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GM Works to Shed 'Government Motors' Image

4 years ago
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Tired of being mocked as "Government Motors," General Motors has ramped up public relations efforts to demonstrate it is on the right track.

As its own ads admit, many Americans, regardless of their political leanings, have a bad attitude toward the nation's largest automaker in the wake of taxpayer-financed bailouts. For GM, the danger is that this antipathy leads Americans to quietly boycott the company. As recently as last year, popular conservative radio host Hugh Hewitt wrote a column titled, "Just say no to Government Motors and Obamacars."

Concerns reached a high point last year when, after bailing out General Motors -- the largest industrial rescue in U.S. history -- President Barack Obama fired GM's chief executive, Richard Wagoner Jr. For free-market conservatives who oppose big government, this move confirmed their worst fears about the president.

Obama has gone out of his way to say he does not want to run auto companies, or any industry, but GM officials in particular have reason to echo this message. As Renee Rashid-Merem a GM spokesperson strongly assured me: The government is "not interested in running our business, they are interested in making sure our business is well run."

There is evidence to support this. Were the government looking to maintain control over GM, it is likely it would have installed a patsy to "run" the company. It most assuredly would not have brought on Ed Whitacre, a strong leader and former AT&T chief executive, who has vowed to turn the company around.

And a turnaround is exactly what is needed.

Fifty years ago, General Motors controlled half of the U.S. car market. Today it holds just 22 percent. And while much of the blame belongs to Wagoner's GM predecessors, it's also fair to say that organized labor and the government -- especially the Michigan state government -- helped create a situation that almost guaranteed problems for the company.

Thanks in large part to the union laws in Michigan, United Auto Workers' members were essentially immune from being fired. A union could shut down a plant at the drop of a hat. This not only drove up costs, it also contributed to bad cars. Workers in some plants intentionally vandalized vehicles and drank on the job. Absenteeism was rampant. Employees were frequently on strike, and spent more time filing frivolous grievances than building cars.

"The American political system -- and its catering and pandering to labor unions -- has caused this," said Brian M. Johnson, executive director of the Alliance for Worker Freedom, a project of Americans for Tax Reform.

The good news is that GM now has a much better deal with the unions -- a five-year labor agreement that includes "no strike" provisions that extend beyond five years. The labor agreement also allows more flexibility in terms of hiring skilled and non-skilled workers.

Many Americans still believe we would all be better off had GM been allowed to fail. But one major counterargument is that the auto industry is interdependent, meaning the same companies that supply GM also supply Ford and others. As such, a precipitous closing of GM would have impacted all suppliers and car companies.

As GM officials seeks to restore the company -- and repair its image -- it's also important to understand that the government bailout was actually a two-tier system. A direct loan of $8 billion was made, and that loan has been paid in full -- with interest. But that's only part of the story. Most of the taxpayer's funds are still tied up in government-owned equity. When the company goes public, the government will sell those shares and presumably recover that equity investment.There are strong indications that GM intends to file a public offering in August. This means it is likely the government could begin to divest itself of the business and, at the least, become a minority shareholder.

GM is working hard to stress it is now a new company with new leadership. Speaking at GM's Global Business Conference on June 29 of this year, Steve Girsky, vice chairman for corporate strategy and new business development and a GM board member noted: "About a third of the top 40 people are new to their jobs. This new team does things differently, they act differently."

It's clear that GM's culture has changed for the better. Whitacre, I've been told, occasionally shows up at company meetings unannounced. Another promising change was GM's decision to open a design studio in Southern California. This move comes from the realization that the best and brightest designers probably wouldn't want to live in Detroit. Ultimately, GM hopes that attracting top designers will allow it to produce cars aesthetically pleasing and functionally appealing to 21st century consumers.

Today, even GM critics are impressed. As Dan Neil of The Wall Street Journal wrote in May: "It gives me no joy to write this. I know it will upset a lot of readers, and that's never pleasant. So I might as well come right out and say it: The new Buick Regal is a really nice car."

But when it comes to one of GM's hottest new cars, some critics point to the fact that GM recently got a subsidy, which only applies to one car -- the Chevy Volt. In fact, this is a $7,5000 tax incentive that Congress passed.

Conservatives may oppose this market distortion, but it is not a special exemption for GM as much as it is a tax credit for Americans to buy plug-in cars. And there is plenty of buzz surrounding the Volt. According to Greg Martin, GM's director, of policy and Washington communications, "In terms of sex appeal, the Chevy Volt is like Megan Fox. But cars like the Chevy Malibu and Cruze are like Meryl Streep -- strong and steady performers in the high volume segments that will make a real difference the fastest on the company's bottom line."

GM also decided to focus on just four brands: Cadillac, Buick, Chevrolet and GMC. Resources formerly used to promote the other brands are now used to design and market the four brands.

And GM is also winning other accolades. For example, the Chevy Equinox was named the Insurance Institute for Highway Safety's Top Safety Pick and Kelley Blue Book's kbb.com named the 2010 Equinox one of the Top 10 Family Cars for 2010.

All this has helped GM sell cars internationally, too. As Bloomberg recently reported, "General Motors Co. expects sales in Brazil to grow by 68 percent to 1 million vehicles by 2014 as growth in Latin America's largest economy stokes demand for fancier cars, said the automaker's South America chief." Additionally, for the first time, GM is now selling more cars in China than in the United States.

It remains to be seen whether producing solid cars will convince skeptical Americans to give GM another look. Many Americans have deep philosophical reasons to oppose government bailouts. But, it is clear that GM is trying hard to shed the "Government Motors" image -- as well as begin building quality cars again.

"We want to succeed and win on the cars and trucks we build," says Greg Martin. "We've been given a second chance and have restructured our business to make money and provide jobs for Americans," and, he added, "to return the taxpayers' money."
Filed Under: Economy, Analysis

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