General Motors: Corporate Rap Sheet
By Philip Mattera
For decades General Motors held a commanding position in the motor vehicle industry. After emerging from the consolidation of various carmakers, parts producers, and other operations early in the 20th century, GM went on to become the cornerstone of the U.S. economy. It was widely believed, as GM President Charles “Engine Charlie” Wilson famously told Congress, that “what was good for our country was good for General Motors--and vice versa.” GM also had far-flung operations outside the United States, making it the world’s largest automaker.
GM’s dominance began to deteriorate in the 1970s, and the slide continued over the following three decades. The company lost more and more ground to Japanese competitors such as Toyota and Honda, which seemed better able to respond to changes in consumer preferences. The recession that began in 2007 dealt a heavy blow to the weakened company, which had to be bailed out by the federal government and undergo a brief period in bankruptcy.
Also for decades, General Motors was seen by many as the epitome of corporate irresponsibility. During the 1960s it was at the center of controversy over auto safety and through its clumsy actions helped turn consumer advocate Ralph Nader into a national figure. During the 1970s its attempt to intensify the assembly line to an unbearable extent gave rise to a blue-collar rebellion centered on the company’s plant in Lordstown, Ohio. During the 1980s and 1990s it led the industry’s effort to block stricter federal fuel-efficiency standards. GM then claimed to be serious about developing a zero-emission electric car, but prematurely pulled the plug on its own creation.
The new GM placed greater emphasis on more environmentally-friendly vehicles such as its Chevrolet Volt, but in 2014 it became embroiled in a scandal involving a decade-long failure to deal with an ignition switch problem that has been linked to more than a dozen deaths. The company has had to contend with large-scale recalls, record federal penalties and demands for compensation from victims and their families.
Federal Bailout and Takeover
Conditions for GM deteriorated amid the sharp economic downturn in 2008. After the federal government came to the rescue of the big banks, GM and other automakers began to appeal to Congress for their own bailout package. In September 2008 Wagoner and Ford executive chairman William C. Ford Jr. began making the rounds on Capitol Hill seeking $25 billion in federal loan guarantees for the Big Three. GM said the assistance would, among other things, play a key role in promoting the Chevrolet Volt (mostly) electric car it was planning to introduce. But assistance was also presented as the only way for GM to avoid a bankruptcy filing.
The Bush administration resisted calls by leading Congressional Democrats to use a portion of the $700 billion financial rescue program to help the automakers. The proposal also faced skepticism when Wagoner and the CEOs of Ford and Chrysler testified before a Senate Committee in November—in part because they traveled to Washington in corporate jets. The following month the three returned to Washington, this time arriving by (fuel-efficient) car, but the reception remained cool.
The Democratic leadership, nonetheless, continued to press the White House for action, though now the emerging plan was expected to involve a federal ownership stake in the automakers. In a sign of its desperation, GM published a full-page advertisement in Automotive News that amounted to an apology to American customers for its mistakes: “While we’re still the U.S. sales leader, we acknowledge we have disappointed you. At times we violated your trust by letting our quality fall below industry standards and our designs become lackluster.”
A $14 billion rescue package for GM and Chrysler (Ford decided it didn’t need federal help) came together and was put before Congress. The House approved it promptly, but on the Senate side, the plan deadlocked over demands by Republicans including Bob Corker of Tennessee who insisted that the United Auto Workers union make even more severe wage concessions than they had already offered.
In the end, the Bush administration agreed to provide a total of $17.4 billion in emergency loans to GM and Chrysler, with the money coming from the financial bailout fund. Each company was required to produce a plan for long-term profitability.
After President Obama took office, GM and Chrysler decided they needed more federal aid. In February 2009 GM pegged its request at $12 billion, and began to signal that it would consider going through a bankruptcy proceeding to get it. It turned out that the Obama administration wanted additional changes in the company. In late March the administration forced Wagoner to resign as CEO and indicated that other radical changes would be necessary to qualify for more federal help.
Wagoner’s successor, Fritz Henderson, made it clear he would bow to the administration’s wishes, which would include further job cuts and reductions in its dealer network. The company also announced plans to sell or discontinue several of its marques, including Pontiac, Saturn, Saab, and Hummer. It also agreed to sell its European operations, including Opel of Germany and Vauxhall in Britain.
On June 1, 2009, GM finally filed for Chapter 11 bankruptcy, a step that paved the way for its transformation into a company temporarily controlled by the federal government. In exchange for an additional $30 billion infusion of taxpayer funds, the feds took a 60 percent stake, while the Canadian government, which provided another $9.5 billion, got 12.5 percent. Bondholders received 10 percent, with the remaining 17.5 percent going to the UAW healthcare trust in exchange for the $20 billion GM owed to it.
GM vowed to emerge from bankruptcy and phase out government control as quickly as possible. The first objective was accomplished with remarkable speed. The company completed its reorganization in less than two months, and launched a campaign to win back consumers. It also ousted Henderson to make a clean break with the past.
In November 2010 the restructured company carried out a $23 billion initial public offering of stock that reduced the federal government’s holding to 26 percent. Three months later, the company announced that 2010 was its first profitable year since 2004.
In December 2012 the federal government said it would sell off its holdings in GM by early 2014. The process was completed early, in December 2013.
Environment and Product Safety
Although the entire automobile industry is partly responsible for the decline of public transportation in the United States, General Motors has played a more direct role. In 1936 GM joined with Firestone Tire and Standard Oil of California to create National City Lines, which purchased municipal streetcar systems, converted them to bus line and then sold out, with the stipulation that the new owners would only use gasoline-powered vehicles. Between 1936 and 1949 NCL was involved in the dismantling of rail systems in some 45 cities.
In the mid-1960s General Motors became a symbol of industry insensitivity to safety concerns as a result of the controversy over the Corvair compact GM introduced in 1960 to respond to the growing demand for smaller cars. The Corvair had serious design problems, making it rather unstable and dangerous to drive. Substantial information on the problems was amassed by a young lawyer named Ralph Nader, who ended up as a consultant to Senator Abraham Ribicoff of Connecticut. Ribicoff held hearings in 1965 at which GM President James Roche and Chairman Frederic Donner were grilled about the company's meager commitment to improving auto safety.
That same year Nader published Unsafe At Any Speed, which focused on the defects of the Corvair. The book galvanized public opinion on the issue and unnerved GM to such an extent that the company hired private detectives to dig up dirt on Nader. Instead, the surveillance plan backfired, and Roche was compelled to apologize before Congress for the spying. The controversy helped bring about passage of the National Traffic and Motor Safety Act of 1966.
GM was also at the forefront of the industry's resistance to pollution control. The company was aware that even a simple, inexpensive device--a positive crankcase ventilation valve, or PCV--could substantially cut down on emissions, yet it declined to use it. When the federal government finally established the first modest emission standards in the mid-1960s, GM and the other big auto companies successfully pleaded for delays in enforcement. After the Clean Air Act of 1970 established more stringent regulations, the Big Three again got delays, even though a number of foreign carmakers were able to meet the standards.
GM also dragged its feet when presented with reports that poorly sealed panels on some of its cars could cause dangerous levels of carbon monoxide to leak into the passenger compartment. After some deaths were attributed to the problem in the late 1960s, the company recalled 2.5 million cars to repair the defect.
During the 1970s and 1980s the company was frequently criticized by environmentalists and consumer advocates for its efforts to weaken federal rules on emissions and for its resistance to regulations requiring passive restraints such as airbags in all automobiles. In 1990 the U.S. Public Interest Research Group published a report stating that GM spent $2 million over the previous decade lobbying against clean-air and fuel-efficiency regulations. In August 1990 GM finally agreed to put air bags in all of its U.S. cars starting in 1995.
GM has also had problems with health and safety conditions on the job. In 1987 the company was fined $500,000 by the U.S. Occupational Safety and Health Administration for violations of record-keeping requirements at four plants. A study of conditions at the Lordstown, Ohio plant found that workers there were experiencing an abnormally high incidence of cancer. In 1991 OSHA proposed fining the company $2.8 million for 57 willful safety violations at an Oklahoma City plant that the agency said contributed to a fatal accident at the factory. An administrative law judge later reduced the fine to $1.945 million.
In 1992 the New York Times published an investigation concluding that GM had recognized as early as 1983 that its pickup trucks with side-mounted gas tanks were highly dangerous but took no action until 1988, when the company altered the way it mounted the tanks—yet the company said it was making the change for design rather than safety reasons. During that period, more than 300 people were killed in collisions in which the tanks exploded.
GM resisted recalling trucks with the side-mounted tanks even after the federal government asked it to do so. Instead, it launched a campaign against safety advocates and plaintiffs’ lawyers. In 1994 the company reached a settlement with the U.S. Transportation Department under which the federal government gave up on its effort to get GM to recall the trucks in exchange for which the company agreed to contribute $51 million to auto safety programs. GM still faced a series of personal injury lawsuits in connection with the exploding gas tanks, including one in which a Los Angeles jury awarded victims $4.9 billion in damages. GM appealed, and the case was later settled out of court for an undisclosed amount.
In 1995 GM agreed to recall more than 470,000 Cadillacs, and pay nearly $45 million in fines and other costs to settle a federal complaint that the company had installed devices that caused the cars to emit illegal levels of carbon monoxide.
GM was an early proponent of the electric car. In 1990 it displayed a prototype that the company said could be on the market by the middle of the decade. But in 1992 the company scaled back its effort and said it would instead explore an alliance with Ford and Chrysler. That alliance went nowhere fast, and the Big Three ended up working together to fight a mandate for zero emission vehicles adopted by California. GM proceeded with the development of its own electric car, but without much enthusiasm. A January 1994 front-page article in the New York Times said GM “is preparing to put its electric vehicle on the road, and planning for a flop.”
GM introduced its EV1 electric vehicle in parts of the western United States in 1996. Even in the selected areas, the EV1 was available only on a limited basis, and had to be leased (at luxury car rates) rather than purchased. It traveled a maximum of about 90 miles between charges. After the initial burst of publicity, GM did little to promote the EV1, which was pulled from the market in 2003. The 2006 film "Who Killed the Electric Car?" documented its demise.
Once Toyota’s Prius began to catch on, GM felt pressure to take the hybrid market more seriously. In late 2002 the company announced plans for hybrid versions of five of its major models by 2007, but it later backed away from that timetable. And in late 2004 it joined other automakers in filing suit against new rules adopted by California on greenhouse gas emissions by cars and trucks.
In 2007 GM announced its Chevrolet Volt, a mainly electric car that also contained a small gasoline engine. Yet the Volt would not be immediately available, given that it depended on refinements in battery technology from outside suppliers. The following year GM said the Volt would hit the market in 2010. By late 2008 GM was using the Volt plan as a centerpiece of its argument for a federal bailout. After a Volt in the possession of federal safety officials caught fire, GM said it would reinforce the structure and cooling system surrounding Volt batteries. However, continuing problems prompted federal regulators to begin a formal defect investigation.
In June 2010 GM recalled 1.5 million vehicles sold around the world because of a glitch in the heated windshield wiper fluid system that could ignite a fire.
The announcement by GM in early 2014 that it was recalling hundreds of thousands of its small cars because of an ignition switch problem mushroomed into a major scandal as information came to light suggesting that the company had dragged its feet in dealing with the issue, even though it was linked to 13 deaths. Federal regulators, which had received several hundred complaints relating to the problem, were also criticized for being slow to act. Both Congress and the Justice Department launched investigations of the matter.
As the size of the recall soared and evidence mounted that GM had been concealing the true extent of the problem, CEO Mary Barra faced sharp questioning before Congressional committees. Barra apologized but avoided admitting liability, insisting on waiting until the results of an internal company investigation. GM, however, hired lawyer Kenneth Feinberg, who has overseen a number of high-profile disaster compensation plans for corporations. In April 2014 the National Hightway Traffic Safety Administration (NHTSA) fined GM $28,000 for failing to cooperate fully with the agency's investigation of the ignition-switch issue.
The following month, NHTSA added on a record fine of $35 million for GM's failure to promptly report the ignition-switch defect. The agency also announced that the company would be subject to "unprecedented oversight requirements."
In the wake of that penalty, GM announced a series of additional recalls, which by late May 2014 had reached a total of more than 13 million for the year.
In June 2014 GM released the results of an internal investigation which concluded that there was a pattern of "incomptence and neglect" in the long delay in addressing the ignition-switch defect, but it claimed there was no conspiracy to cover up the problem. More than a dozen employees were fired, but Barra was let off the hook. Meanwhile, the recalls mounted.
Amid a separate controversy over airbag defects involving various automakers, GM halted sales of its popular Chevrolet Cruze sedan.
In July 2014 the New York Times published the results of an investigation showing that GM had avoided giving explanations for the fatal ignition-switch accidents when submitting "death inquiry" reports to NHTSA.
Autoworkers at General Motors and the other large car companies remained largely unorganized until the 1930s. After the federal government sanctioned collective bargaining, organizing efforts emerged, and in 1935 the American Federation of Labor gave a charter to the United Automobile Workers of America. UAW activists' interests in building an industrial union ran contrary to the AFL's craft orientation, so the union ended up allying itself with the recently formed Committee for Industrial Organization.
When the UAW set out to organize the industry, GM was made the primary target. The company, petrified at the thought of having to deal with a union, made extensive use of detective agencies to keep track of the UAW's activities. Nonetheless, workers began to pressure the company by engaging in short sit-down strikes, usually to protest the speeding up of the assembly line. The UAW made a special target of GM's Fisher body plant in Flint, which was one of only two sites where the company had dies for its new models. In late December 1936 the workers at the Fisher plant staged a sit-down strike that was to last for six weeks. The dispute was settled when GM agreed to recognize the UAW.
During the 1940s GM and the UAW developed a cooperative working relationship; in fact, company president Charlie Wilson and Walter Reuther, head of the union's GM department, became quite chummy. The harmony was shattered in 1945, when the UAW responded to the lifting of the wartime wage freeze by demanding a 30 percent wage increase (about 34 cents an hour) from the industry. The union also asked that the companies open their books so that the UAW could show that such a raise would be possible without boosting prices for cars. The union accepted 18.5-cent increases from Ford and Chrysler but went on strike against GM to get more. The walkout lasted 113 days, but in the end the union had to settle for the same raises won at the other two major automakers without a strike.
In the 1948 bargaining GM and the UAW created a system of automatic wage increases tied to the cost of living and annual improvement factors. Two years later the union won health insurance and a pension plan, thus opening up collective bargaining to the area of employee benefits.
For the next 20 years the UAW went easy on General Motors, targeting instead the weaker Ford and Chrysler for setting industry contract terms. Then in 1970 the union decided once again to "take on the big guy," as a UAW official put it. When the company failed to give in to the union's demands, which included full pensions after 30 years of service, regardless of the retiree's age, the UAW struck. The walkout, which was peaceful (some said ritualistic), ended after 59 days with a compromise.
Much less placid was the situation that soon emerged at the plant in Lordstown, Ohio, where the company was assembling its ballyhooed new subcompact, the Chevrolet Vega. The young workforce at the factory rebelled against the inhuman pace of the line, and the strike became the leading symbol of what came to be known as the "blue collar blues."
By the early 1980s, the crisis in the industry brought on by the rising tide of imports end the UAW's ability to win steady contract improvements. When Chrysler used contract concessions from the UAW as part of its survival strategy, GM and Ford were inspired to make such requests from the union as well.
Faced with the loss of hundreds of thousands of its members' jobs, the UAW was in no position to resist. The union also began to move away from its adversarial tradition and adopt a stance more like that of Japanese unions. When GM and Toyota formed their New United Motor Manufacturing Inc. joint venture in California, the union signed a contract that gave the operation an extraordinary degree of flexibility in managing the labor process.
The UAW again embraced what became known as "jointness" when GM decided to open a Japanese-style factory on its own in Tennessee. The union ceded so much in its contract at the Saturn plant that one of the union's founders, Victor Reuther, charged it with betraying the principles of the labor movement.
GM and the UAW nonetheless attempted to introduce jointness at other plants. The 1987 contract agreement committed the union to such a path, in exchange for greater guarantees on job security. Yet the hoped-for shop revolution did not proceed smoothly. Productivity gains were slow in coming, and the move widened a split in the union between those advocating the team concept and those who still thought that the union should maintain an arm's-length relationship with management. The production system at the NUMMI plant in California and at Saturn, which involved a more intense pace of work, came under attack by some critics for being "management by stress."
Jointness fell out of favor during the 1990s as GM sought greater flexibility in reducing its workforce, while the UAW resorted to scattered local strikes to protest speed-ups and outsourcing. Many of these walkouts led to wider production shutdowns, especially an eight-week dispute in 1998 centered on two plants in Flint, Michigan. At the national level, the union focused on protecting wage and benefit levels while giving some ground on job security.
GM continued its effort to reduce labor costs through layoffs and changes in benefits for the workers who remained. In 2006 the company, facing massive losses, negotiated a deal with the UAW under which every unionized worker would be offered buyout and early-retirement packages. Some 35,000 workers, about 30 percent of the total labor force, accepted the offer.
During the 2007 contract negotiations, GM and the UAW reached an impasse, prompting the union to stage its first national strike since 1970. The dispute was settled after only a few days with an agreement that gave workers improved job security, but contained no wage increases and allowed GM to remove from its books liability for retiree health care. The UAW took over that obligation in the form of a voluntary employee benefit association (VEBA) that would receive negotiated contributions from GM.
In 2009, as part of its deal with the federal government to get loan guarantees, GM successfully pressured the UAW to make contract concessions. The UAW also agreed to take a 17.5 percent ownership stake in the company in exchange for the $20 billion GM owed to the VEBA.
A lithium-ion battery plant GM opened in Michigan in 2010 was its first non-union U.S. facility in three decades. That same year, the UAW agreed to a deal with the company under which wages for some workers at a Michigan plant producing a low-cost subcompact would be half the usual rate.
In 2011 workers at GM’s subsidiary in India went on strike to protest a speed-up and unsafe conditions. In 2012 GM was confronted with worker protests over its move to eliminate jobs and cut costs at some of its operations in South America. In Colombia, a group of former workers staged a hunger strike, alleging that they were fired after they sustained serious injuries resulting from unsafe conditions on GM assembly lines.
In September 2011 GM and the UAW negotiated a new contract that allowed the company to accelerate its hiring of lower-wage, entry-level workers.
In 1998 General Motors was among a group of U.S. companies accused of having assisted the Nazi war effort during the Second World War. GM’s Opel operation in Germany was said to have converted its plants to produce war planes. Opel later decided to contribute to a fund to compensate forced laborers from that era.
GM is among a group of companies being sued in a U.S. federal court under the Alien Tort Claims Act because of its operations in South Africa during the apartheid era.
In 2000 General Motors Acceptance Corp. was the target of a class action lawsuit brought by the National Consumer Law Center alleging that the finance unit discriminated against African-Americans by charging them significantly higher interest rates on car loans than the rates offered to white buyers. In 2004 GMAC settled the case by agreeing to cap its markup on all loans, and to offer more than 1 million no-markup loans to qualified minority applicants.
In 2001 GM agreed to pay $1.25 million to settle a lawsuit brought by the U.S. Equal Employment Opportunity Commission alleging that a group of workers was subjected to racial harassment at the company’s plant in Linden, New Jersey.
Watchdog Groups and Campaigns
Key Books and Reports
Billy, Alfred and General Motors by William Pelfrey (2006).
Call Me Roger: The Story of How Roger Smith, Chairman of General Motors, Transformed the Industry Leader into a Fallen Giant by Albert Lee (1988).
Chrome Colossus: General Motors and Its Times by Ed Cray (1980).
Driven by Corporate Responsibility? Ten Top Car Manufacturers--A CSR Analysis (SOMO, February 2010).
Irreconcilable Differences: Ross Perot versus General Motors by Doron Levin (1989).
My Years with General Motors by Alfred P. Sloan Jr. (1963).
On a Clear Day You Can See General Motors: John Z. DeLorean's Look Inside the Automotive Giant by J. Patrick Wright (1979).
Rude Awakening: The Rise, Fall, and Struggle for Recovery of General Motors by Maryann Keller (1989).
Taking on General Motors: A Case Study of the Campaign to Keep GM Van Nuys Open by Eric Mann (1987).
The Company and the Union: The "Civilized Relationship" of the General Motors Corporation and the United Automobile Workers by William Serrin (1973).
The Dream Maker: William C. Durant, Founder of General Motors by Bernard A. Weisberger (1979).
Unsafe at Any Speed by Ralph Nader (1965).
Why GM Matters: Inside the Race to Transform an American Icon by William Holstein (2009).
Note: This page draws from a corporate profile originally prepared by the author for the Crocodyl website in August 2009.
Last updated July 28, 2014.
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