How on earth did this happen?
General Motors, the 100-year-old car company that once employed more than 500,000 workers and had a 50 percent market share, just crumbled into bankruptcy. The government now runs it.
In the mid-'70s, I attended law school in Michigan. Even back then, foreign automakers -- especially the Japanese -- steadily shaved off market share from the once-mighty Big Three: GM, Chrysler and Ford.
This foreign encroachment into the auto industry scared the socks off executives of domestic appliance-makers. Manufacturers of dishwashers, refrigerators and stoves scrambled into all-hands-on-deck mode. They vowed to make better stuff, with continually improved features and zero tolerance for defects. Westinghouse -- a major manufacturer in serious trouble during the early '70s -- set up a "productivity and quality center" to study Japanese manufacturing methods. A 1983 Business Week article quoted one Westinghouse top exec: "We have sent more study teams to Japan than any other American company. We are doing to the Japanese what they have done to us for 20 or 30 years." Today domestic manufacturers of large appliances still dominate the American market.
But while the appliance-makers manufactured better products, the automotive Big Three manufactured excuses: "The Japanese pay their workers less"; "the Japanese benefit from their weak yen"; "OK, the Japanese excel at making tiny cars, but they can't compete with us on larger models and trucks"; etc.
The Big Three then turned to Washington. Their lobbying paid off through protectionist policies: "voluntary" import quotas (forcing American consumers to pay more for Japanese cars); domestic content rules (requiring foreign automakers to use a certain amount of American-produced equipment in their cars); and demands that foreigners "open" their markets to American car products or stand accused of "unfair trade."
All of this shielded the Big Three from the rule of business that determines success or failure: Improve or die.