GM Navigates A Treacherous Road

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 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, 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 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 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 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

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 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 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 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.

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 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, 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.

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 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, 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. 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 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 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 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 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 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

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, 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 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 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

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 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 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 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 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.

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 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 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 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 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 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 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

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 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

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 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 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 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 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 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 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

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, 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 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, 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

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 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 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 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 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, 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 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

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 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 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 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 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 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 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. 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 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 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 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 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 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 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 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 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 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 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 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. 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 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 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 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 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 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 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 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

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, 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, 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

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, 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 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

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 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 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.

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, 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 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 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. 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 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 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

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

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 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 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. 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, 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 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, 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

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 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, 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 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 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.

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 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 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 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

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 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 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.

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 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 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 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 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.

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 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 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 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

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 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, 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 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 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 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 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 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 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 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

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 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 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

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 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 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 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 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.