GM: How The Giant Lost Its Mojo – An Insider’s Perspective

GM logo crumbling

[first posted 5/21/2013.  CraigInNC is a former GM employee, and has been sharing the benefits of his insider’s knowledge and perspective since he arrived here at CC.  In this post, which was originally a comment Craig left, he shares his thoughts on the external and internal forces at work during the crucial era that started with the OPEC Oil Embargo, and which he identifies as a key turning point at GM. The decline of GM is the biggest automotive story just about ever, and there obviously are many takes and perspectives to it. Feel free to agree or disagree, but please keep the tone civil. – PN]

GM’s downsized 1985 FWD C-Body cars (Cadillac DeVille and Fleetwood, Olds 98, Buick Electra) and 1986 E/K cars (Eldorado/Seville) represent one of the key turning points at GM. The situation with these all-new cars was not just confined to those models only, but was part of a broader set of directions that GM decided to take ten years before they hit the street. To say that OPEC had influence on this would be an understatement, but that affected all cars, most especially the domestics who built big cars. At that time, most of the imports were very small, with the exception of some Mercedes models.

As much as we blame Roger Smith for all of the troubles of the 1980s, he was only marginally influential in the process that got all of this going. He could have done more probably to exert pressure to tweak models, but the die was already cast before he assumed the chairmanship in the fall of 1980. The situation as I saw it was like this:

OPEC embargo

Of course the OPEC Oil Embargo of 1973-1974 changed everything – it burst the bubble for most Americans and made us realize that the oil that begot gasoline was a finite natural resource, and a resource that was not entirely controlled by the United States. We all pretty much know and understand that part of history so nothing more needs to be said.

CAFE was enacted in 1975, to take affect for MY1978 passenger cars and MY1979 light trucks. GM was most affected by this legislation as they were the master builder of large cars. Chrysler fuel economy was probably slightly lower than GM’s during the 1970s, but given Chrysler’s dire financial situation by the late 1970s, the focus at Chrysler was keeping the company alive rather than the threat of government action on CAFE. Also being the weakest of the Big Three with about a 15% market share, Chrysler was less of a threat to government action than GM, which always lived under the threat of anti-trust, much like AT&T and IBM.

As I commented in the article with the Olds Firenza, GM not meeting CAFE standards would likely have resulted in severe consequences. At that time, Washington wrote legislation and bench-marked it again GM. AT&T gave you telephones, RCA gave you TVs, NBC/ABC/CBS gave you TV programs, Kodak sold you film for your camera, and IBM sold you computers. That was it in a nutshell. But as we can see, each and every one of those companies no longer exist in historical form. Some like AT&T were forcibly broken up, others like IBM & GM endured a decline and recovered in new form, and of course we know how TV went from 3 channels to 3,851 and counting…

Ed Cole With Corvairs-horz

Ed Cole (left) retired as GM President in 1974. He was one of the last truly influential GM Presidents that was considered a “car guy.” He started his career working in an auto parts store and ended it as President of Checker before he tragically died. Pete Estes (right) followed Cole and was an operational guy, but under him the guy got rolling and despite his legendary career with Oldsmobile, Pontiac, and Chevrolet, he did not have the swagger of Ed Cole and others. But he was much loved. And a man of extreme innovations. While others were more big picture in their pronouncements, Estes understood all the details. As young GMI students, we were all in awe of the big names like Mitchell and Cole, and even Iacocca at Ford, because they were celebrities. But for those that did not possess extreme extroversion, a guy like Pete Estes whose influence was felt less in what you saw on the outside of a car than what you felt on the inside driving it. He was a real engineer’s man and it is quite apropos that there is a near shrine to him on display in the Scharchburg Archives at Kettering University.

Roger Smith

Roger Smith was a numbers man; his tenure before Chairman and CEO was Executive VP of public relations, governmental affairs, and finance. Things we considered necessary for doing business but never expected anyone to get promoted to the head of the company from. A very unusual situation and one that many had a difficult time adapting to. We were used to getting our ideas approved or disapproved by guys that had walked in our shoes beforehand. To discuss costs before results was tantamount to squashing creativity and productivity.

Part of the genius of GM for so many years as that is was really a collective organization of mini brain trusts and ideas and energy flowed up to the top from below. Things like the genesis of the turbo Buick V6 originating from a Boy Scout project is testament to this. That would have been nearly impossible to have occurred after the 1980s. There simply was not that level of flow of communications. Coming from a non-operational background, Smith felt no connection to the engineering crew that actually made everything that that we sold. He had no personal affinity for any of them and often did not even know all but the most senior staff of the divisions at the time he became CEO. Thus, he felt unencumbered to embark on various projects of his liking without pains of guilt.

Bill Mitchell

Bill Mitchell retired in 1977. Mitchell exerted influence over corporate management unlike what had been seen before or since. Pretty much whatever Mitchell wanted, he got. Unless it was mandated by the government, no one told Mitchell what to do. Unfortunately, Irv Rybicki, who replaced Mitchell, did not have the spine nor the influence that Mitchell had. By the time that Rybicki retired in 1986, he was basically designing cars that he was told to design and not the other way around.

Cadillac 1992 eldorado

By the time that Chuck Jordan assumed the design reigns, things were already too far along to be able to correct in concrete fashion, but had Jordan followed Mitchell, I personally feel things would have been a lot better. Jordan was a real fan of Cadillac and his influence was most felt with the 1992 E/K designs that are widely considered smart looking. Jordan was also influential in convincing management to begin upsizing cars again and was largely responsible for why cars grew from 1988-on. Of course Mitchell is second to Jesus Christ in automotive styling at GM, but Jordan had a flair for presence second only to that. The current GM design chief, Ed Welburn is very talented himself, but Jordan was the last of the old guys with the critical eye.

In the aftermath of OPEC, with the coming of CAFE, and changing customer tastes, the decision was made in 1975 within GM on a corporate level, to go full speed into FWD and to maximize space efficiency. The belief was, rightly, that the days as we knew them were over. The paradigms that drove automotive design and development from the first Oldsmobile no longer applied. Up until the late 1960s, automakers built whatever they wanted, totally unencumbered by anything, whether it be government regulation to world events. Europe and Japan were still digging out from the ashes of WWII. Detroit built cars represented everything that we thought of about the United States.

Cadillac 1961 convertible

I remember sitting in an auditorium at GMI when a GM executive gave a speech extolling to us the virtues of GM and how it fits in with the rest of the country. You know “what’s good for GM is good for the US, etc…” The car was the ultimate expression of the freedom that built this country. Manifest destiny, live free or die, and the power of the individual. Soviet citizens drove Ladas and East Germans drove Trabants. We drove cars that represented the country’s industrial might, and they were styled accordingly.

Then it all changed. A bunch of small men, dressed in white shirts with skinny black ties and coke bottle glasses came in and told us it was all a dream. Well not really, but it felt like that. Suddenly we had insurance companies breathing down our backs, the EPA looking for trouble, NTHSA telling us that people were crazy, and OPEC told us that strange sounding men with permanent tans dressed in bathrobes showed us that they had more control over our behavior than our own elected government. It was very surreal after a while.

After 1978, everything seemed to be a giant scramble; if it wasn’t CAFE, it was cash flow, or something else. Nothing felt like it flowed freely from the brain to the garage. Everything felt like a compromise; success felt like you achieved as much as you could. Everything was a what if… The days of building cars from dreams that Bill Mitchell had of cars coming out of the clouds in England were over.

Chevrolet Citation 1980

Given all of these factors, the decision was made at the corporate level to take the direction of the company towards FWD and space efficiency. The second oil crisis (1980) and the two following years of uncertain energy prices and inflation only validated that. First came the X cars (Citation, etc.). Then came the J & A cars, and the rest followed as we know them. It was a total commitment, not just on the model level, but corporate wide. RWD was gone, done, finished; for all but the most specialized models of passenger cars like the Corvette.

If all had went accordingly to plan there would have been NO RWD cars, except for a few, by MY1985. It was a paradigm shift unheard of in the automotive world that ranks probably third behind the invention of the self starter and the automatic transmission, in terms of what changed people’s perception of what a car was. Yes, the market had the VW Rabbit that was small, efficient, and FWD with a transverse four cylinder engine, but the Rabbit was a niche vehicle. It was purchased by people that needed a small car, and VW at that time did not produce anything that matched the center of the buying public, the big RWD car.

Chevrolet Cavalier 1982

As much as we disparage the Citation, when it came out it really changed the thinking of both Detroit and the US buying public. Especially as time went on with the release of the J and A body cars, everyone knew where the market was going. Chrysler came out with the K cars. Had GM decided to make smaller RWD cars with longitudinal engines, it is very likely that FWD transverse cars would have remained the purview of imports, and/or only smaller cars. To underestimate the impact would not do justice to the sea change that both affected the design culture inside Detroit and in the minds of the US buying public. One only has to think of the Chevette and the Vega as ultra-small cars with ultra-conventional designs. While all these ‘deadly sins’ of the 1980s might have cost GM dealers, their influence begot space efficiency as a benchmark for car design that remains with us today.

The fulcrum of influence at GM shifted from the divisions to the executive level under Roger Smith. No more reflective of that was the ill-fated 1984 reorganization that largely demolished corporate autonomy. I suppose from a business perspective, the old model was not going to last forever. As we saw with the engine mixing affairs of the 1970s, total vertical integration of the divisions was no longer cost effective in light of continuing escalation of costs of goods sold, regulation, and the costs associated with the corporate plan to move to FWD.

GM 1958-Ad-01

In the old days, cars were simple, they were RWD, mostly framed vehicles, V8s, carbureted, and large. Most of the budget in car development went to styling. Engines evolved incrementally, bodies could be changed rather easily and with less expense with a body on frame design. Everything was set up nicely. Even using identical frames and substructures, you could make a car look and feel completely different with relative ease. GM was the master at this. With FWD and unibody that was no longer possibly, at least as easily and inexpensively as in the past.

FWD costs money, a lot of money. Unibody designs cost more money to design because they have to be designed as a package no just as a body that can be dropped on an existing frame. And they cannot be easily made different. Hence all the cookie cutter cars of the 1980s. Unfortunately, the other automakers, especially the imports, only built one kind of car, so there was nothing to look similar to, until the Japanese came out with their premium brands and many of those models started looking and feeling a lot more badge engineered (although admittedly not to the degree of GM vehicles).

Fortune cover GM A bodies

So when you have five divisions now having to build similar-sized FWD cars on unibody designs, you go from platforms that could be before-easily altered to fit each divisions styling themes and customer characteristics, to platforms that were virtually impossible to make different. It was a bad situation that could not be easily rectified. Believe me, that idea was lost on NO ONE at the division level and it pained many people. But when a company makes a corporate decision to take the company in one direction and invests what is the equivalent of the GDP of probably several states, directions can’t be changed easily. Given the predictions of gas prices going up and regulations continuing, FWD was here to stay and we had to make the best of it.

Given that GM went whole-heartedly into the FWD program, not only did the basic body structure change, but everything else changed with it. The X cars were one of the first mass market vehicles that had fuel injection standard. Real fuel injection, like the kind that took cars into the modern ages and lasted well into the 1990s. That was another incredible paradigm shift. Of course the Seville was the first big GM model to have a modern EFI system, but it was a niche model and handled only by Cadillac dealers who could train select personnel to service it. And that EFI system borrowed heavily on existing European systems.

Chevrolet 2.5l_tech_4_engine

The GM TBI system that debuted in 1980 set the standard for basic but highly efficient throttle body fuel injections system in production. While there were many engineering failures over the years, that TBI system was not one of them and became a highly reliable rock solid design along with the subsequently developed SFI that came out in turbo Buicks for 1984 that again set the standard for fuel control in the industry. Until the recent adoption of direct injection systems, fuel injection systems were largely carbon copies of the original system that debuted in the 1984 Regals.

All of this was done on a massive scale, unprecedented before seen. The closest thing to a total re-engineering was the 1966 Toronado and that was justified because it was sold to Oldsmobile and eventually Cadillac and Buick because they were premium cars. Now we were building inexpensive everyday cars for the masses that had move development in them that had been spent developing the atomic bomb of WWII. If you added up all the monies spent from the first dollar spent on the Citation to the last car converted from RWD to FWD and converted them to 2013 dollars, you could almost balance the federal budget. No kidding. It was at that level. It was overwhelming. It was nothing like anything could have dreamed or imagined when they entered engineering school.

When we started college, we all expected to be building variations of RWD body on frame cars forever. Ones that were styled like each division wanted them. Some cars like the Vette and the Toronado were different but they were low volume vehicles and had dedicated staffs. Little did I know that by the time that I effectively retired full time after 41 years that we would be driving massively computerized FWD vehicles with space aged materials that could protect us from all but the most dire of situations.

Cadillac V864_464985

And that really was where all the failures came from. Some of them, like the V864 were stop gap, clearly introduced to bridge between old and new. Others like the HT4100, an engine that turned out to be quite sound by the end but was rushed into production due to time and circumstance. So in a way, it was like mobilizing for war. The changes affected everything. Almost nothing was the same from 1975 to 1985. I am not sure a single automotive company changed like that in a ten year span on the face of the earth. Maybe the Soviet bloc companies but I suppose we could confine it to free market countries.

Whenever you undertake such massive change on that level, with a company that large, with that amount of influence in the industry, mistakes are going to happen. That does not absolve anyone of the effects, but it would have been difficult to have imagined how it could have been totally perfected since so much was going on we had our hands full just keeping everything moving.

Honda ad 1980

So people ask, well how did Honda, or Mercedes manage to keep it together during this time and grow? Well, quite simply, they were a lot smaller, built fewer products, and were largely unaffected by the forces that affected the Big Three and GM in particular. Toyota built nothing of any particular size except for the Cressida which was only a bit player in the market. Honda only sold Accords, Civics, and Preludes three of which were small vehicles unaffected by CAFE, so Honda as a corporation did not have to endure a wholesale change that the Big Three experienced after OPEC. They could quietly continue to devote their energies into continuing to develop their vehicles without radical changes.

When gas was in short supply and fuel economy was of paramount concern, people bought a lot of small imported cars, plus a lot of small domestic cars. But when those concerns subsided we saw buyers return to more traditional buying patterns if only for short periods. During the 1990s we had an extended period of prosperity and low relative gas prices which, by that time passenger cars were already fully redesigned and much smaller, drove SUV sales which were the spiritual successors to the traditional American car design. Gas went back up and people started buying smaller again and the cycle has yo-yo’d around like that for some time.

So in a way, at least for the Japanese automakers, building only small cars, when things began to change on the energy front, they did not go to the market, but the market came to them. They just sort of happened to be there, like the Mustang II was in 1974, designed without any real regard to OPEC, but happened to be something that seemed so right for the moment. And it sold, partly because it was more manageable than the recent Mustangs, but often because it was just much more efficient. Same with the Vega, despite the troubles of the first couple of years, MY1974 was a banner year because it was a small efficient car when people’s worlds were turned upside down.

satellite _tv-293x300

In the 1980s, the biggest sin for Roger Smith was the money spent on extraneous projects unrelated to car design and build. Things like EDS, Hughes Electronics, and buying robots to lick envelopes when money could have been spent refining product. It felt like the Federal government, billions of dollars flying everywhere but no one really knew where it was going. In 1965, every dollar went into putting cars into people’s garages. Yes, Frigidaire built fridges and appliances, but they did so in part because they also made air conditioning for cars, and those product lines were profitable, and did not drain from corporate resources. I did not know until about eight years ago that a division of Hughes Electronics developed and introduced DIRECTV, yes THAT DirecTV that competes with DishNetwork and TimeWarner for our television viewing. So all you GM haters with DirecTV, better switch fast! Well actually you don’t have to since it is a fully separate company (spun off in 2003), but just so you know…

Stempel, bob

By the time that Roger Smith retired in 1990 and Bob Stempel assumed the reigns, things were a mess. Bob should have replaced Pete Estes in 1981, but he wasn’t at that point in the food chain at the time, but like Pete, he was an operations guy. He knew how to get things done. He could not have reversed the push to FWD, but he would have not spent the money that Roger Smith did on everything but and might have made these cars the best vehicles ever produced, or at least much better than they were. By the time he got the keys, he was hamstrung. The company was bleeding money, nothing was selling, and he spent most of his time trying to right the ship. Unfortunately for him, he was out of the country for much of the 1980s managing Opel (which was making money hand over fist at the time not like today where it is dying) and did not have influence over North American operations. But Stempel was a car guy and would have done well if he would have had the resources to do so.

To tie this into something that Paul might appreciate, back in 2007, there was an article written over at TTAC:

(also this one, on the same subject:  – Ed)

While most of the (first) story documents various ills experienced by the owner and others, I feel he rightly points to the X car as the beginning of the end. Really that date was June 21, 1975 when the executive committee approved the whole FWD X platform to begin with, but that is being discrete.

CC 23 013 800

It’s hard to say whether it was the decision to go FWD that began the decline itself or the ills that the car suffered as a product. Because we have to go back to the original premise of what made GM what it was and what made it great. All that changed with the decision to go FWD unibody. People bought GM cars because each division made something unique and not only was it unique, but at least with regards to imports, the only competition was from within the Big Three.

Before OPEC, no one really cared about imported vehicles except on the margins. Mercedes was chipping away at luxury sales but unless they started building mass market vehicles, they would have been confined to a small section of that market. As would have VW and the other Europeans who built small quirky vehicles that catered to niche segments of the populations that had specific needs or were just weird enough to not mind driving 55hp VW buses that went nowhere fast. If OPEC would not have happened, one of two things would have happened: imports would have remained nibbling on both ends of the extremes, or they would have been forced to introduce larger products that would have looked a lot more like old fashioned American cars than what they were currently building. As much as we talk about how much OPEC and CAFE affected the Big Three, just to play devil’s advocate I have often thought about what would have happened if the reverse were true that the government would have passed a law mandating cars of a minimum size. GM would have gladly dropped the Vega and chaos would have reigned in Tokyo. Not unlike how it reigned in Detroit for so long.

So the moral of all of this way many things, we could argue that Roger Smith wasted money that could have been spent on product, we could blame it all on OPEC for destroying the US business model, blame it on UAW for extracting maximum benefits, blame it on corporate decisions to go FWD. Its impossible to really do that constructively. It was just so big. So much was going on. The real deadly sin was that it was all just overwhelming. Almost like a drug addiction.

Chernobyl Disaster

Once the ball got rolling back in 1975, it blew up into this huge amount of change that was unprecedented in history. It got out of control, and sadly, probably to the point that no one man could have stopped. When you have a corporate the size that GM was at one time, that was bigger than probably half the countries in the United Nations, it was like nuclear fission. When the reactions start happening they are hard to control. It was like the meltdown in Chernobyl.

So while I look back at the 40+ years of my life, and think of all of this and history and my place in it, what could have been done differently, what I could have done differently, in the end I really do not have any answers. It would have been like trying to figure out how to run the world during WWII. I suppose in the end it had to all go away. The days of vertically integrated massive corporations with dominating market shares are over. Some will dominate for a short time, usually when a new product is introduced, but the days of GM, AT&T, IBM, Kodak and RCA are over. Gone, done. Globalization, technology, communication, whatever the factors are will never let such things happen again.

But it was a ride, a fun ride, a ride I never dreamed would turn out the way it did, but despite all of the bitterness I could have regarding everything, I probably would not have had it any other way.