'The General' surrenders at last

CP FILE PHOTO

General Motors headquarters in Detroit.

David Olive

BUSINESS COLUMNIST

"The skeleton frames of burned-out Chevrolets"

– Bruce Springsteen, "Thunder Road"

Few products have done more to help shape American culture than those of General Motors Corp., which filed for Chapter 11 bankruptcy protection yesterday in the largest industrial bankruptcy in U.S. history.

"The General," as it was known at the height of the Auto Century it long dominated, inspired the tunesmiths of Tin Pan Alley and later, the Beach Boys and the Boss.

But by late last year, GM, the world's biggest automaker for 77 years until it was overtaken by Toyota Motor Corp. in 2008, could no longer pay its bills. It was just another deadbeat, stringing along many of its more-than-3,000 suppliers for as long as it could.

When Dinah Shore sang "See the U.S.A. in your Chevrolet" in the 1950s, GM held the whip in an oligopoly shared with Ford Motor Co. and Chrysler Corp.

The early GM decided its cars would have covered bodies, and later automatic transmissions, and still later outrageous tail fins.

Soon almost all American cars had these things. The GM mystique then expanded to its leading role in the "arsenal of democracy" as a prodigious arms supplier in two world wars.

But an arrogant Detroit went into denial at the dawn of the import era, and remained fixated on big, heavy gas-guzzlers well into the 21st century. Americans long ago abandoned Detroit brands for more fuel-efficient foreign makes.

Today, GM is mocked as "Government Motors." Washington, Ottawa and Queen's Park have taken a 72 per cent ownership stake in the reorganized GM, set to emerge from bankruptcy in about six months, in return for about $72 billion (U.S.) in state loan assistance, $9.5 billion of it from Canada.

In a recent public-opinion survey released last week, two-thirds of Americans opposed the use of taxpayer funds to bail out GM, regarded as a textbook case of chronic failure of free-market managers. The dwindling popularity of GM products relegated its market share to "flyover country," the less-populated interior American states.

The allegiance of motorists on the coasts is to Toyota, Honda, BMW and other foreign makers. GM's overall market share has plummeted to 19.1 per cent. In the most heavily populated states such as New York and California, GM's market share is even lower than that. In detailing Washington's turnaround scheme for the company, built by the legendary Alfred Sloan, who was an implacable foe of FDR's interventionist policies, U.S. President Barack Obama described yesterday what he called "a credible plan that is full of promise."

That it may be, since it expects a "new GM" to be capable of making a profit even during the current 27-year low in auto sales.

Yet ,this phoenix-like rebirth will require another round of drastic downsizing at a GM that already has been shrinking at a desperate pace. Fourteen more plants are to be boarded up, another 21,000 jobs eliminated and a remarkable 40 per cent of GM dealerships closed.

Washington is widely accused of throwing good money after bad in its long-shot rescue bid of a company that managed to lose $88 billion over the past four years. "I think this is going to be Obama's Vietnam," U.S. auto historian Bob Elton told Reuters on Sunday. "Every time he turns around, there goes another $20 billion."

Indeed, it will take some doing to renew America's affection for Chevys, Buicks, Cadillacs and GMCs, after a restructured GM has shed its Pontiac, Saturn, Saab, Hummer, Opel and Vauxhall brands. (Control of the last two, GM's European brands, was tentatively won by Magna International Inc. last weekend.)

GM had begun its death spiral about a decade before Michael Moore's 1989 breakout classic, Roger & Me. The film misses the point in savaging then-GM chief executive Roger Smith for his alleged insensitivity to laid-off GM workers in Moore's native Flint, Mich. Smith's real crime was failing to cut deeper and reduce GM's overcapacity. Instead, Smith and his successors continued to flood the market with vehicles North Americans didn't want.

And so came yesterday's great reckoning. For all that Americans have spurned GM in the showroom, the parlous state into which GM has steadily slipped over the past three decades is, for many, as unthinkable as the earlier demise of Penn Central, Pan Am and the Great Atlantic & Pacific Tea Co.

"The phrase `bankrupt General Motors,' which we expect to hear uttered on Monday, leaves Americans my age in economic shock," P.J. O'Rourke wrote in a Wall Street Journal essay over the weekend. "The words are as melodramatic as `Mom's nude photos.'"

dolive@thestar.ca

More videos from Wheels.ca and our partners