GM celebrates 75 years in car business

By , Automotive editor of The Christian Science Monitor

*The 1984 Pontiac Fiero, a two-seater, mid-engine sports car, unites a steel space frame with polyurethane body panels, reinforced with fiberglass flakes.

* The GM research laboratories recently came up with a new steel alloy that not only has great strength, but also the pliability to ease manufacturing.m

The Fiero and the new alloy show the determination of the world's biggest vehiclemaker to keep up with the times as it celebrates its 75th anniversary this month.

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GM's founding, in September 1908, helped mark a bumper year for the fledgling American automobile industry. Henry Ford launched his Model T (more than 15 million were sold in the next 19 years) and Billy Durant launched the General Motors Company with an initial capitalization of $2,000, which soon grew to $12. 5 million.

Flint, Mich., carriagemaker William Crapo Durant had plunged into the automobile business four years earlier, when he reorganized the Buick Motor Company. Then, in the months following the organization of GM in 1908, Durant drew Oldsmobile, Oakland (now Pontiac), and Cadillac, as well as a variety of other companies, into the GM garage.

The innovative entrepreneur and zealous salesman even tried to buy out Henry Ford, but that lanky, independent-minded automaker drove away.

Meanwhile, in its first 12 months, GM was to build some 25,000 cars and trucks with a maximum work force of 14,000.

Now, as it begins its 76th year in the auto business, General Motors, along with the rest of the American auto industry, is emerging from the worst sales slump since the 1930s, consumers are still complaining about the cars they buy, and the Japanese continue to snap at its wheels.

Yet the early years of GM were far from a Sunday afternoon drive in the country, either, and a recession at the time didn't help.

Writing in ''The Decline and Fall of the American Automobile Industry,'' Brock Yates says, ''Durant's financial acrobatics with General Motors put the young company on the brink of bankruptcy in 1910.'' Durant was eased out.

''Although Durant lost control of GM, he did not lose his desire for an automotive empire,'' writes Richard A. Wright in the GM 75th anniversary issue of Automotive News. In rapid succession, he founded a number of other automobile companies, including Chevrolet, in November 1911. In organizing Chevrolet, Durant had joined up with Swiss racing driver Louis Chevrolet.

Then, ''with General Motors still in the doldrums,'' Yates says, Durant came up with ''a scheme in which he would trade Chevrolet stock for GM's. This move caught the attention of the Du Pont family of Wilmington, Del., which considered General Motors a fire-sale property anyway, but with enormous potential.''

In 1916, with the support of the Du Pont family, GM was reorganized and Durant was once more running the show. But by 1920, he was again on the street and a Du Pont took over the wheel.

An all-out battle with Ford Motor Company began, a battle which GM won easily because of what Yates describes as Henry Ford's ''sodbuster mentality.'' Simply, Ford stuck with the Model T far too long, and GM never looked back.

It was long-time chairman Alfred P. Sloan Jr. who set the corporation on the road to competitive, decentralized management, yet with strong central financial controls. An annual model changeover helped as well by assuring an ongoing demand for the cars that the company built.

GM's pioneering efforts in the automobile industry are manifold. GM, for example, developed the first successful self-starter, the synchromesh transmission, the two-cycle diesel that revolutionized the railroad industry, the first high-compression V-8 engines, shatter-resistant safety glass, and the refrigerant freon that led to the air conditioner.

The world's biggest automaker has been pioneering in robotics since 1961, when a robot was used to unload a die-casting machine. Today GM has some 2,000 robots in place, with 5,000 expected by 1985. GM has the only optically directed arc-welding robot in the auto industry.

Over the past 20 years, the firm has been a leader in the development of computer-aided design and manufacturing systems (CAD-CAM).

Cars are becoming increasingly complex. Computer systems not only control the delivery of fuel to the engine, but oversee many other functions, both inside and outside the car. GM engineers predict that in the future computers will expand to such areas as the transmission, suspension systems, electronic displays, braking, and more sophisticated fuel-injection and navigation systems.

In the years following World War II, GM found its biggest success and profits , as well as one of the greatest threats to its future. What the auto industry calls ''government control'' evolved in the 1960s and '70s as law followed law in such areas as safety, emissions, and road mileage.

The publication of Ralph Nader's ''Unsafe at Any Speed'' in the mid-1960s forced GM to scuttle the rear-engine Chevrolet Corvair and helped launch an array of spirited consumer-action groups that have turned the auto industry upside down.

Nonetheless, says GM chairman Roger B. Smith: ''From its founding on Sept. 16 , 1908, as a loose grouping of largely unproven and under-financed firms, GM has grown to become the world's most successful automotive manufacturer.'' Few would dispute his claim.

Despite a four-year recession in automotive sales, GM still has 149 facilities in the United States; 13 plants in Canada; and assembly, manufacturing, distribution, or warehousing operations in 29 other countries.

What about the future of GM, as well as the other Detroit-based automakers?

Marvin J. Cetron, president of Forecasting International Ltd., predicts that the number of automakers in the world will be reduced to no more than three by the turn of the century, each in a different part of the world: Europe, China, and South America.

As you might imagine, the American auto industry disagrees. For one thing, F. James McDonald, GM president, says the US auto worker is becoming more dedicated because of quality-of-life programs in industry. As a kickoff to the 75th anniversary of Fisher Body, the division that builds the bodies for GM cars, the GM president cited a US Chamber of Commerce study that found that an overwhelming 88 percent of all working Americans feel it's personally important to do their best on the job.

Yet despite what the GM president said at the time, the US auto industry still has serious structural, cost, and competitive problems that must be solved , according to Martin L. Anderson of the Massachusetts Institute of Technology and head of a wide-ranging study of the world auto industry.

Mr. Anderson, a former automotive analyst for the Department of Transportation, says that despite the return to profitability of the American Big 3 automakers, they still have major underlying financial problems.

The industry, Anderson says, has had an $8 billion decline in working capital in the past three years, operating cash flow is down drastically, and the companies all have a rising debt ratio.

Nonetheless, the American auto industry cut its fixed costs drastically in the early 1980s. ''We're producing about the same number of vehicles as we were three years ago,'' Anderson says, ''but there's a $3 billion to $4 billion improvement in cost - primarily fixed costs. That's a pretty good indicator.''

He concludes: ''But the industry is still clearly overstaffed. That's the big thing that has to change, in my opinion, over the next decade - a reduction in the staffing level from the middle through top management.''

Historically, except in the most dire of times, GM has been a money machine. In recent years, however, the machine had slowed down. The company lost money several years ago, but in 1982 made a net profit of $963 million. Even better, and confirming a turn-around in the automobile industry this year, GM had first-quarter earnings of $650 million worldwide - and more than $1 billion in the second quarter.

The big profits being reported by the company, according to Anderson, are largely just ''accounting'' or ''paper'' profits rather than money in the bank. No matter, it's still good news in this ''year of celebration'' for the big carmaker. But no one can deny the negatives, some of them mountainous.

Japanese carmakers still enjoy up to a $2,000 cost advantage over US carmakers. That keeps the Detroit money men awake nights.

Then there are large numbers of disgruntled car buyers, including tens of thousands of GM diesel-car owners who are pressuring the Federal Trade Commission for relief. Class-action lawsuits are on the rise.

All carmakers are beset by recalls and pressure for more recalls, even though the quality of Detroit-built cars has sharply improved over the past few years. The industry, however, still faces the job of convincing more buyers that the quality is as good as it says it is.

Many of the problems facing GM, as well as the other US carmakers, have always been around. But in the 1960s and '70s they were overshadowed by the successes. If things didn't work - an engine, a style, or some options - a manufacturer could quietly change or scrap them, and hardly anyone would notice. Today that system doesn't work.

As one longtime observer says: ''Any mistake nowadays is a big mistake.''

In his 1963 book, ''My Years With General Motors,'' Alfred P. Sloan divided the history of the automobile into three periods: class, mass, and mass-class. Today the American auto industry is in a fourth period of increasing competition from abroad, notably the Japanese.

Some analysts wonder how former GM chairman Sloan would handle the situation today.

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