The Fall of an American Icon

Do you know what the definition of an icon is? According to Microsoft Encarta one of the definitions of an icon is a picture or symbol that is universally recognized to be representative of something. So as I have been watching the troubles plaguing America’s auto industry I realized that we are watching in real time the fall of an American Icon. General Motors is a symbol of what America is. As General Motors grew from its meager beginnings in 1908 to become one of the most treasured and revered automakers in the world it became a symbol of what can be accomplished in America.

The company was founded in 1908 by William Durant as a holding company to oversee the production of Buick’s. The company quickly began acquiring its competitors in its rise to the top of the global auto industry. By 1931 the company became the global leader in auto sales, a position that it would hold for 77 consecutive years. Now with the onset of the global financial crisis the company is on the verge of collapse. Contrary to what some have been saying it is not the financial crisis that is toppling the automotive giant. That would be much too simple, there are in actuality many factors that have contributed to GM’s rapid decline.

One of the many factors in the fall of General Motors is the ridiculous compensation packages enjoyed by GM’s employees. For the most part the benefits bequeathed upon GM employees have been negotiated through collective bargaining by the employee’s union representatives, the UAW. These contracts have contributed to the increased cost of GM cars and trucks. However the UAW alone cannot enforce a new contract, it took GM management to approve the contract before it is ratified. In other words, GM management and UAW leadership negotiated the terms of the contract. GM itself has contributed to the high production costs by agreeing to these obscene labor contracts.

Another factor in the fall of GM is the increasingly burdensome regulations subjected on the auto industry. The excessive regulation really came about in the 1970s at the end of what was called the muscle car era. Rather than letting market forces dictate the trends in the auto industry the federal government felt that it was their responsibility to save the masses from the auto industry. A result of that is the misguided Corporate Average Fuel Economy standard, otherwise known as CAFE. This regulation was intended to encourage the creation of vehicles with increased fuel efficiency. When these vehicles were brought to market, they were not purchased. In 2003 Eron Shosteck of the Alliance of Automobile Manufacturers said,

“We as an industry are doing our part by offering consumers choices. We offer more than 30 different models that get 30 miles to the gallon or better, but very few consumers buy them.”

Instead of issuing regulation after regulation demanding that the auto industry produces what the policy makers in Washington wants perhaps it would have been better for our government to provide a tax breaks as an incentive to develop the new technology. Perhaps then we wouldn’t have needed to bailout Chrysler Corporation in the 1980s and GM and Chrysler this year. But that would be too farsighted for the blind men running our country.

Now as a direct result of the combination of poor management, irresponsible unions, and incompetent elected leaders American’s must watch the slow and painful demise of an American Icon.