Chapter 1
WALTER REUTHER AND THE TREATY OF DETROIT
The weight of history on our results has been significant. -RICK WAGONER, chairman and chief executive officer, General Motors
Once upon a time, General Motors was a symbol of success. After World War II, the automaker routinely captured more than 40 percent of the American automobile market, and in 1955, when an entry-level Chevrolet cost $1,450, GM's market share climbed to 51 percent. The company's brass was moved to complain (or so went the joke) "We're still losing five out of every ten sales."1 In an age when GM was criticized for pursuing its own selfish aims rather than those of the country, Charlie Wilson, its outgoing president, testified, rather memorably, before the Senate Armed Services Committee, "What was good for the country was good for General Motors, and vice versa." Wilson's remark didn't fool anybody; GM, of course, was in business for its stockholders. To ensure that its profit targets were met, it methodically raised the prices of its cars, and year after year it had the highest sales, the highest profits of any com-pany in America. The shareholders made out like bandits. From the end of the war until 1965, a span of two decades, the stock registered a stupendous, eightfold gain.
But as an institution, General Motors was already beginning to age. Shareholders did not at first notice the great transformation that was occurring in their status-their great disenfranchisement. But in a manner of speaking, they lost their claim; General Motors was sold out from under them. Oh, it wasn't literally sold. But the gushing stream that was GM s cash flow, which previously and properly had flowed to the stockholders, was quietly but most assuredly diverted. Over the next four decades, GM's stock lost 60 percent of its value. The company continued to pay dividends, but the owners of America's biggest industrial enterprise would have done better holding T-bills. Even though, over those many years, GM sold as many cars or more as in Wilson's day, the putative owners-the stockholders-for all practical purposes had lost their title.