Why GM Matters

How General Motors Turned the Wrong Way

General Motors remains important to building America, so insiders resent the shots the media take at it. Outsiders, they say, do not realize how much other sectors of the national and global economies, from robotics to health care, depend on GM’s research and purchasing volume. Critics are right about GM’s mistakes and how slowly it corrects them, but the company is still at the core of the U.S.’s remaining manufacturing might.

GM’s market position weakened continuously from the mid-’70s through the ’90s while its labor expenses and fixed costs, particularly health care, soared. GM’s leaders watched their wage, health care and pension costs rise dangerously for decades. Instead of hitting the brakes, every United Auto Workers (UAW) contract seemed to stomp on the gas, accelerating GM’s headlong rush toward a crash. Still, executives stuck with the obsolete business model, which had once made GM great, long after its effectiveness waned. Research and development languished as GM let Toyota dominate the hybrid market.

Early Lessons from Toyota

GM and Toyota began collaborating in some areas by 1982, because Toyota...