10 Things Most People Don’t Know about GM

This week is arguably one of the most historic in the history of the US automotive industry as the Big 3 will submit their recommendations for Federal aid to Congress.  Of course, this week is just one of many in 2008 that have brought the automotive sector to the brink of catastrophe with record oil prices; evaporating credit markets and unprecedented sales declines.  However, there have been some positive events such as GM’s 100th anniversary which it celebrated on September 15th. 

I do not think many people recognized the event as September 15th also happened to be the day that the financial markets reached a new level of distress with the failure of Lehman Brothers.  But the automotive community did take notice.  In honor of GM’s 100th, Automotive News published a special edition of its weekly magazine entitled 100 Years – How General Motors Changed the World. 

The special edition featured over 300 pages about the history of GM including 25 “game changing” events.  I started reading it back in September, but it took me until this past weekend to finally finish it.  While reading I found that about every ten pages I had to stop to reflect upon the magnitude of the impact GM has had on the global economy.  I imagine most people do not find the inner workings of the automotive industry as fascinating as I do and will probably not read this cover-to-cover.  So I thought I would summarize what I learned with a list of the Top Ten Things Most People Don’t Know about GM.

1. Market Leader in Japan – Believe it or not GM was the market leader in Japan throughout most of the 1920s and 1930s.  GM established operations in 1915 – over 20 years before Toyota was even founded in 1937.  From the period of 1929 to 1937, GM held a commanding market share of 42% in Japan.
2. Seized by Hitler and Hirohito – With the outbreak of World War II, GM’s Opel plants in Germany and GM’s plants in Japan were nationalized by the respective governments.  GM eventually restored its position in Germany.  In fact, Opel remains a popular brand in Europe today.  However, GM never returned to Japan, but the reason as to why may surprise you.  Most people assume that the Japanese government instituted to nationalist trade policies and tariffs to block foreign auto imports.  However, it was actually General Douglas MacArthur who established protectionist trade policies in Japan during the American occupation following WWII.  GM established a presence in China early too – back in 1929.  But when the nationalists lost the Civil War in 1949, GM fled the mainland along with Chiang Kai-shek and others.
3. The Leading Defense Contractor – At the onset of American involvement in WWII, GM suspended its car manufacturing operations to become a primary contractor to the US Department of Defense.  Over 200 factories were converted in 1942 to military production facilities.  During WWII, GM produced over 30,000 tanks; 200,000 airplane engines; 800,000 trucks and almost 2,000,000 machine guns.  At the end of the war, GM was America’s largest defense contractor with the equivalent of $150B (in today’s dollars) of contracts.
4. Only Car to Drive on the Moon – GM was also a large contractor to NASA.  Along with Boeing, GM’s Delco Defense Electronics Division designed the Lunar Roving Vehicle used in the Apollo 15 mission to drive on the Moon’s surface.
5. Springboard for Politicians and Business Men – Throughout its 100-year history, GM was the starting point for numerous entrepreneurs, politicians and thought leaders.  Although, in many cases the relationships were somewhat antagonistic.  Ralph Nader first gained fame after publishing a book about the potential safety hazards of a Chevy Corvair in the 1960s.  Filmmaker Michael Moore launched his career with a documentary criticizing GM’s plant closings and layoffs in his home town of Flint, MI.  Formerly presidential candidate Ross Perot served on the board of GM for two years after the 1984 acquisition of EDS.  Going further back, GM was home to famous businessmen such as Arthur Sloan (also of MIT), who served as president from 1923 to 1946 and  Walter Chrysler, who served as Buick’s president in 1916 before leaving to start his own company.
6. Scandals and Lawsuits – During its lifetime GM has been the target of blame for nearly for every industrial dilemma in corporate America.  In many respects, GM still is being blamed for the many of the country’s environmental, energy and employment issues.   There are numerous accounts of GM coercing dealers to buy unwanted inventory and neglecting the safety of passengers in vehicle designs.  The scandal I found most interesting was a claim in the 1960s that GM had conspired with oil companies to destroy the US public transportation system.  Although, there was never any proof of wrongdoing, politicians accused GM of purchasing all of the nation’s electric street car networks; systematically dismantling the operations and then promoting the purchases of passenger cars as the alternative.
7. Revolutionary Business Practices – But the outcome of these scandals and lawsuits was usually positive for the industry in the long term.  In fact, GM can be credited with inventing many of the fundamental concepts and structures used in industry today.  GM was the first to establish a captive financing arm.  GMAC proved to be a key accelerant to growth in consumer vehicle purchases and the establishment of new dealer franchises.  In fact, GM was the first to institutionalize the dealer concept by financing numerous entrepreneurial startups.  From the 1940s-1960s, GM was a pioneer in the areas of collective bargaining agreements with labor unions such as the UAW as well in the area of health care, pension and vacation benefits for hourly workers.
8. GM almost acquired Ford – The topic of a merger between two of the Big 3 has been frequently rumored in recent years.  But in the fall of 1909, GM actually made an offer to purchase Ford for $8M in combined stock and cash.  Ultimately Ford rejected the offer seeking a higher percentage of cash.  In the early days of GM, growth came primarily through acquisition.  GM acquired Oldsmobile in 1908 followed by Cadillac, Oakland (later renamed Pontiac) and Rapid Motor (later renamed GMC) in 1909.  About ten years later GM acquired Chevrolet.
9. Planes, Trains and Automobiles – Is not just a movie with Steve Martin and John Candy.  It was reflective of GM’s strategy throughout much of the first 50 years of its existence.  In the late 1920s and early 1930s, GM acquired a number of aircraft engine manufacturers.  GM also gained a controlling interest in North American Aviation which later became Eastern Airlines.  GM sold the aircraft assets a few years later to Boeing.  GM was also a powerhouse in the railroad diesel engine sector.  In fact, its market leadership in the 1960s was so significant that GM became the target of an anti-trust suit.  GM ultimately sold its Electro-Motive group to private equity firms in the 1990s.
10. Marriages, Divorces and Offspring – Throughout its 100 year history GM has acquired and divested a number of Fortune 500 companies.  In addition to Eastern Airlines, Electro-Motive and the assets sold to Boeing, GM also owned home appliance maker Frigidaire until 1979. GM owned computer services leader EDS and Hughes Aircraft (including DirecTV) throughout most of the 1980s and 1990s.  Most people think of GM as running scared from the Japanese and Korean OEMs, but in the 1990s GM actually had minority ownership stakes in Fuji Heavy Industries (Subaru), Isuzu and Suzuki.  At one point in the 1970s, GM even considered acquiring General Electric, but saw no synergies (presumably outside of the fast growing GEIS division).