When cars were America's idols

In the midst of turning the ship around, GM hit not one but three icebergs: the sudden collapse of the U.S. auto market, the sharp spike in gas prices and the crisis in credit. U.S. auto sales contracted from around 16 million vehicles a year in January 2008 to fewer than 10 million in March. GM's sales plummeted by roughly half, which meant it burned through its cash reserves much more quickly than anyone could have imagined and sent its total debt soaring to more than $60 billion.

Bankruptcy was not inevitable, until it was.

--

From a certain historical altitude, GM's problem is fairly simple to appreciate: Call it a prosperity hangover. The company acquired enormous momentum in the postwar boom when the United States was the world's only functioning economy. With no domestic peers and no overseas rivals, in a society frantic for mobility and flush with cash, GM became the colossal incumbent it was.

In the decades since 1962 -- the peak of its market dominance -- GM's singular dilemma has been servicing its own over-scaled nature as it competed against a succession of younger, smaller and more agile companies, primarily from Japan. To cite but one example: For years, critics of the company called for the elimination of the Oldsmobile division and the GMC truck division, which sold clonal versions of Chevy trucks. But GM found itself handcuffed to its obstreperous network of dealers who were protected by state franchise laws. It cost GM more than $1 billion to buy out Oldsmobile dealers when, at last, the division was closed in 2004.

GM also struggled with its vast and unresponsive, self-perpetuating bureaucracy. When Chairman Roger Smith -- the "Roger" in Michael Moore's skewering "Roger & Me" documentary -- attempted to streamline GM's back-of-the-house operations in the 1980s, the result was chaos.

Divisional managers openly subverted the reorganization, hiring new people and reestablishing the old chains of command until they had created a weird rump parliament inside the company. GM's capital outlays soared, while sales and quality plunged.

To justify its own size, GM's bureaucracy was neurotically preoccupied with scale, market share and volume, while seemingly agnostic regarding profit. In 2002, GM execs took to wearing lapel pins with "29," indicating their goal to maintain a 29% U.S. market share (GM sales now represent about 20%). Lotus. Hummer. Saturn. Saab. Daewoo. All of these companies were purchased or established in an attempt to increase global volume. Add to that a series of wobbly strategic alliances with Fiat, Fuji Heavy Industries (Subaru), Suzuki and others, designed to help broaden its reach overseas even as the North American market was deteriorating.