Karl Ludvigsen is irritated by ill-informed criticism of the troubled American auto giant — which was once a model of quick, responsive and decentralised decision-making
Outraged is too mild a word for the way I felt after reading a piece in the 12 November edition of the New York Times about General Motors. Focusing on the faults of this once-great company, its author said the following:
For all its financial troubles and shortcomings as an automaker, no aspect of GM has confounded its critics as much as its hidebound, command-and-control corporate culture. When GM collapsed last year and turned to the US government for an emergency bailout, itcentury-old way of conducting business was laid bare, with all its faults in plain sight. Decisions were made, if at all, at a glacial pace, bogged down by endless committees, reports and reviews that astonished members of President Barack Obama’s auto task force.
This accusation cannot go unanswered. GM was the victim of an accumulating sclerosis which, toward the end of the 20th century, deeply impaired its decision-making capacity and its responsiveness to the marketplace. This was no secret to many GM insiders as well as observers of the industry who bemoaned the corporation’s inability to get to grips with its problems. But to assert that this was GM’s culture throughout its 100-year history is just plain wrong.
The great strength of General Motors through its glory years was its system of strong, independent operating divisions with shrewd central co-ordination. This was a by- product of the way GM was created in 1908 by its founder, William Crapo Durant. A magpie for motor companies, the wheeler-dealer Durant started with Buick as his nucleus. He added Oldsmobile and then, in 1909, Cadillac and Oakland, with Chevrolet joining in 1918.
After he became president of General Motors in 1923, Alfred P. Sloan, Jr conceived the system of central co-ordination of decentralised business units that worked so well for so long. ‘We decided for free enterprise,’ said Sloan. ‘We set up each of our various operations as an integral unit, complete as to itself. We placed in charge of each such unit an executive responsible, and solely responsible, for his complete activity.’
The result was a vibrant enterprise whose operating divisions were close to their markets and individually creative. They also commanded great brand loyalty. GM’s divisions fought harder with each other than they did with their external rivals, creating a competitiveness that generated fine products and appreciative customers. A light touch from the centre ensured that financial targets were met and capital investments justified.
The general manager of a GM division commanded a complete car company, from engineering and manufacturing through marketing and sales. Within guidelines set centrally, he had autonomy over the way he managed his operations to achieve the best results. The system delivered fast market response and customer-pleasing diversity of product.
Poster child for this style of operation was Pontiac’s GTO. A late arrival in 1964’s new Tempest range, the GTO version was technically an option so did not need the approval of GM’s powerful Engineering Policy Group. First of the so-called ‘muscle cars’, it slipped a 389-cubic-inch V8 under the bonnet of an intermediate-sized model, creating an exciting new kind of car that went like stink. The decision to build it was made at the last minute entirely within Pontiac, whose chief engineer was none other than John DeLorean. Pontiac profited hugely from the GTO’s eager marketplace acceptance.
Pontiac as a brand is now history. Today’s General Motors had to be dragged kicking and screaming to its decision to delete it. GM struggled similarly with the loss of Oldsmobile: Its death announced at the end of 2000, the last Oldsmobile was built in 2004. Decision-making in the much-ridiculed ‘Old GM’ was much quicker.
Following the lead of the LaSalle introduced by the Cadillac Division, at the end of the 1920s other GM divisions had introduced lower-priced ‘companion cars’. Buick’s was the Marquette, Oldsmobile’s the Viking and Oakland’s the Pontiac. When the Depression hit, no time was lost in axing these newcomers. By 1931 they were all gone, in Oakland’s case giving way to Pontiac. And when, towards the end of the 1930s, LaSalle’s face no longer fitted, that was deleted as well.
How, you might ask, did the supposedly sluggish Old GM deal with the depths of the Depression? In 1933 it acted swiftly to merge production of Chevrolet and Pontiac and of Buick and Oldsmobile. Sales operations of Buick, Olds and Pontiac were married in a new division under the corporation’s best salesman, Richard H. Grant. ‘In effect,’ wrote Sloan, ‘from a management point of view, General Motors for a year and a half was reduced from five to three car divisions.’
How was such decisive action possible in such a huge enterprise? ‘We had simply learned how to react quickly,’ said Sloan. ‘This was perhaps the greatest pay-off of our system of financial and operating controls.’ So well managed and financed was GM in the Depression that in 1933 it went halves with the US government to capitalise a brand-new bank that Detroit desperately needed, the National Bank of Detroit.
In the 1930s, hard-charging Harlow Curtice was named as head of the faltering Buick Division. He revived it with high performance, sharp styling and aggressive marketing. From 1940 into the 1950s my father, a motor-industry executive, chose Buicks. After the charismatic Curtice became GM’s postwar president, he dispensed millions for expansions on his own recognisance when he visited the divisions. He didn’t wait for the tedious review of a committee.
Continually revived and strengthened by the appointment of capable and experienced general managers, GM’s divisional structure paid steady dividends. When in the summer of 1960 it was evident to Chevrolet that Ford had scored with its compact Falcon, the biggest GM division didn’t hesitate. Even though it already had its rear-engined Corvair, Chevrolet pushed the button on a Falcon-like product of its own that was ready in the fall of 1961 as the Chevy II for ’62. Slow decision-making and action? I don’t think so.
So where did General Motors go wrong? Ironically, it was the view of John DeLorean that the blind-siding of GM’s Engineering Policy Group by him and his division chief Pete Estes with their Pontiac GTO had the effect of spurring that crucial body to demand greater detail on future products, putting sand in the gears of the decision-making process. Gone were the halcyon days when Chevrolet boss Edward Cole could get quick approval for a new big truck engine that soon appeared under the bonnets of Chevy Impalas racing on southern stock-car tracks.
When the free-wheeling Harlow Curtice retired in 1958, GM’s board rejected his cult of personality and named a quintessential finance man, Frederic Donner, to replace him. Donner’s elevation was the victory of the bean-counters over the car guys at GM, a triumph that would shape the company’s future. It was Donner’s initiative in 1965 to take manufacturing plants away from the divisions and put them under a new Assembly Division. No longer could a divisional chief take responsibility for ‘his’ factories.
Chevrolet’s Edward Cole was an authentic car guy, but when in 1961 he was promoted to take charge of all the car-making divisions he reached down to meddle in their decision-making. Cole had a vision of making all GM’s cars from a common kit of parts, even one day all having Wankel rotary engines. Cole forced shared components on the divisions even when it ended up costing more to do so.
Another ebullient GM executive whose retirem ent resulted in the appointment of a more conservative successor was William Mitchell, head of styling. While Mitchell fought hard to preserve divisional identity in his designs, his replacement bowed to corporate pressure to produce cars so blandly similar in looks that a competitor ran television ads exploiting a parking attendant’s inability to tell them apart.
Donner’s heirs, bred in GM’s finance arm, rode roughshod over the company’s structure, rolling out one reorganisation after another. These took their toll of the lingering independent spirit of the once-hallowed divisions. Small wonder that Oldsmobile expired after a carousel of six general managers in 13 years, the last of whom had previously headed brand management for Alpo dog food.
By the 1980s, the managerial sclerosis lampooned by the New York Times really had infected General Motors. Its decisions were completely centralised, as remotely as possible from its dealers and customers, in the hands of executives with no knowledge of the way GM once worked so well — and no interest in learning why and how it once led the global motor industry.
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