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My HS Senior Research Paper

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For my 12th grade Research Paper in English class, i decided to right a "past present and future" of GM, and this is my second draft... just thought id post it, any comments/ critique is greatly appreciated :pbjtime:

one of the sources i cited is C&G, as TamaZ71 has wrote some fantastic articles that i found useful.

Michael Ferone

Sr. Rita

English 12-82

January 7, 2008

The New Renaissance of General Motors

In the early days of the automobile, thousands of small independent companies sprang up as virtually everyone attempted to built and sell their own variation of the new “horseless carriage.” While many of these fledging auto companies failed quickly after introduction, some were able to persevere and rise among the rest; for example the world’s biggest automobile manufacturer, General Motors. GM has had a long and interesting past, and in the past quarter decade has faltered in the eyes of the public. While it’s had its previous pitfalls, General Motors is now building better cars than it ever has.

General Motor’s storied past has long interested me, and researching its evolution to the goliath it is today is a hobby of mine. GM’s nearly century long history began in Flint, Michigan in September of 1908. General Motors was started by William Durant as a holding company for his Buick Motor Division, and over the next two years, he obtained Oldsmobile, Cadillac, Oakland and Elmore. Durant lost control of the company to his investors in 1910, but used his power as head of the newly created Chevrolet Motors to leverage his way back into the GM board (General Motors 2). The Great Depression was the greatest test for of America’s automobile producers, as what little money families had went to food and rent, not to luxuries, which to most people in the Thirties, a new car was. While it had to trimmed a few divisions out of its profile, GM was one of the few to last through the depression, and after the Second World War. When car manufacturing resumed, a young executive named Alfred Sloan rose through the ranks of GM and led it into the golden age.

Sloan, as chairman of the board, solved a problem many multi-divisional auto companies have by creating what is known as Sloanism. In his system the divisions ordered from the value oriented Chevrolet, Pontiac, Oldsmobile, Buick and as the “Standard of the World,” Cadillac. In this system, each division was justified and as a buyer grew up and gained more money, he/she would move up the system, buying a Chevy and moving until eventually owning a Cadillac. This ensured no divisions cannibalized the others’ market share, all market segments were covered and business remained within General Motors (Sloan 1). He describes his system with his famous quote “A car for every purse and every person” (3). During the Forties and Fifties when Sloansim was General Motors business model, profits soared and market share increased dramatically. Another trend GM started was “planned obsolescence.” Cars would be refreshed every year and have a major restyle every 3 or 4 years, so customers would be drawn back every year to see what the new version of each car was.

Unfortunately, markets change and Sloanism fell apart. This is partly due to the fact that in the past, each division had only one car body with different variations. When Oldsmobile, for example, started building midsize cars that started cheaper than some Chevrolets, the pricing structure was thrown into a tailspin. Add to it that each division built a luxury model of their full-size car, Sloanism began to fall apart as each brand demanded a full line of vehicles. This alone was not, however problematic at first. This was evident during the 1960’s, when each brand began building their own midsize and compacts in addition to their full-size lines, GM gained so much market share that the government threatened to break up the company, then thought as a monopoly.

Another inherent problem is described by Ed Wallace in “How GM Lost Its Status.”

“The annual styling change became history—ended by the high costs of meeting new federal safety standards and emissions standards” (Wallace 2). The money that once went to the design teams to constantly update styling, now went to building big bumpers and lowering pollutants. Customers did not notice how much safer and cleaner these cars were, rather they just noticed that a model looked identical for a few years in a row and felt the automaker was just becoming lazy. The consumer became bored and held on to a car they had previously bought for longer, as there was less motivation to buy new. Wallace also explains how the techno-boom of the Seventies and Eighties grabbed hold, and people had other places to spend their money. “Suddenly, if you had $1500 to spare, there were so many all-new and exciting things to buy that, instead of trading in for the 1986 Olds Cutlass (which looked exactly the same as your 1981 model) you went for the hipper status symbol” (2).

For years General Motor’s had little competition. After the Great Depression weeded out most of the smaller auto companies, what survived in the Fifties were GM, Ford, Chrysler and the much smaller American Motors Corporation. With this little competition, GM had a massive market share. In the 1960’s, Japanese companies began importing cars to America. Most Americans at first laughed at these tiny boxy hatchbacks sold by companies such as Toyota and Honda. America was in an automotive haven at the time. Cars were bigger than most even today, high performance V8 engines the norm, and Detroit’s cars at the time were some of the best designs ever produced. When comparing tiny, cramped compact cars built halfway around the world to American built “land yachts,” most of the buying public had no reason to spend their money on these new imports.

That was all well and true, until the 1973 Oil Crisis. America’s automakers were unprepared for the shock of rising oil prices. Gas that had once been plentiful and cheap was now scarce and expensive due to the 1973 OPEC Oil Embargo (Oil Crisis 1). While GM tried hastily to downsize their cars and build smaller, more efficient engines, consumers took a second look at the quirky imported cars, as their small size led to much better fuel economy. The 70’s led to a massive surge in the number of sales Toyota, Honda and Datsun (known as Nissan today) sold in America. This increased competition came at a bad time for General Motors, as they were not only struggling to meet stringent new pollution and emissions regulations, but also to make their cars safer.

A series of misguided leaders came at a time when a strong CEO was needed. From 1972 until 1980 Thomas Murphy led General Motors, and he is well known for saying “General Motors is not in the business of making cars. It is in the business of making money" (Murphy 1). While this is true for any business, he ordered costs cut anywhere possible in order to increase profit. He is widely known for starting the phenomenon known as “rebadging.” Before him, each division’s cars shared a platform, or basic architecture, and then were free to use their own motors and exterior design. Even though they shared a large percentage of parts, they bore no more then just a passing resemblance. Instead, under the rebadging business model, all divisions sold the same car, with the only difference being very slight exterior changes and different model names, basically “rebadging” the same car to all divisions. When people visited the showroom and saw the new Buick Century looked identical to their Chevy Celebrity, most thought it pointless to spend the premium for nothing more than the emblem. To further the problem, the next in line to take charge was Roger Smith. In an attempt to reduce costs, he led the failed 1984 Reorganization. The value divisions would design the small cars for all brands, and the luxury divisions would build all the full size cars. Instead of reducing overhead on each car sold, all the reorganization led to was a larger bureaucracy within the company and a further blurring of the target markets for each division. This was the final nail in the Sloanism coffin. Under Smith, market share continued to fall as consumers once loyal to GM swayed to imports (Smith 2).

The 1990’s seemed to be the light at the end of the tunnel for General Motors. In 1990 the Saturn division was created as a direct competitor to the small imports that were now commonplace. Using concepts new to auto sales including a “no haggle” sales policy, building reliable cheap transportation and the idea of putting customer service first, Saturn showed that GM was up to the challenge. Unfortunately, Saturn rarely showed a profit for its parent company during the Nineties (Saturn 2). Half-way through the decade, an SUV craze swept the nation, as families dumped their traditional sedans for more trucks. While GM had been building world class trucks since the Forties, families were never the target market. All of a sudden, profits were soaring as people flocked to buy the massive trucks. Car production was drastically reduced as the plants were needed to meet demand for SUVs. Things were going well until gas prices rose towards the turn of the century, and suddenly people couldn’t afford to drive a truck with poor fuel economy. Having paid little attention to their car lines, GM was stuck up the proverbial river without a paddle.

A big change was needed at the company. Consumers saw the company as a relic, the shell of a once great empire, no longer the builder of quality cars. In the new millennium, two GM executives sought to start a turnaround and return the company to its former glory. Rick Wagoner was elected CEO in 2000 and he brought in ex-Chrysler CEO Robert Lutz to begin the turnaround (Wagoner 1). Under their reign, bureaucracy has been eliminated, product overlap has once again been taken care of, and the rebadging era has come to an end. Some tough decisions had to be made, such as the 2004 closing of the Oldsmobile division, yet quality and sales continued to rise. Lutz is a “car-guy” and is dedicated to making sure quality and desirability in the cars built come before the cost cutting that had previously hurt sales. (Maximum Bob 1)

To indicate a turnaround, world class cars were needed. The Media, which has always been critical of American car companies, began lauding new cars that GM built. New products such as the newest generation of trucks, the 2008 Buick Enclave, Chevy Malibu, and Cadillac CTS signal that GM is on the right track. The CTS is the shining star of the new offerings, bringing Cadillac back to its status as “Standard of the World.” As Motor Trend Journalist Angus MacKenzie stated in his review of the car, “The best damn Cadillac sedan in 50 years? Easily” (MacKenzie 4).

General Motors has had many successes and pitfalls in the last 100 years it hass been building cars. While it has a long way to go, General Motors has definitely gone through renaissance. With world class cars, better-than-ever marketing and Wagoner and Lutz at the helm, GM will once again rule the world.

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im scared of that fact too... but even if GM lives on, CAFE is going to eventually kill all my interest in new cars... im honestly going to stick to old cars... i may never buy a new car, judging by the look of the future

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You probably stumbled upon this since you mentioned it, but it's an interesting FYI... Chevrolet bought General Motors. The Corporate name General Motors remained after the (rather hostile) take-over by Durant and the operations of Chevrolet were converted into a division.

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First thing first: "attempted to built and sell"...make sure the change is made to "attempted to BUILD and sell." I didn't get a chance to read the whole thing, yet, but read over it again for little grammatical mistakes/typoes like this.

im scared of that fact too... but even if GM lives on, CAFE is going to eventually kill all my interest in new cars... im honestly going to stick to old cars... i may never buy a new car, judging by the look of the future

If you're a real car person, CAFE won't kill your interested in new cars. People thought the same thing in 1975 and today's cars are the best they've ever been. In 1975, nobody could have imagined a 400hp V8 getting over 20 mpg, but they can today. In 1975, nobody would have imagined four-cylinder engines producing more than 200hp, but they regularly do today. A new CAFE standard or not, cars will continue to improve and the best cars are yet to be designed.

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