Too Big

"General Motors is too big for the good of American businessmen who must deal with it, and too big for the good of the country."

These strong words came this week from the respected, nonprofit American Institute of Management* after a three-month study of G.M.'s published figures. The survey was the idea of A.I.M.'s founder-president, Jackson Martindell, a hardheaded businessman himself, who has been president of Fiduciary Counsel (investment counselors) and Fiduciary Management (an investment trust), last month won control of Who's Who.

Martindell's Institute found that G.M.'s bigness is bad because it is too efficient; it has managed to disprove the theory that bigness automatically brings diminishing returns, and that there is thus a built-in check on size. Said the institute: "General Motors' net sales in 1955 amounted to $12,433,277,000, or more than ten times G.M.'s sales volume in 1935. G.M. profits [for 1955] were $1,189,477,000, or about $34 million more than their total sales in 1935. According to all classic economic concepts, such a growth ought to have been accompanied by diminishing returns, [when] each further increase in size is compensated by a reduction in the margin of profits." Instead, G.M.'s operating profit margin of 15% in 1935 actually rose to 20.6% last year. The reason the theory broke down, said A.I.M., was that G.M. slashed sales and administrative costs from 7.1% in 1935 to 3.7% in 1955, while holding material and labor costs steady in proportion to sales volume.

G.M.'s huge gain in production (50.76% of all autos sold in the U.S. last year) also brought much good, A.I.M. found. In the past 20 years, take-home pay of G.M. workers advanced by $3,435, while profits per employee rose only $1,233. And the Government, through increased taxes, benefited more from G.M.'s growth than the company's stockholders.

But on balance, the report delivered a verdict against G.M.: "Three years ago the institute defended big business. The utterly irresponsible Ford-G.M. production war has changed our minds." Bigness can "crush the small producer. Bigness is partly responsible for the slow strangling of Studebaker and Hudson today."

Debating the pro and con of huge corporations in general, A.I.M. said: "Their skill, research and gargantuan productive capacity may well have tipped the scales to retention of our freedom. But they must not become destructive to that freedom by gaining so much monopoly as to restrict freedom of choice, gain undue political power or even too large a share of the national product."

The report raised the question of whether it would not be wise to limit any one company, however honestly and efficiently managed. For example, a limit of 1% of the gross national product would slice G.M. to one-third its size.

*Among A.I.M.'s recent surveys of some of the world's major organizations: a report on the efficiency of the Vatican (TIME, Jan. 30).

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