Could “Old” GM bring down “New” GM with the recent recall news?
Is the “Cinderella” story about the turnaround all a “fairy tale?” Are the poor workmanship practices of “Old GM” haunting “New GM?”
For want of a $0.57 switch will GM’s Kingdom be lost?
Recently in the news there has been an alarming fact about General Motors automobile products that have caused a loss of property and more importantly loss of lives, while most admit a simple design flaw could’ve been repaired with a $0.57 switch. This paper will touch on the history of GM dating back to 1899 where you will see a history of boom and bust cycle all the way up to the collapse and rebirth of GM in 2009 and subsequent success years since. The examination of some of the decisions made will help to paint a picture as to why GM failed, declared bankruptcy and ultimately had to be bailed out by the US government and taxpayers via TARP This paper will also pose two questions; “Were the roots of the bankruptcy and restructuring to blame in the current recall proceedings?” Should “New GM” be held accountable for actions of “Old GM?”
The History of General Motors Corporation the one time “largest automaker in the world” had its start in 1899. At that time over one thousand companies had attempted to improve the “horse drawn carriage” to that of an automobile and failed. William Crapo Durant; Durant had been in the horse carriage business in Flint Michigan since 1886 selling over 75,000 in 1895. In 1904 Durant bought into the Buick Motor company many other auto makers also had operations in Flint, MI; Chrysler, Buick, Nash to name a few. The economic downturn of 1907 bankrupted many of the smaller auto manufacturers and to protect the company Durant sought out Henry Ford and Ransom Olds to discuss a possible merger, both declined due to a lack of large capital from Durant. Durant declined and General Motors was founded on 16th Sep 1908.By 1910 the company owned 20% of the American auto industry by buying up numerous smaller competitors but at the expense of significant debt. Durant was removed from his position as the leader of GM and replaced him with a board of trustees. Durant went on to start another company and Incorporated Chevrolet Motor Company in 1911. By 1915 Chevrolet earned a profit of $1.3million dollars. While Chevrolet was growing and succeeding GM was floundering and with the help of the Du Pont brothers wrested back control of The General Motors Company which officially became General Motors Corporation on 13 October 1916, when incorporation papers were filed in Delaware. By 1 August 1917, the new corporation had acquired all the stock of GM of New Jersey, which was formally dissolved two days later. Amazing how history repeats itself. Durant two more times brought General Motors back from bankruptcy until his death on 18 Mar 1947 the same year as his great rival Henry Ford.
Durant, W. (2004). William Crapo Durant: Making and Losing an Industry. Business Strategy Review,...