiat Auto S.p.A. unit of Fiat S.p.A., the number six automaker in the world, in exchange for Fiat taking a 5.1 percent stake in GM. Through this deal, General Motors aimed to grab a larger share of the market for the small vehicles that are popular in Europe and Latin America but shunned in the United States. In mid-2000 GM and Fiat jointly bid to acquire troubled South Korean carmaker Daewoo Motor Co., but were outbid by Ford. Also in 2000, General Motors acquired the 50 percent of Saab Automobile that it did not already own.

In another key early 2000 development, General Motors agreed to join with DaimlerChrysler AG and Ford to create an Internet-based global business-to-business supplier exchange, Covisint, that would be open to all suppliers and automakers. This would potentially create the world’s largest virtual market-place, although the Federal Trade Commission quickly opened a preliminary antitrust inquiry into the plan. The company also began building a factory in Lansing, Michigan, its first new plant in 15 years. In June 2000 G. Richard Wagoner was promoted from president to CEO, with Smith remaining chairman. At the age of 47, Wagoner became the youngest CEO in GM history and faced the daunting task of running what was still considered by many observers to be an excessively bureaucratic and overly complex organization, which was extremely resistant to change and seemingly unable to anticipate most market trends.

Principal Subsidiaries

General Motors Acceptance Corporation; General Motors Investment Management Corporation; Hughes Electronics Corporation; Saturn Corporation; Holden, Ltd. (Australia); General Motors do Brasil Ltda. (Brazil); General Motors of Canada, Ltd.; Adam Opel Aktiengesellschaft (Germany); General Motors de Mexico, S.A. de C.V.; Saab Automobile AB (Sweden); Vauxhall Motors Limited (U.K.).

Principal Divisions

Allison Transmission Division; Buick Motor Division; Cadillac Motor Car Division; Chevrolet Motor Division; Electro-Motive Division; Oldsmobile Division; Pontiac-GMC Division; Pontiac-GMC Truck Division.

Principal Operating Units

e-GM Group; GM Asia Pacific; GM Europe; GM Latin America, Africa and Mid-East; GM Locomotive Group; GM North America; GM Powertrain Group; GM Truck Group.

Principal Competitors

AmeriCredit Corp.; Bayerische Motoren Werke AG; Credit Acceptance Corporation; DaimlerChrysler AG; Ford Motor Company; Ford Motor Credit Company; General Electric Capital Corporation; General Electric Company; Honda Motor Co., Ltd.; Hyundai Motor Company; Mazda Motor Corporation; Mitsubishi Motors Corporation; Nissan Motor Co., Ltd.; PSA Peugeot Citroen S.A.; Renault S.A.; Suzuki Motor Corporation; Toyota Motor Corporation; Volkswagen AG.

Further Reading

Bary, Andrew, “How to Fix GM,” Barren’s, July 5, 1999, pp. 18–19.

Cray, Ed, Chrome Colossus: General Motors and Its Time, New York: McGraw-Hill, 1980.

Dassbach, Carl H.A., Global Enterprises and the World Economy: Ford, General Motors, and IBM, the Emergence of the Transnational Enterprise, New York: Garland, 1989.

De Lorean, John Z., On a Clear Day You Can See General Motors, London: Sidgwick and Jackson, 1980.

Geyelin, Milo, “Lasting Impact: How an Internal Memo Written 26 Years Ago Is Costing GM Dearly,” Wall Street Journal, September 29, 1999, pp. A1 +.

Hamper, Ben, Rivethead: Tales from the Assembly Line, New York: Warner Books, 1992.

Jacobs, Timothy, A History of General Motors, New York: Smithmark, 1992.

Keller, Maryann, Collision: GM, Toyota, Volkswagen, and the Race to Own the 21st Century, New York: Currency Doubleday, 1993.

______, Rude Awakening: General Motors in the 1980s, New York: Morrow, 1989.

______, Rude Awakening: The Rise, Fall and Struggle for Recovery of General Motors, New York: HarperCollins, 1990.

Kerwin, Kathleen, “For GM, Once Again, Little Ventured, Little Gained,” Business Week, March 27, 2000, pp. 42–43.

Kerwin, Kathleen, and Joann Muller, “Reviving GM,” Business Week, February 1, 1999, pp. 114-K Kuhn, Arthur J., GM Passes Ford, 1918–1938: Designing the General Motors Performance-Control System, University Park: Pennsylvania State University Press, 1986.

Madsen, Axel, The Deal Maker: How William C. DurantMade General Motors, New York: Wiley, 1999.

May, George S., R.E. Olds, Auto Industry Pioneer, Grand Rapids, Mich.: Eerdmans, 1977.

Meredith, Robyn, “Can GM Return to the Passing Lane?,” New York Times, November 7, 1999, Sec. 3, p. 1.

Miller, Scott, “Open No Quick Fix for GM’s ‘Mr. Fix It,’” Wall Street Journal, June 13, 2000, p. A22.

Osterland, Andrew, “Al and Me: Why General Motors Will Finally Get Serious About Downsizing,” Financial World, December 16,1996, pp. 39–41.

Palmer, Jay, “Reviving GM,” Barren’s, June 22, 1998, pp. 31–35. Pollack, Andrew, “Paper Trail GM After It Loses Injury Suit,” New York Times, July 12, 1999, Sec. A, p. 12.

Ramsey, Douglas K., The Corporate Warriors: Six Classic Cases in American Business, Boston: Houghton Mifflin, 1987.

Rothschild, Emma, Paradise Lost: The Decline of the Auto-Industrial Age, New York: Random House, 1973.

Shirouzu, Norihiko, “GM Cracks Japan’s Market with Its Wallet, Not Its Cars: Network of Alliances Aids Asia Expansion by Filling Gaps in Product Line,” Wall Street Journal, January 26, 2000, p. A17.

Simison, Robert L., Fara Warner, and Gregory L. White, “Big Three Car Makers Plan Net Exchange,” Wall Street Journal, February 28, 2000, pp. A3, A16.

Simison, Robert L., Gregory L. White, and Deborah Ball, “GM’s Linkup with Fiat Opens Final Act of Consolidation Drama for Industry,” Wall Street Journal, March 14, 2000, pp. A3, A8.

Sloan, Alfred, Jr., My Years with General Motors, New York: Doubleday, 1964.

Smith, Roger B., Building on 75 Years of Excellence: The General Motors Story, New York: Newcomen Society of the United States, 1984.

Taylor, Alex, III, “GM’s $11 Billion Turnaround,” Fortune, October 17, 1994, pp. 54–56 +.

______, “GM: Some Gain, Much Pain,” Fortune, May 29, 1995, pp. 78–80, 84.

______, “GM: Time to Get in Gear,” Fortune, April 28, 1997, pp. 94–96 +.

______, “GM: Why They Might Break Up America’s Biggest Company,” Fortune, April 29, 1996, pp. 78–82, 84.

______, “Is Jack Smith the Man to Fix GM?,” Fortune, August 3, 1998, pp. 86 +.

Weisberger, Bernard A., The Dream Maker: William C. Durant, Founder of General Motors, Boston: Little Brown, 1979.

White, Gregory L., “As GM Courts the Net, Struggling Saturn Line Exposes Rusty Spots,” Wall Street Journal, July 11, 2000, pp. A1, A10.

Zachary, Kamerine, “Shopping Spree: GM Plunks Down Hard Cash to Add Strength in Asia,” Ward’s Auto World, February 29, 2000.

Zesiger, Sue, “GM’s Big Decision: Status Quo,” Fortune, February 21, 2000, pp. 101–02, 104.

—April Dougal Gasbarre

—updated by David E. Salamie

General Motors Corporation

3044 West Grand Blvd.
Detroit, Michigan 48202
U.S.A.
(313) 556-5000

Public Company
Incorporated: 1916
Employees: 750,000
Sales: $138.22 billion
Stock Exchanges: New York
SICs: 3711 Motor Vehicles and Car Bodies; 3714 Motor Vehicle Parts and Accessories; 3812 Search and Navigation Equipment; 3761 Guided Missiles and Space Vehicles; 3663 Radio and TV Communications Equipment; 6141 Personal Credit Institutions; 3743 Railroad Equipment

General Motors Corporation is the world’s largest full-line vehicle manufacturer and marketer. Its American nameplates include Chevrolet, Pontiac, Oldsmobile, Buick, Cadillac, GMC Truck, and Saturn. Opel, Vauxhall, Saab, and Isuzu comprise General Motors’ international nameplates. The company’s Automotive Components Group Worldwide brings vertical integration to General Motors’ manufacturing, and also supplies components and systems to every major automotive manufacturer. Other principal businesses include GM Hughes Electronics Corporation, a manufacturer of automotive electronics, commercial technologies, telecommunications, and space and defense electronics; Electronic Data Systems corporation, a global information technologies company; and General Motors Acceptance Corporation and its subsidiaries, providers of financing and insurance to GM customers and dealers.

The beginning of General Motors can be traced back to 1892, when R. E. Olds collected all his savings in order to convert his father’s naval and industrial engine factory into the Olds Motor Vehicle Company to build horseless carriages. For a number of years, however, the Oldsmobile (as the product came to be known) did not get beyond the experimental stage. In 1895 the first model, a four-seater with a petrol engine that could produce five horsepower and reach 18.6 mph, went for its trial run.

Olds proved himself not only an innovative engineer but also a good businessman and was very successful with his first model, of which relatively few were built. As a result of his success, he founded the first American factory in Detroit devoted exclusively to the production of automobiles. The first car was a luxury model costing $1,200, but the second model was introduced at a list price of $650 and was very successful. Two years later, at the turn of the century, Olds had sold over 1,400 cars.

That same year, an engineer named David Buick founded a factory under his own name in Detroit. A third factory for the Cadillac Automobile Company was also built in Detroit. This company was founded by Henry Leland, who was already building car engines with experience gained in the Oldsmobile factory, where he worked until 1901. By the end of 1902 the first Cadillac had been produced—a car distinguished by its luxurious finish. In the following year, tiller steering was replaced by the steering wheel, the reduction gearbox was introduced, and some cars were fitted with celluloid windscreens. Oldsmobile also reached their projected target of manufacturing 4,000 cars in one year.

By 1903, a time of market instability, so many different manufacturers were operating that the financially weakest disappeared and some of the remaining companies were forced to form a consortium. William Durant, a director of the Buick Motor Company, was the man behind the merger. The son of a Michigan governor, and a self-made millionaire, Durant believed that the only way for the automobile companies to operate at a profit was to avoid the duplication that occurred as many concerns manufactured the same product. General Motors was thus formed, bringing together Oldsmobile and Buick in 1903, and joined in 1909 by Cadillac and Oakland (renamed Pontiac). Positive financial results were immediately seen from the union, although the establishment of the company drew little attention.

Other early members of the General Motors family were Ewing, Marquette, Welch, Scripps-Booth, Sheridan, and Elmore, together with Rapid and Reliance trucks. General Motors’ other U.S. automotive division, Chevrolet, became part of the Corporation in 1918. Only Buick, Oldsmobile, Cadillac, and Oakland continued making cars for more than a short time after their acquisition by GM. By 1920 more than 30 companies had been acquired through the purchase of all or part of their stock. Two were forerunners of major GM subsidiaries, the McLaughlin Motor Company of Canada (which later became General Motors of Canada Limited) and the Fisher Body Company, in which GM initially acquired a 60 percent interest.

By 1911 the company set up a central staff of specialists to coordinate work in the various units and factories. An experimental or “testing” laboratory was also established to serve as an additional protection against costly factory mistakes. General Motors’ system of administration, research, and development became one of the largest and most complex in private industry.

About the same time that General Motors was establishing itself in Detroit, an engineering breakthrough was taking place in Dayton, Ohio: the electric self-starter, designed by Charles F. Kettering. General Motors introduced Kettering’s invention in its 1912 Cadillacs, and with the phasing out of the dangerous and unpredictable hand crank, motoring became much more popular. Kettering’s Dayton Engineering Laboratories were merged into General Motors during 1920 and the Laboratories were relocated in Detroit in 1925. Kettering later became the scientific director of General Motors, in charge of its research and engineering programs.

During World War I General Motors turned its facilities to the production of war materials. With no previous experience in manufacturing military hardware, the American automobile industry completed a retooling from civilian to war production within 18 months. Between 1917 and 1919, 90 percent of General Motors’ truck production was for the war effort. Cadillac supplied Army staff cars, V-8 engines for artillery tractors, and trench mortar shells, while Buick built Liberty airplane motors, tanks, trucks, ambulances, and automotive parts.

It was at this time that Alfred Sloan, Jr., who went on to guide General Motors as president and chairman until 1956, first became associated with the company. In 24 years, Sloan had built a $50,000 investment in the Hyatt Roller Bearing Company to assets of about $3.5 million. When Hyatt became part of General Motors, Sloan joined the corporate management.

General Motors suffered greatly under the effects of the Depression, but it emerged with a new, aggressive management. Coordinated policy control replaced the undirected efforts of the prior years. As its principal architect, Sloan was credited with creating not only an organization which saved General Motors, but a new management policy that was adopted by countless other businesses. Fundamentally, the policy involved coordination of the enterprise under top management, direction of policy through top-level committees, and delegation of operational responsibility throughout the organization. Within this framework management staffs conducted analysis of market trends, advised policy committees, and coordinated administration. For a company comprised of many varied divisions, such a system of organization was crucial to its success.

By 1941 General Motors accounted for 44 percent of the total U.S. automotive sales, compared with 12 percent in 1921. In preparation for America’s entry into the Second World War, General Motors retooled its factories. After Japan struck at Pearl Harbor in 1941, the industrial skills that General Motors had developed were applied with great effectiveness. From 1940 to 1945 General Motors produced defense material valued at a total of $12.3 billion. Decentralized and highly flexible local managerial responsibility made possible the almost overnight conversion from civilian production to wartime production. General Motors’ contribution included the manufacture of every conceivable product from the smallest ball bearing to large tanks, naval ships, fighting planes, bombers, guns, cannons, and projectiles. The company manufactured 1,300 airplanes and one-fourth of all U.S. aircraft engines.

Car manufacturing resumed after the war, and postwar expansion resulted in increased production. The decade of the 1950s was characterized by automotive sales records and innovations in styling and engineering. The public interest in automatic gears convinced General Motors to concentrate their research in this field; by 1950, all the models built in the United States were available with an automatic gearbox. Car body developments proceeded at the same time and resulted in better sight lines and improved aerodynamics.

During the Korean war, part of the company’s production capacity was diverted into providing supplies for the United Nations forces (although to a smaller extent than during the Second World War). The reallocation reached 19 percent and then leveled off at about five percent from 1956 onwards. Between 1951 and 1955 the five divisions which today form General Motors—Buick, Chevrolet, Pontiac, Oldsmobile, and Cadillac—all began to feature a new V-8 engine with a higher compression ratio. Furthermore, the electrical supply was changed from six to the more reliable 12 volts. Power assisted steering and brakes appeared on all car models and the window dimensions were increased to further enhance visibility. Interior comfort was improved by the installation of the first air-conditioning systems. Also during this period General Motors completely redesigned its classic sedans and introduced front seat safety belts.

The period between 1950 and 1956 was particularly prosperous in the United States, with a rise in demand for a second car in the family. However, Americans were beginning to show real interest in smaller European cars. By 1956, a year of decreasing sales, Ford, Chrysler, and General Motors had lost some 15 percent in sales while imports were virtually doubling their market penetration. The longer Detroit’s automobiles grew, the more popular imports became. In 1957 the United States imported more cars than it exported, and despite a recession, imports accounted for more than eight percent of U.S. car sales. Although General Motors promised that help was on its way in the form of smaller compact cars, the new models failed to generate much excitement; the company’s market share slipped to just 42 percent of 1959’s new car sales.

The 1960s were difficult years in Detroit. Riots in the ghettos surrounding General Motors’ facilities forced management to recognize the urban poverty that had for so long been in their midst and they began to employ more workers from minority groups. Much of the new hiring was made possible by the expansionist policies of the Kennedy and Johnson administrations. General Motors prospered and diversified; its interests now included home appliances, insurance, locomotives, electronics, ball bearings, banking, and financing. By the late 1960s after-tax profits for the industry in general reached a 13 percent return on investment, and General Motors’ return increased from 16.5 percent to 25.8 percent.

Like the rest of the industry, General Motors had largely ignored the importance of air pollution control, but new, costly federal regulations were mandated. However, by the early 1970s, the high cost of developing devices to control pollution was overshadowed by the impact of the oil embargo. General Motors’ luxury, gas guzzling car sales were down by 35 percent in 1974, but the company’s compacts and subcompacts rose steadily to attain a 40 percent market share. Ford, Chrysler, and General Motors had been caught unaware by a vast shift in consumer demand, and General Motors suffered the greatest losses. The company spent $2.25 billion in 1974 and 1975 in order to meet local, state, and federal regulations on pollution control. By the end of 1977 that figure had doubled.

Under the leadership of president F. James McDonald, and chairman Roger Smith, General Motors reported earnings declines from 1985 to 1992. The only respite came from an accounting change in 1987, which effected an earnings increase. McDonald and Smith attempted to place these losses in perspective by arguing that they are necessary if General Motors is to develop a strong and secure position on the worldwide market. Since the start of the 1980s, General Motors had spent over $60 billion redesigning most of its cars and modernizing the plants that produce them. The company also acquired two major corporations, Hughes Aircraft and Electronic Data Systems (EDS). Though expensive, the EDS purchase provided General Motors with better, more centralized communications and backup systems, as well as a vital profit center.

General Motors’ market share dropped steadily from 1982 to 1992. In 1987 Ford’s profits exceeded GM’s for the first time in sixty years. From 1990 to 1992, the corporation suffered successive and devastating annual losses totaling almost $30 billion. Problems were myriad. Manufacturing costs exceeded competitors’ due to high labor costs, over capacity, and complicated production procedures. GM faced competition from 25 companies, and its market share fell from almost 50 percent to about 35 percent.

In 1992 Jack Smith, Jr. advanced to General Motors’ chief executive office. He had earned respect as the engineer of GM Europe’s late 1980s turnaround, and quickly applied those strategies to the parent, focusing on North American Operations (NAO). During 1993, Smith simplified the NAO, cut the corporate staff, pared product offerings, and began to divest GM’s parts operations. He was hailed for his negotiations with the United Auto Workers. In 1993 he pledged $3.9 billion in jobless benefits, which raised the blue-collar payroll costs about 16 percent over three years. But at the same time the contract gave Smith the ability to cut 65,000 blue-collar jobs by 1996 in conjunction with the closure of nearly 24 plants. Salaried positions were not exempted from Smith’s job-cutting scalpel: staffing at the corporate central office was slashed from 13,500 to 2,300 in 1992.

In the early 1990s GM began to recapture the automotive vanguard from Japanese carmakers, with entries in the van, truck, and utility vehicle markets and the launch of Saturn Corp. GM also gained an advantage in the domestic market because the weak dollar caused the price of imported cars to increase much faster than domestics. Market conditions along with Smith’s strategies effected a stunning reversal in 1993, when GM recorded net income of $2.47 billion on sales of $138.22 billion. The CEO noted his corporation’s strategic advantages: “a large customer base; a large and excellent car and truck dealer network; strong brands; a global presence in engineering, manufacturing, and marketing; a management team with broad international experience; and, most of all, a worldwide team of diverse, capable, and motivated employees.”

Principal Subsidiaries:

Electronic Data Systems Corp.; GM Hughes Electronics Corp.; General Motors Acceptance Corporation; Saturn Corp. The company also has subsidiaries in the following countries: Australia, Austria, Belgium, Brazil, Canada, Chile, Colombia, England, Finland, France, Greece, Ireland, Italy, Japan, Luxembourg, Mexico, The Netherlands, New Zealand, Norway, Portugal, South Africa, Sweden, Switzerland, Uruguay, Venezuela, Germany, and Zaire.

Further Reading:

Cray, Ed, Chrome Colossus: General Motors and Its Time, New York: McGraw Hill, 1980.

Dassbach, Carl H. A., Global Enterprises and the World Economy: Ford, General Motors, and IBM, the Emergence of the Transnational Enterprise, New York: Garland, 1989.

De Lorean, John Z., On a Clear Day You Can See General Motors, London: Sidgwick and Jackson, 1980.

Hamper, Ben, Rivethead: Tales From the Assembly Line, New York: Warner Books, 1992.

Jacobs, Timothy, A History of General Motors, New York: Smithmark, 1992.

Keller, Maryann, Rude Awakening: General Motors in the 1980s, New York: Morrow, 1989.

______, Rude Awakening: The Rise, Fall and Struggle for Recovery of General Motors, New York: HarperCollins, 1990.

Kuhn, Arthur J., GM Passes Ford, 1918-1938: Designing the General Motors Performance-Control System, University Park: Pennsylvania State University Press, 1986.

May, George S., R.E. Olds, Auto Industry Pioneer, Grand Rapids, MI: Eerdmans, 1977.

Ramsey, Douglas K., The Corporate Warriors: Six Classic Cases in American Business, Boston: Houghton Mifflin, 1987.

Rothschild, Emma, Paradise Lost: The Decline of the Auto-Industrial Age, New York: Random House, 1973.

Sloan, Alfred, Jr., My Years with General Motors, New York: Double-day, 1964.

Smith, Roger B., Building on 75 Years of Excellence: The General Motors Story, New York: Newcomen Society of the United States, 1984.

Weisberger, Bernard A., The Dream Maker: William C. Durant, Founder of General Motors, Boston: Little Brown, 1979.

—April Dougal Gasbarre

General Motors
Corporation

300 Renaissance Center
Detroit, MI 48265-3000
(313)556-5000
http://www.gm.com

Over the course of nearly a century, General Motors (GM) has weathered more ups and downs and gone through more fundamental changes than most companies. GM has been the world's largest vehicle manufacturer since 1931, producing such brands as Buick, Cadillac, Chevrolet, GMC, Pontiac, Saab, Saturn, and Oldsmobile. From the 1950s into the 1970s, the automaker led the industry in building millions of low-cost cars, achieving nearly 60 percent of U.S. auto sales. Along the way, its Chevy Corvette convertible sports car became an American icon and a symbol of the laid-back West Coast lifestyle. Today, General Motors has about 30 percent of the auto market and faces new challenges, such as decreased productivity, rising costs of employees health benefits, and the demand for cleaner, safer, and more fuel-efficient vehicles.

From Carriages to Cars

General Motors traces its history back to the late 1800s, when William "Billy" Durant (1861-1947) was leading the horse-drawn carriage market in Flint, Michigan. A natural born salesman with his finger on the pulse of new markets, he realized the future was in the "horseless" carriage. In 1904, Durant took over Flint's failing Buick Motor Company. He quickly turned Buick around, and by 1907, was producing over four thousand cars per year. In 1908, with Durant at the helm, the company was the number-one automaker in the United States, outselling rivals Cadillac and Ford Motor Company (see entry).

Spurred by his success, Durant set out to take control of the auto industry. He attempted to buy Ford Motor Company in 1907, but was unable to obtain a $9.5 million bank loan. Instead, he formed the General Motors Company, with headquarters in Detroit, Michigan, and began adding other new divisions. In 1908, Durant purchased Olds Motor Works, which had been formed in 1899 by Ransom E. Olds (1864-1950). In 1909, he acquired the Oakland Motor Car Company, which eventually became the Pontiac division in 1932. Rapid Motor Vehicle Company, the predecessor of the GMC truck, was purchased soon after. By 1910, Durant had gobbled up so many companies that GM was deeply in debt and on the verge of financial collapse. Several banks stepped in with loans to help out the struggling automaker on the condition that founder Durant be replaced as company head. After losing control of GM, Durant started the Chevrolet Motor Company in 1911.

General Motors at a
Glance

• Employees: 362,000
• CEO: G. Richard Wagoner Jr.
• Subsidiaries: Adam Opel AG; Allison Transmission Division; Covisint, Inc.; Daewoo Motor Company Ltd.; General Motors Acceptance Corporation; GMAC Insurance; GM Locomotive Group; Hughes Electronic Company; Isuzu Motors Ltd.; New United Motor Manufacturing, Inc.; OnStar Corporation; Saab Automobile AB; Saturn Corporation; Vauxhall Motors Ltd.
• Major Competitors: DaimlerChrysler AG; Ford Motor Company; Toyota Motor Corporation; Honda
• Notable Products: Buick: Regal, Century, LeSabre; Cadillac: Seville, El Dorado, Escalade; Chevrolet: Blazer, Camaro, Corvette, Prizm, Silverado, Cavalier, Impala, Suburban, Tahoe; GMC: Sierra

The General Motors board of directors elected Pierre S. du Pont (1870-1954) its chairman in 1915, a position he retained for nearly fourteen years. Durant, however, remained on the board and embarked on a GM stock-buying spree. By 1916, he had purchased 54.5 percent of GM stock and with a controlling interest, took over as president of GM, ousting Charles W. Nash (1864-1948) who had served in that role since 1912. Power shifted again in 1918, when General Motors took over Chevrolet.

Timeline

1897:

Olds Motor Vehicle Company is started by Ransom E. Olds.

1903:

David B. Buick founds the Buick Motor Company.

1908:

General Motors Corporation is formed, incorporating Buick and Olds.

1909:

CM purchases Cadillac Automobile Company.

1918:

GM buys the Chevrolet Motor Company.

1923:

GM opens its first European assembly plant in Copenhagen, Denmark.

1932:

Pontiac division is established.

1936:

Workers at two Michigan assembly plants stage a sit-down strike.

1937:

Workers' strike is settled when GM recognizes the United Auto Workers (UAW) union.

1942:

All GM plants convert to producing military supplies until the end of World War II.

1953:

GM introduces the Chevy Corvette.

1956:

Chevrolet unveils the Corvair.

1965:

Ralph Nader publishes the book, Unsafe at Any Speed, critical of GM and its Corvair.

1969:

GM-made guidance and navigation systems are used in Apollo 11 Moon landing; Corvair is discontinued.

1985:

GM acquires Hughes Aircraft Company.

1986:

GM announces plans to close eleven U.S. plants.

1990:

The Saturn line of cars is introduced.

1991:

GM chairman Robert Stempel resigns amid financial crisis.

1999:

Assembly plant is opened in Shanghai, China.

2000:

GM announces it will discontinue its Oldsmobile line.

2002:

Company announces that eighty-seven new models will be introduced over the next four years.

Empire Thrives

General Motors expanded into Canada in 1918, merging the McLaughlin Motor Car Company Ltd. and Chevrolet Motor Company of Canada Ltd. into General Motors of Canada Ltd. It also made an attempt to get into aircraft manufacturing when it purchased the Dayton Wright Company in 1919. Ten years later, it sold the company to Fokker Aircraft Corporation. A more successful acquisition that year was of the Guardian Frigerator Company, which was renamed Frigidaire Corporation. It soon became the best-selling refrigerator in the country.

The 1920s and 1930s saw General Motors continue to expand by purchasing smaller companies and moving into foreign markets. It opened its first European assembly plant in Copenhagen, Denmark, in 1923. The first GM vehicle assembled outside the United States and Canada, a Chevrolet utility truck, rolled off the assembly line on January 7, 1924. Manufacturing plants were also opened in Buenos Aires, Argentina, in 1925, followed by plants in Australia and New Zealand in 1926. GM's acquisitions included Vauxhall Motors Ltd. of England, Fisher Body Company of Detroit, and Adam Opel AG of Germany.

In 1923, Alfred P. Sloan Jr. (1875-1966) became president of the ever-expanding GM. His priority was to make sure all the various divisions of the company were functioning efficiently. As part of this vision, Sloan structured General Motors so that its many parts worked together to produce maximum profits. At the same time, he wanted each of the divisions to retain its own unique identity. This was no easy task since GM produced a wide range of products, including Cadillac limousines, earthmoving equipment, buses, refrigerators, spark plugs, and roller bearings. For much of Sloan's long tenure, which lasted from 1923 until 1956, General Motors was the largest and most profitable manufacturing company in the world.

In 1936, amid the harsh economic climate of the Great Depression, employees at two GM plants in Flint staged sit-down strikes. Like many workers across the United States, they demanded higher wages, more benefits, and the right to be represented by a union. The strikes ended after about six weeks when GM recognized the United Auto Workers (UAW) union. Through the union, autoworkers could negotiate with their employees for improved working conditions, wages, work hours, and benefits.

On January 11, 1940, General Motors produced its twenty-five millionth vehicle but entered the decade under the dark cloud of World War II (1939-45). GM Japan ceased operation in 1941, the year the Japanese bombed Pearl Harbor. In 1942, GM converted all production at its assembly plants to the war effort, churning out $12.3 billion worth of goods, including airplanes, airplane engines and parts, trucks, tanks, guns, and ammunition shells. Vehicles included the 6x6 Army truck that carried troops and supplies and the DUKW, known as "the duck," which could carry fifty troops on land or water.

GM Tangles with Federal Government

With the war over, GM again turned to producing cars, bringing out several dozen new models in the 1950s and 1960s. An American legend was born in 1953 when GM introduced the Chevrolet Corvette, the first mass-produced sports car and the first with a plastic body. The company introduced new, smaller models during the 1960s, including the Buick Special, Oldsmobile F-85, Chevy II, and Pontiac Tempest.

The decade also found GM embroiled in several battles with the federal government. In 1961, the U.S. Department of Justice accused the company of using unfair practices to try and control all aspects of the diesel electric locomotive market. A federal judge dismissed the charge three years later. In 1962, the Justice Department filed charges against GM and three Chevrolet dealer trade associations. It accused GM of restricting Chevrolet sales in Southern California by refusing to sell to " discount houses," which are independent car dealers that buy vehicles in bulk and resell them to the public, usually at lower prices. A federal court ruled against GM in 1966, ordering it to stop restricting sales of Chevrolets to discount houses.

The company's image was further tarnished in 1965 with the release of Unsafe at Any Speed, a landmark book written by consumer advocate Ralph Nader (1934-). In his book, Nader was highly critical of GM and its Corvair model, which resulted in a publicized ongoing disagreement between the advocate and the automaker. In 1966, Nader accused GM of harassment, and the U.S. Senate committee investigated the situation. Company president James M. Roche acknowledged the harassment and apologized to Nader on behalf of GM. In 1969, GM's Chevrolet division announced it was discontinuing Corvair production.

Beetle Invasion Spurs Ill-fated Corvair

In the mid-1950s, the Volkswagen Beetle was a big hit in the United States and GM's Chevrolet division decided it needed a car to compete with it. Chevy designers were told to come up with a car that was small, got good gas mileage, was easy to manufacture, and had a European look. The result was the Corvair, which debuted in 1960, and was available as either a two-door coupe or a four-door sedan. In appearance, it was not at all like the Beetle. It had a boxy shape compared to the VW's half dome look. It also had more interior room. It did, however, incorporate many of the basic components of the Beetle, including an engine located in the rear of the vehicle.

By 1965, more than 1.2 million Corvairs had been sold when the car ran head-on into a wall of bad publicity. That year, the book Unsafe at Any Speed by consumer advocate Ralph Nader (1934-), was published. It claimed the Corvair would sometimes malfunction, causing the car to go out of control and roll over. GM denied there was a safety problem and in 1972, the National Highway Safety Administration investigated the situation and found that the Corvair was safe. The ruling, however, came too late. In 1965, Chevrolet produced 237,000 Corvairs; that number dropped to 103,000 in 1966. In 1969, the last year the car was built, only 6,000 Corvairs came down the assembly line. Over one million snazzy Corvairs were produced between 1960 and 1969; an estimated 300,000 Corvairs were still in use in 2002.

The 1970s brought a whole new set of problems. With the start of the environmental movement, public pressure was placed on the U.S. government to reduce air pollution. As a result, federal laws were created that required Detroit to build "cleaner" cars. In 1971, GM introduced engines that ran on unleaded or low-leaded gasoline, which burned cleaner than fully leaded gasoline. Prior to that time, all cars ran on leaded gas. In order to comply with the Federal Clean Air Act, GM began installing catalytic converters on all its cars sold in the United States and Canada, beginning with 1975 models. Catalytic converters help clean harmful exhaust fumes emitted by cars. It also began to build smaller cars that used fuel more efficiently, a trend that continued through the 1980s. That trend was reversed in the 1990s with the rise in popularity of bigger vehicles, particularly minivans and sport utility vehicles (SUVs).

Company Heads for Financial Collapse

By the start of 1980, the United States economy was in trouble. As a result, auto sales plummeted and carmakers suffered. GM posted an annual financial loss that year, its first since 1920. The loss came at a time when the company was spending billions of dollars to modernize aging assembly plants in the United States and abroad. Its finances were also weakened by a string of acquisitions made during the decade, including Hughes Aircraft Company, a defense electronics firm, and Electronic Data Systems, a data processing and telecommunications company. These factors led GM to close eleven plants worldwide, including several much publicized closings in Flint, Michigan, the city where the company began. All told, thirty thousand jobs were eliminated. The cost-cutting moves seemed to have paid off when in 1988, GM reported a $4.9 billion profit on record sales of $110.2 billion.

The sweeping and painful cuts were put in place by GM head Roger B. Smith (1925-), the longest-running CEO since Sloan. Smith was a colorful but controversial person who added an interesting chapter to the history of GM. Named CEO in 1981, he became known for his extraordinary vision and business savvy. He was also considered to be a blunt, quick-tempered loner. Smith expanded GM's overseas operations and improved the quality of GM cars. He served as CEO until he retired in 1990.

The 1990s, like the 1980s, was a decade of turmoil for General Motors. As revenues once again dropped, GM chairman Robert Stempel (1933-) announced he would close twenty-one North American production plants and eliminate seventy-four thousand jobs over four years as a cost-cutting measure. But the cuts failed to impress GM's board of directors, which demanded and received Stempel's resignation, giving the job of CEO, and the daunting task of rebuilding the company, to John F. "Jack" Smith Jr. The bright spot of the decade for GM was the introduction of the Saturn line of autos, built in Tennessee. The Saturn was designed to compete against small import cars, which it did with great success. Part of the success was due to Saturn dealerships not employing high-pressure sales techniques and its excellent customer service.

On the Upswing

After twenty years of declining market share, General Motors started the twenty-first century with a shakeup of its top management. Its board of directors named G. Richard Wagoner Jr. as its CEO in 2000, replacing Smith, who remained as chairman of the board. Some industry analysts suggested GM would have been better off hiring a more dynamic leader from outside the company. According to Irene Gashurov writing for Fortune magazine in 2000, "Despite constant reorganization over the past decade, [GM] remains complex, bureaucratic, and highly politicized. The question is not so much, Can Rick Wagoner run GM? He can. The questions are these: Can Rick Wagoner make GM hum? Can he turn it once more into the heartbeat of America? Can any insider?"

Roger & Me

The closing of GM plants in Flint, Michigan, led to the 1989 controversial movie Roger & Me by Michael Moore (1964-), a novice filmmaker and son of a Flint GM worker. The film features Moore relentlessly pursuing Roger B. Smith (1925-), CEO and chairman of General Motors, to try and get him to visit Flint, which was devastated by the shutdown of the GM factories. Funny in parts and deeply moving in others, the movie tells the story of a working-class city in the Midwest that depended on the auto industry.

Two years later, those questions were at least initially answered. By 2001, after several decades of decline, GM controlled 30.9 percent of the U.S. auto market, up slightly over 2000. That same year, the company reported a profit of $1.5 billion on global sales of $177.3 billion. Some of the biggest news came in 2002 when, for the first time in eleven years, Chevrolet vehicles outsold Ford. Some industry analysts credited the upswing to improved vehicle quality, increased worker productivity, and getting rid of unprofitable vehicles. GM also unveiled plans for introducing more models than ever before, with eighty-seven new car models to roll out between 2002 and 2006. The success of GM will likely hinge on how popular these new models become.

GENERAL MOTORS

GENERAL MOTORS is a worldwide corporation that produces everything from microchips to locomotives. William Crapo Durant of Flint, Michigan and a small group of investors formed the General Motors Company (GM)16 September 1908 in Trenton, New Jersey. Durant, who already owned Buick Motor Company, bought small car and parts manufacturers and incorporated them into GM. Among Durant's first acquisitions were Oldsmobile, Cadillac, and Oakland (Pontiac). By 1920 GM had purchased more than 30 companies. After World War I GM experienced a decline so severe Durant resigned his post as president. In 1923 the Board of Directors elected Alfred P. Sloan, Jr. president (10 May 1923–3 May 1937)and Chairman of the Executive Committee (3 May 1937–2 April 1956). Sloan, whose Hyatt Roller Bearing Company joined GM in 1919, utilized creative management techniques that made GM the largest car and truck manufacturer in the world. Under Sloan's leadership, GM developed a number of firsts including independent front wheel suspension and the automatic transmission. While GM participated in all U. S. war efforts, its most dramatic contribution was during World War II. From 1942 through the end of the war, GM's plants stopped all non-military production. Producing ball bearings to bombers, GM was responsible for 13,000 planes and a fourth of the engines produced for all planes. In all, GM produced 12. 3 billion dollars worth of military materials. After the war GM experienced its share of the postwar boom, and by the sixties and seventies it was taking advantage of new technologies to make cars more efficient and safe even before government regulations went into effect. During the oil crisis of the 1970s GM experienced a decline in sales but responded by designing lighter and more economical autos. During the 1980s and 90s, GM continued to expand and opened plants in Germany, Brazil, Thailand, and Spain. In order to compete with an expanding import market GM developed Saturn located in Spring Hill, Tennessee, in 1990 and in 1996 it developed its own version of the electric car. GM has also been involved in various humanitarian projects such as a housing project with Habitat for Humanity for its employees in Mexico and the "Care and Share" program to collect food.

BIBLIOGRAPHY

Cray, Ed. Chrome Colossus: General Motors and its Times. New York: McGraw-Hill Book Co., 1980.

Madsen, Axel. Deal Maker: How William C. Durant Made General Motors. New York: John Wiley & Sons, 1999.

Smith, Roger B. Building on 75 Years of Excellence: The General Motors Story. New York: The Newcomen Society of the United States, 1984.

Lisa A.Ennis

General Motors. See Automotive Industry.