Dull at Any Speed

Smith also acquired Electronic Data Systems, which Ross Perot had founded, to shake up the company's culture and Hughes Aircraft to introduce space age technology into the car. Money that should have been devoted to designing better automobile engines and restoring the luster of, say, Cadillac (which had degenerated into a tarted-up Chevrolet) was spent on diversions. Smith also added Saab to the roster of money-losing ventures. A multi-billion-dollar investment in Saturn was supposed to spur a cultural revolution by getting management, labor and dealers to work together. But in the 1990s, GM's next CEO, Jack Smith, and his team starved that division, which had enjoyed modest retail success at the outset because of a strong and dedicated dealer body. Today Saturn has been relegated to just another undistinguished GM brand that has cost the company more than $10 billion.

During the 1990s, GM focused on productivity and quality with some success. Profits soared for a while. But once again dollars that should have been invested in cars were diverted into stock buybacks at prices considerably above the current level, vehicle production in China and elsewhere in Asia, Internet startups and lastly into Fiat, the Italian automaker. That Rick Wagoner can argue, as he has, that the $4 billion to $5 billion it cost to get in and out of Fiat (about half to buy a stake and half to get out of an obligation to buy the rest) was money well spent is beyond belief. It is baffling that GM -- a company supposedly run by "bean counters" demanding forecasts of double-digit returns before approving investments -- wasted so much.

Jack Smith, who got the top job in 1992, brushed aside concerns about the slide in the company's U.S. market share by saying that GM's global share mattered more because of faster market growth abroad. No one at the company seemed to understand that the United States has been, is and will be the source of virtually all of the profits earned by world automakers. How could GM think that it could save itself in Asia when the Japanese and Korean auto companies have been intent on increasing sales here because this is where the profits are?

Jack Smith also blamed GM's U.S. problems on poor marketing rather than poor vehicles. In an effort to establish unique brand identities in the increasingly crowded American market, the company expanded the influence of market researchers even as it reduced the ranks of engineers. GM convinced itself that by using "psychographics," a hocus pocus term that means a combination of psychology and demographics, it could profile the U.S. population and create niche products. Car designers surrounded themselves with photos of their intended customers . I remember being taken through these studios with then-executive vice president for marketing Ron Zarella. On the wall of one studio hung large photographs of vital young men and women doing the things that GM associated with Pontiac. One photo showed a Spandex-clad young woman rock-climbing, the supposed inspiration for the prototype of what would become the Aztek. The car, by comparison, was anything but agile and sleek. GM managed to create a vehicle that everyone hated.

One has to wonder why it has been so hard for GM to figure out what car buyers want and then give it to them. The company has not been able to leap ahead of the competition since the early 1980s when it led the way into front-wheel drive. Its failures are numerous.

Chrysler launched the first minivan in 1984. It took more than a decade, but the Japanese established themselves in the sector while GM failed to come up with a desirable model. Today, GM's minivans still lack the seating configurations that have become the norm, forcing the company to lure consumers by offering thousands of dollars in "incentive" discounts, ultimately a self-defeating exercise that gives the impression (correctly) that the company is having trouble selling its cars.

GM has all but given up trying to come up with a competitor to the Toyota Camry and Honda Accord that its Mona Lisa center took apart. But Toyota added a hit SUV, the RX 300 in its Lexus line. When Toyota realized that the Lexus brand was attracting only older buyers, it created Scion and matched unique style with unconventional marketing to appeal to the young generation. When GM faced the same problem of appealing only to seniors with Oldsmobile, it ended up killing off the brand and sacrificing more market share.

GM's product planning has also ignored the possibility that fuel economy might again become a priority for consumers. When I was a member of a National Academy of Sciences panel studying the Corporate Average Fuel Economy (CAFE) standards for the auto industry in 2001, GM argued against raising them. At the same time that it was forecasting bigger auto sales in China, it was denying the impact that would have on oil markets. And it is virtually alone in arguing that aging models explain its falling SUV sales while every other vehicle manufacturer points to fuel prices as the reason. The SUV boom of the 1990s is over and with it the huge profits that these titans generated.

GM's management tells us to wait until the new GMT 900 series of SUVs and pickups hit the showrooms next year. These will be followed by more new models, including the new entrants into the surging crossover category. But GM's Asian competitors are introducing new models and refreshing existing ones at a faster pace, so that GM is always reacting rather than forcing its rivals to respond. And there are just too many examples of the company's failure to match the competition, let alone innovate, leaving us to wonder why we should believe that what's in the pipeline will be any better.

It's true, as management argues, that health care costs are a huge burden for GM. But management agreed to the health care provisions in past contracts based on faulty assumptions of rising production. It seems unfair to ask hourly workers to sacrifice wages without equal sacrifice among executives or the shareholders who still get a $2-a-share dividend from the company's large but rapidly dwindling cash horde.

What is so tragic about the GM story is that the company has always attracted highly talented and dedicated people who want to do the right thing. No one at GM wants to close factories or bribe customers with rebates or employee pricing. GM invests more money and time in the creation of a new model than Toyota. So why does GM get it wrong so often? Why was Lee Iacocca able to save Chrysler? How is it that Carlos Ghosn was able to turn Nissan around in a few years and GM hasn't been able to stabilize itself in three decades?

It's hard to change a corporation's culture, especially when the corporation is as large as GM. The age-old refrain about GM is that its executive ranks are dominated by treasurer's office graduates while car guys are nowhere to be found. Yet Jack Smith moved the company away from Roger Smith's imperial style to consensus management. Rick Wagoner, admitting a lack of product expertise, brought in Bob Lutz and gave him the freedom to revive GM styling. But a stifling corporate culture plagued by slow decision-making and a lack of accountability is hard to change.

Perhaps Ghosn's and Iacocca's secret weapon was a willingness to admit to a crisis. So far, GM has only told us to wait for the new models while it leans on the United Auto Workers for concessions.

Back in the Sloan era, GM was so dominant that it was worried that government trustbusters would order a breakup of the company. Those days are long gone. And while the company still has substantial resources, unless it can come up with some more appealing vehicles, no amount of UAW concessions or layoffs will be enough.

Maryann Keller, of the consulting firm Maryann Keller & Associates, is the author of "Rude Awakening: The Rise, Fall, and Struggle for Recovery of General Motors" (William Morrow) and "Collision: GM, Toyota, Volkswagen and the Race to Own the 21st Century" (Doubleday).