General Motors (GM), the pride of the U.S. economy, filed for bankruptcy protection on June 1, 2009, due to severe financial distress. With $82 billion in liabilities, it was the fourth-largest bankruptcy filing in U.S. history. Founded in 1908, GM, along with Ford and Chrysler, formed the "Big Three" that dominated the global auto market. Backed by a marketing strategy that differentiated brands by vehicle type and price range, GM overtook Ford from the 1930s. Its U.S. market share soared to 54% in 1954, prompting calls to break up the company over monopoly concerns.
How did the "too-big-to-fail" myth of GM, a fortress-like century-old company, collapse? The biggest reason is that it grew complacent during an industry transition and was overtaken by Japanese firms championing innovation, leaving it paralyzed. During the 1970s oil crisis, Japanese companies eroded the market with fuel-efficient compact cars, while GM clung to light trucks and lost consumer favor. GM's existing mass production system could not keep up with the flexible lean production method introduced by Toyota. GM's hours per vehicle (HPV) of 26.8 lagged far behind Toyota's 21.6.
The GM union, captive to the "too-big-to-fail syndrome" and obsessed with high wages and excessive benefits, also abetted the decline. Even amid worsening management, the union secured wage maintenance and forced the company to cover retirees' medical costs. In 2005, GM spent $5.4 billion on healthcare, with 70% going to retirees. GM's hourly wages and benefits stood at $74, far above Toyota's $48 and Hyundai Motor's $40. There was no way to compete. On top of this, the United Auto Workers (UAW) pressured the company to bear medical costs as a means of recruiting non-union members, and management, fearing immediate strike losses, settled for compromise.
The U.S. government's "policy failure" also amplified the crisis. Failing to read the massive paradigm shift toward passenger cars, it eased fuel economy regulations on light trucks and raised protective tariffs on imported light trucks nearly threefold. The result was self-inflicted erosion of domestic firms' will to innovate and survive. Ultimately, GM's downfall was a joint product of the company's strategic void, the union's high-wage welfare disease, and government policy failure at a critical industry transition point.
The global economy is now in the midst of an artificial intelligence (AI) transformation. This is not a passing trend but a wave of structural change akin to the Industrial Revolution and the Internet Revolution. Only innovation can guarantee survival, and complacency leads to elimination in this grave situation.
China is deploying a "wandao chaoche" strategy — overtaking front-runners on the corner during industry transitions — and is conquering global markets one by one. Although it lagged behind the United States and Japan in internal combustion engine vehicles, it surpassed Japan to claim the world's top market share with electric vehicles. With cost-effective lithium iron phosphate (LFP) batteries, it has also pushed Korea aside to dominate the global market. Its next target is the memory semiconductor sector led by Samsung Electronics and SK hynix.
The United States, wielding the carrot of the CHIPS Act and the Inflation Reduction Act (IRA) and the stick of retaliatory tariffs, is drawing global firms, including Korean companies, into its domestic supply chain. Japanese Prime Minister Sanae Takaichi, raising the banner of "growth first" over "profit distribution," has appointed herself a cheerleader for businesses through bold regulatory reform. Thirty leading Japanese companies, including SoftBank and Toshiba, have formed an "AI Alliance" and thrown down the gauntlet to the AI market led by the United States and China.
Rival nations and companies are now staking their national fate on cultivating advanced industries and innovating regulations to avoid falling into the "GM trap." What about us? The ruling party and government are busy churning out regulatory bills that strangle businesses, including the Yellow Envelope Act, the Serious Accidents Punishment Act, the Commercial Act, the 52-hour workweek, and uniform retirement age extensions. Bureaucrats are spouting senseless remarks calling for corporate profits and surplus tax revenue — which should be used for future investment and growth engines — to be doled out as cash welfare. Backed by the government's pro-labor policies, unions are demanding "N% of operating profit as performance bonuses," saying they will "eat the dried persimmons first." With "performance bonus invoices" joined even by subcontractors, all industries — semiconductors, autos, biotech, and platforms — are suffering.
This is no time for companies, unions, and the government to indulge in dreams of peace. The GM case, in which complacency during an industry transition led to innovation failure and a death spiral, must serve as a cautionary lesson. Now is not the time for a wasteful profit-sharing feast, but a time to heed the "GM cautionary tale."
