GM's SUV Mistake

GM started selling the H2 Hummer in 2002

Corbis

GM’s decision to disinvest in passenger cars in favor of the short-term profits of selling trucks and SUVs led me to fear the impossible -- bankruptcy -- in the 1990s. After 9/11, the company doubled down on this misguided strategy and sealed its own fate. The aftermath of the terrorist attack was a singular moment when a very strong, even patriotic case could’ve been made to usher in a new paradigm, for the company to say, “We’re too dependent on foreign oil” and to take the lead in encouraging everyone to buy more fuel-efficient cars. Instead, GM used all its money, energy and vast reservoirs of good will to put Americans into the biggest SUVs they could buy. It was the same type of knee-jerk response to world events that led to the Iraq War: “Let’s get armed and crush those who might hurt us, whether they’re our enemies or not.” In essence, GM made its bet on the worst aspects of the American psyche. Rather than try to change the game, it encouraged people to realize their most profligate and aggressive desires. The downside was clear. In the days following 9/11, Manhattan’s West Side Highway was filled with abandoned SUVs covered in dust, looking like so many beached whales. It was an incredible display of how useless they were in crisis. Likewise, the Iraq War itself turned out to be billions of dollars of negative advertising for GM, with abundant images of destroyed, burned-out Hummers filling the airwaves. Far from impervious and indestructible, they were seen as big, fat, slow moving targets; you can’t buy advertising that bad. But Hummer was the war-like brand GM closed Oldsmobile to develop. And all it took was one rise in gas prices for the bottom to fall out.