HOW HE SEES IT General Motors is a cautionary tale for U.S.

By JAMES P. PINKERTON
LONG ISLAND NEWSDAY
General Motors, once a symbol of corporate giantism both admired and reviled, is now a shriveled husk of its former corporate self. And thereby hangs a tale of post-industrial America, and a warning for America itself.
Not so long ago, GM seemed synonymous with a nation whose business was big business. In 1955, Time named GM president Harlow Curtice as its "man of the year." The magazine credited Curtice with steering the United States into a "new age of wide-open affluence." Since the company sold more than half the nation's cars, it could afford to pay high wages, offer generous pensions -- and be grossly inefficient.
Today, amid ever-intensifying world competition, those happy days have gone the way of tail fins. GM's share of the auto market has fallen nearly by half. And, although the company is still profitable, Wall Street looks at its debt load, some $360 billion, and judges the burden of cash outflow to be unsustainable. So the automaker's stock has tumbled 70 percent in five years, its bonds have been downgraded to "junk" status, and the b-word -- bankruptcy -- is heard on the Street.
Yet, as GM flounders, another domestic motor-maker is doing well. A surging Harley-Davidson now boasts a market capitalization -- the total value of all its stock-market shares -- of around $17 billion, a billion dollars more than GM.
Even as U.S. manufacturing has declined in importance over the past half-century, while services and information-rich industries have flourished, the Harley story proves that smart manufacturers can survive and thrive in Information Age America.
Riding-cult domain
Whereas GM attempted to be all things to all consumers -- Chevy to Cadillac -- Harley embraced the opposite strategy. The bike maker concentrated on becoming the marketing master of a riding-cult domain. As a result, Harley's profit margins are fattened by the premium prices it extracts from its super-loyal circle of "hog" buyers -- plus, of course, the revenue the company gains from the many millions more who share, vicariously, in the open-road mystique by purchasing Harley paraphernalia.
There's nothing wrong with this Madison Avenue-ized approach, because money is money. But it's not going to be easy for all of America's old-line companies to pursue a niche-based strategy of focusing on high value-added functions, such as research, development and brand-positioning.
So what lessons might Americans draw from GM's decline and, perhaps, fall? Here are two.
First, the government can sometimes play a role in the restructuring of industries. Exhibit A, interestingly enough, is Harley-Davidson itself. In 1983, the company was nearly bankrupt, but the Reagan administration slapped a protective tariff on imported motorcycles. Critics warned against a costly boondoggle, but the move proved productive. In the past two decades, Harley sales have jumped from $200 million to more than $5 billion; the increase includes stronger sales overseas.
Hummer
GM is probably too big to enjoy that sort of nifty Harley-like renaissance, although it's possible that certain of its marques, such as the Hummer and the rejuvenated Cadillac, could survive a corporate meltdown and find a way, perhaps with government aid, to flourish as independent players.
Second, more ominously, the federal government should see GM as a negative example, a warning against feckless overspending. Just as an overconfident GM made financial commitments it couldn't keep, so has Uncle Sam incurred too many obligations. The feds now say the Social Security trust fund will run out of money in 2041, a year earlier than expected. Meanwhile, they said, Medicare will empty out in 2020.
And now Standard & amp; Poor's projects that American bonds will reach junk-bond status by 2030, as pension and health liabilities surpass 200 percent of gross domestic product. A reckoning is coming; in some form the government will have to downsize its cost structure.
It would be a shame if the United States went the way of GM. But if trends continue, that's what will happen. And there won't be any larger helping hand for our nation as a whole.
Los Angeles Times-Washington Post News Service