What's bad for GM is good for the world
Some companies go bust because of bad management and some get crushed by unrelenting recession. But once in a while you get a business whose death is about much more than supply chains or sales targets; it sounds the death knell for an entire era. And the funeral bells surely tolled this week when General Motors filed for bankruptcy.
Start talking about GM and the superlatives soon run out. What’s now the largest industrial failure in American history was for so many years the biggest company in the world. More than that, the 100-year-old giant was the corporate embodiment of the American Century.
Everyone knows the one about how a former boss of GM (nearly) said that what was good for his company was good for America and vice versa. Today the statement is used for easy irony, but at the time Charles Wilson was voicing a truism. He was speaking a few years after World War II, during which carmakers supplied the US military with hundreds of billions of dollars’ worth of planes, tanks and other military equipment.
The management theorist Peter Drucker said it was not the generals, but GM who “won the war for America”. And they were rewarded handsomely, with cosy regulation and ridiculously low taxes on fuel. The gasoline-industrial complex, you could call it, and for much of the post-war period it held up well enough.
Not any more. Of the Detroit Three, GM and Chrysler are now enfeebled, on an IV-drip of government money. Only Ford has avoided the same fate, by taking out a giant loan three years ago and beginning its own painful restructuring.
The official line is that GM is not dead, it’s just regrouping. Even as he administered the last rites this week, Barack Obama heralded “the beginning of a new GM”. But the fact is that there are no second acts in American life and the world of business is barely more forgiving. Even optimists admit that whatever emerges from Detroit will be a shrunken, modest thing, shorn of its pomp and might.
Just as Detroit’s rise was about more than business, so too is its demise. When people talk about the rising economic might of Asia, they normally paint it in genteel, gradual terms —- photo calls at international summits, say. But sometimes this slow shift of power becomes more of a lurch. Sometimes it’s marked by an industrial humiliation.
For Porsche, BMW and other luxury marques, Shanghai is already the second most important market in the world. And this year, for the first time, the Chinese are set to buy more cars than recession-hit Americans. But the developing countries of Asia are not just consuming more, they are closing the gap in manufacturing. In doing so, they are on a well-trodden path to industrialisation, following Japan and South Korea.
Those countries pioneered cheaper, small cars; this time, the new frontiers of globalisation are leading the way on electric cars.
Yes, you read that right: the green auto, the will-o’-the-wisp of the motor industry, is already being made in smoke-belching Asia. The world’s bestselling plug-in car, the G-Wiz, was invented and built by an Indian firm, Reva. The company that has got the furthest in developing a battery-powered auto which can go for long distances is called BYD (short for Build Your Dreams) and is based in Shenzen, southern China. True, the little G-Wiz is a funny-looking thing, more milkfloat than motor.
Then again, the Americans used to laugh at Toyota —- and now it’s the world’s no 1. When pleading for Washington aid, GM executives made much of their new electric vehicle —- the Volt -— but that’s still years from going on sale.
Such slow-footedness is hardly a surprise from a company whose vice-chair, Bob Lutz, last year reportedly described global warming as “a crock of shit”.
Once a petrolhead, always a petrolhead. And that’s the other big difference about the electric brigade —- strikingly few of its leaders are motor men.
Reva’s founder comes from the solar-power industry; BYD used to make mobile-phone batteries and only got into cars this decade; Shai Agassi, the leading designer of a system for charging electric vehicles, is an Israeli who used to be big in accountancy software.
“The car industry is heading for a showdown between discipline and imagination,” says John Wormald, a British consultant to auto firms for over 30 years. “The old giants have plenty of discipline and heft; but the start-ups have got far more imagination.”
Or, as a Chinese car executive put it to the New Yorker not so long ago: “We have no brand name, no recognition, nothing. We are simply aggressive.”
Plenty of people will read all this as a triumph of free-market economics: the old overtaken by the new, the public good served by an eager private sector and creative destruction writ large. I’m not so sure. Anyone who’s ever been to India and China knows that what they really need is fewer cars and more cheap public transport, powered as cleanly as possible. And all that is far more likely to come now that America’s Big Three have less of a stranglehold on the auto sector. From this week, the car industry is living in the AD era: After Detroit. -—