For a holiday gift, a big lemon from GM

Ralph Nader

December 30, 1991|By Ralph Nader

GENERAL MOTORS produced its biggest lemon ever just in time for Christmas.

The giant auto maker announced the closing of 21 plants in North America and the loss of more than 70,000 jobs by the mid-1990s. The number of GM workers left, blue-collar and white-collar, will be half of those laboring in 1985.

This shrinkage occurred after a decade in which GM executives rTC identified four scapegoats and obtained what they wanted: lower government taxation, government deregulation, quotas on Japanese imports and concessions from the United Auto Workers.

Nonetheless, GM's North American operations are now losing $500 million a month. Since Japanese companies are making good profits in their U.S.-built factories, employing American auto workers, the search for the cause of GM's troubles must focus on GM's top management, led by Roger Smith, the company's strong-willed, sharp-tempered boss during the 1980s.

Smith, who retired in 1990, started the decade with a boast. He was going to invest $40 billion by 1984 to modernize GM factories and capture 70 percent of the market for domestically made vehicles. In 1980, GM sold 62.6 percent of all U.S.-made cars and held 45.9 percent of the combined domestic and import market.

Smith did spend $40 billion to automate the machinery, but he spent little and unwisely to improve the quality of GM cars. He also spent freely for ads and lobbyists to roll back even the most modest standards in the areas of safety, fuel efficiency, pollution or bumper strength -- all of which meshed with polls showing that motorists want environmental protection and safety, along with lower operating and insurance costs.

Roger Smith also turned Adam Smith upside down by regularly raising auto prices while his auto sales declined.

When he retired in August 1990, Roger Smith presided over a troubled corporation with just 36 percent of the U.S. car market. He lost market share not just to the Japanese but also to Ford and Chrysler. GM lagged behind both American companies in installation of air bags, a life-saving device that Smith opposed strenuously for 10 years, and even in car styling.

For such performance, Smith was rewarded with an increase in his pension from $700,000 a year to $1.2 million a year. Every 16 days, in retirement, Smith makes what an auto assembly-line worker, if he or she has a job, makes in a year.

The corporate go-go years of the '80s brought enormous financial rewards for massive management failures.

Smith exemplified this perverse, reverse incentive. He made more than four times what the heads of Nissan and Toyota made in those years.

In the meantime, GM workers' wages were essentially flat, when adjusted for inflation. Indeed, GM management demanded concessions from workers, intimating that anything else would close down the plant, and demanded property-tax concessions from towns and cities where their plants were located, thereby placing school, fire, police and other budgets under tighter pressure.

In 1985, GM's new Poletown plant in east Detroit extracted $350 million in local, state and federal taxpayer subsidies and then employed only half the workers the company had promised to hire.

The big GM cutbacks announced this month did not include the jobs of any top executives or any cuts in their fat salaries. To top off the bungling and connivance, GM's present bosses did not, for the most part, name the plants they would close. They gave the workers and public the number of plants that would be shut down. The final decision on which plants are to be shuttered will come around February.

Why did GM foment such tension and agony for tens of thousands of families during and after the Christmas holidays? Because GM's current CEO, Robert Stempel, and his associates knew that what was going to happen was what the Wall Street Journal described as an "economic free-for-all, pitting worker against worker, community against community and the United States against Canada."

More property tax abatements, relaxation of rules in Canada on pension-fund payments and worker concessions at various plants are being proposed by worried workers and municipalities.

Of course, Stempel denies that that is what GM had in mind. "We aren't in the process of whip-sawing." Sure. And when you floor the accelerator of your 1992 Cadillac, Stempel, you don't expect it to lurch forward, either.

Given GM's chronically stubborn and imperious management, it isn't a surprise that the company is in trouble and cuts must be made.

But the way these executives did it shows that nothing has really changed the deviousness and double standards at the top of GM.

Donald Frey, the former chief executive of Bell & Howell and once an auto executive, put it best in reacting to the announced cutbacks: "Stempel's got bureaucrats in all places and all levels doing the same damned piece of business in their office [that they've done] for 30 years."

Consumer advocate Ralph Nader is author of "The Big Boys: Power and Position in American Business."

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