GM: Death of an American dream

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    Gerstenberg was the quintessential GM man. A graduate of the University of Michigan and an accountant by training, he got his first job at GM keeping track of employee timecards and worked his way up from there. After he retired as chairman and CEO in November 1974, he remained on the board of directors until May 1980. He was part of a system that perpetuated the automotive enterprise but did not admit much in the way of fresh air. "We have the best people in this or any industry," Gerstenberg told a group of employees in November 1972. "I always feel a special personal pride, a General Motors pride, because I am one of you - a General Motors man."

    Years later I saw Gerstenberg again at a GM event in New York City. By then 80 years old, he shyly introduced himself to a current GM executive in attendance. Though still a GM man, Gerstenberg seemed shrunken and insignificant without the corporate apparatus behind him. Mere men, even a former chairman and CEO, were nothing compared with the might of the company.

    In 1970, I witnessed my first strike against GM by the United Auto Workers. It lasted 67 days, triggering layoffs at parts suppliers and steel companies, and dampening economic growth nationwide. The UAW deployed a massive army back then. Some 400,000 union workers walked off their jobs; one historian described it as a "titanic clash between two massive permanent entities." The union won this clash, as it won most, because GM's high fixed costs made the company especially vulnerable to a production shutdown.

    The new contract was a sweet one: no cap on cost-of-living adjustments to wages, full retirement after 30 years regardless of age, and increases in already lavish health-care benefits. Detroiters referred to the company as "Generous Motors." The cost of those benefits would bedevil GM for the next 35 years. But they didn't buy union peace. Rancorous relations and periodic strikes remained a fact of life at GM.

    GM was still growing - the number of employees worldwide reached an astonishing 853,000 in 1980 - but cracks were appearing that would widen into fissures. The company seemed to forget how to execute. It started to downsize its model line after the 1973 oil embargo and change over to front-wheel drive, but it encountered all kinds of engineering problems.

    The small Chevy Vega was prone to overheating that warped the cylinders in its aluminum engine block. GM introduced diesel engines that couldn't withstand the higher temperatures needed to burn diesel fuel. To save money, GM was sharing more parts among its brands, blurring their distinctiveness. A shortage of V-8 engines caused GM to install Chevrolet engines in mid-priced Pontiacs, Oldsmobiles, and Buicks. Complaints crescendoed in 1981 with the arrival of the Cadillac Cimarron, which customers quickly discovered was little more than a Chevy Citation wearing the Cadillac crest.

    Since Roger Mudd was in no danger from my career in TV news, I started to freelance in print and landed a job in 1977 on the Detroit Free Press, a morning paper then the sixth-largest in the U.S., with a daily circulation of 620,961. Detroit had been badly scarred by race riots in 1968 and the recession of 1973, and white residents were fleeing the city, but it was still a great news town, and we fought every day against the afternoon Detroit News.

    As a business reporter, I worked alongside future stars like Fortune's Allan Sloan and began to inhale the auto industry on a daily basis. Henry Ford II was king of Detroit, making news whenever he appeared in public. He fired Ford president Lee Iacocca in 1978 with the famous line, "I just don't like you." Iacocca landed at Chrysler in a matter of weeks and went on to lead its successful campaign for a government bailout - the first for an auto company - a year later.