Page last updated at 12:24 GMT, Monday, 1 June 2009 13:24 UK

From biggest carmaker to biggest bankruptcy

By Kabir Chibber
Business reporter, BBC News

cars
GM's network of dealers has been hit hard as US sales have dropped

At its height, General Motors (GM) was bigger than any other car company in world.

Founded when the US still had fewer than 10,000 cars in total, the carmaker was once the symbol of American prestige and its brands respected all over the world.

Yet GM has now suffered the world's biggest industrial bankruptcy.

GM as we know it began in 1908, though its founder William "Billy" Durant had already made his name selling horse-drawn carriages in Flint, Michigan and had acquired a controlling stake in the fledgling Buick Motor Company.

Humble origins

Though the carmaker started with Buick, within the year Mr Durant had put Cadillac, Pontiac precursor Oakland Motor Company and the Oldsmobile all under its umbrella.

The Oldsmobile, one of the most evocative brands, was actually quite new. The first one was made in 1897.

Cadillac was bought for $5.5m in 1909, a huge sum at that time that would equate to over $130m in today's money.

The company set about a rapid expansion, setting up foreign operations to sell its cars abroad and, critically, acquiring stakes in Germany's Opel and the UK's Vauxhall during the 1920s.

The company joined the Dow Jones Industrial Average in 1925, where it has been ever since.

Mr Durant also set up what was to become another iconic US brand, Chevrolet.

And it was GM's decision to recognise the fledging United Auto Workers (UAW) union, which could end up taking a major stake in the carmaker during any bankruptcy proceedings, which set the pattern for industrial relations in the industry.

The move came after GM workers in Flint went on a sit-down strike in December 1936, at the height of industrial militancy during the Great Depression.

But the company really started to take off after World War II.

In the 1950s, when GM's chief executive Charles Wilson became Secretary of Defense, he famously said at his confirmation hearing when asked about any conflicts of interest that "what was good for the country was good for General Motors and vice versa".

GM was not only the biggest carmaker in the world, but the biggest company in the world. It had over 50% share of the US car market.

It was so large in this period, with more than 50% of the US domestic car market, that its only worry was that it might be broken up by the government on anti-trust grounds.

Aspirations

Its cars were a cultural phenomenon.

In the 1950s Cadillac introduced its legendary hardtop, the Coup de Ville, and the Corvette sports car followed soon after.

Rick Wagoner
Mr Wagoner, head of GM since 2000, was ousted this year

In 1964, Pontiac inspired a song called "Little GTO" - a track that reached number four in the American charts. Alongside the GTO, the company developed the Grand Prix and the Firebird during the 1960s, all of them muscle cars.

The cars all had their place in the world - Chevrolet was beneath a Pontiac, which was not as good as an Oldsmobile. And you had really made it when you could afford a Cadillac.

It had made its 100 millionth car in the US by 1967, and opened a flagship 50-storey building in New York the following year.

Burt Reynolds drove a black and gold Firebird in the hit film Smokey and the Bandit.

But trouble was brewing for GM.

In the 1970s, the oil crisis gave the first sign that the US car industry might be vulnerable to an invasion from smaller and more efficiently produced Japanese cars.

GM's attempts to change its own production process ran into trouble with its workforce, leading to a downward spiral in industrial relations.

Another infamous moment in GM history came with the introduction of the world's first mass-produced electric car, the EV1, in the mid-1990s. For various reasons, the car did not take off and GM ceased making them in 2003.

Gas guzzlers

For a while, GM's fortunes were revived by the large, gas-guzzling Sports Utility Vehicles that once not only dominated the American automotive landscape, but also proved much more profitable than ordinary cars.

In 1999, GM acquired the gigantic Hummer brand.

pontiac
The Pontiac, once a cultural bellwether, will be discontinued

But its downfall has been brutal.

When drivers started to switch to smaller, more fuel efficient cars, GM and the other US carmakers were slow to follow suit.

Japan's Toyota, a pioneer of smaller and more efficient cars, became the biggest carmaker in the world by annual sales in 2008.

Toyota also started selling its electric-hybrid Prius in 1997, a decade before GM sold theirs.

Heavy discounting aimed at maintaining the American public as customers led to sharp cuts in profits, which eventually losses. The company was last profitable in 2004.

It announced plans to cut almost 50,000 jobs and close up to 1,100 dealers.

The final humiliation came last December when GM, along with now-bankrupt rival Chrysler, was forced to go cap in hand to the US government for a bail-out to keep it going.

In February, GM received another $4bn of US government loans, taking its total bail-out to over $19bn.

Its lending unit, GMAC, which provides auto loans, has also been bailed out twice.

Now, GM is scrambling to save itself. Its former head, Rick Wagoner, was forced out by President Barack Obama and it is struggling to avoid bankruptcy.

It has dropped Oldsmobile, the iconic Pontiac brand was shuttered away earlier this year and it is trying to sell Hummer and Saab.

The carmaker is also in the process of flogging its other European operations, especially Opel and its UK brand Vauxhall.

Time seems to have almost run out for GM.

Whatever its success in rebuilding itself from here, it is unlikely GM will ever find itself in as lofty a position as it has had in the past.

GM legacy costs
Like other US car-makers, one of General Motors' major financial problems has been paying for pensions and healthcare plans, with retired employees now far outnumbering those still working for the company.



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FROM OTHER NEWS SITES
Irish Times From heights of success to biggest failure for GM - 11 hrs ago
The Times The day the music died for General Motors - 37 hrs ago
The Age US govt drives GM to bankruptcy court - 66 hrs ago
Telegraph GM: Its rise fall and future - 66 hrs ago



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