An Industrial Titan Dies, and a Smartphone Innovation Revealed


On this day in economic and business history...

General Motors filed for bankruptcy on Jun. 1, 2009. For decades, GM had been the world's largest automaker, but it had been brought low by staggering losses related to the 2008 financial crisis. The year 2009 was a terrible struggle for the automaker. Its CEO had been ousted via pressure from the President of the United States, and it had received billions in federal loans to avoid complete collapse. None of these efforts could turn GM around quickly enough, and over a century of automotive history fell apart at a bankruptcy court in Manhattan.

The bailout reshaped GM as a smaller company, its assets largely government-owned, with the United Auto Workers Union's pension arm gaining control of approximately 20% of the company. GM would also shutter 14 plants after its bankruptcy, and would shed as many as 21,000 jobs, which was only in addition to the plants already closed, and the thousands of jobs already lost. GM's American workforce would shrink to less than a tenth the size of its postwar peak, when the company employed up to 400,000 people. GM's bankruptcy was (and remains) the fourth-largest of all time, behind Lehman Brothers, Washington Mutual, and WorldCom. The bankruptcy also ended GM's 84-year tenure as a component of the Dow Jones Industrial Average -- the Dow replaced GM eight days later and, for the first time in decades, America's largest industrial employer was no longer a part of its most-watched stock market index.

What caused GM's collapse? The Economist painted a picture of inevitability shortly after the bankruptcy, explaining that a car company comprised of dozens of smaller car companies assembled through acquisitions could easily become unmanageable without corporate unity. The rise of unions in postwar America also planted the seeds of GM's demise, as its payrolls grew bloated, and its pension promises to hundreds of thousands of retirees became gold-plated. Competition from Japanese automakers also exposed GM's flawed reliance on gas guzzlers when the price of oil shot up, first in the 1970s, and then during the years leading up to its bankruptcy. GM's share of the American auto market had been in decline for decades -- it had held over 40% of the market in the early 1980s, but had slipped to a share below 25% during the financial crisis.

GM's bankruptcy process was fast-tracked through the courts, and the company exited Chapter 11 after only 40 days. Nearly $130 billion in debts were gone, as were nearly 23,000 employees, and about 2,300 dealers. The Hummer, Saturn, Saab, and Pontiac brands were also on the chopping block. A year-and-a-half after filing for bankruptcy, the new GM returned to public markets with the largest IPO (by the size of its offering) in American history, raising $20 billion through the sale of shares predominantly held by the government.

Fronting the smartphone revolution
When Apple's Steve Jobs approached Corning in early 2007 with a seemingly impossible request for an ultrathin, ultrastrong glass to protect the soon-to-be-released iPhone, he couldn't have known that Corning's engineers had been working on such a material for decades. In fact, the genesis of Gorilla Glass can be traced back to 1937, when photosensitive glass was first invented, and more specifically to Jun. 1, 1947, when the existence of such a glass became public.

How did photosensitive glass become the foundation for Gorilla Glass? First, let's identify what photosensitive glass is to understand its origins. Invented in late 1937 by Corning researcher Donald Stookey, photosensitive glass -- as its name implies -- functions similarly to photographic negatives. Exposure to ultraviolet light can create transparent images on the glass surface, but, when heated, these images will become visible. Complex imagery, including photographs, can be transferred this way, and part of the reason for the long delay between discovery and publicity is the use of this glass to send hidden messages during World War II.

Production of photosensitive glass with any sort of photographic qualities has remained elusive and expensive, which is why the new product achieved no commercial success. However, Stookey continued to experiment with photosensitive glass, which, five years after its announcement, led to the ancestor of Gorilla Glass. Wired's feature article on Gorilla Glass, published in 2012, explains what happened then:

Don Stookey knew he had botched the experiment. One day in 1952, the Corning Glass Works chemist placed a sample of photosensitive glass inside a furnace and set the temperature to 600 degrees Celsius. At some point during the run, a faulty controller let the temperature climb to 900 degrees C. Expecting a melted blob of glass and a ruined furnace, Stookey opened the door to discover that, weirdly, his lithium silicate had transformed into a milky white plate. When he tried to remove it, the sample slipped from the tongs and crashed to the floor. Instead of shattering, it bounced.

The future National Inventors Hall of Fame inductee didn't know it, but he had just invented the first synthetic glass-ceramic, a material Corning would later dub Pyroceram. Lighter than aluminum, harder than high-carbon steel, and many times stronger than regular soda-lime glass, Pyroceram eventually found its way into everything from missile nose cones to chemistry labs. It could also be used in microwave ovens, and in 1959 Pyroceram debuted as a line of space-age serving dishes: Corningware.

Corning expanded its use of this new glass product by marketing it as Chemcor in the 1960s, but found limited commercial interest. It was shelved in 1971, and would not re-emerge until 2005, as cell phone manufacturing processes began incorporating glass screens. At this point, it was given the codename Gorilla Glass, a moniker it retained after reaching the market. Even then, it remained more an idea than a completed product, and it might have remained so for years longer had the iPhone not needed something insanely advanced to protect its insanely great new screen.

Jobs and the iPhone provided Corning its first major commercial contract for Gorilla Glass, but Jobs' time frame for delivery gave Corning scientists mere weeks to produce a workable product. Multiple reformulations were required to turn the original Chemcor composition into something thin and clear enough for a sensitive touchscreen, but Corning's development pushed from concept to commercial production in less than five months. Today, according to Corning, Gorilla Glass protects over 1.5 billion devices built by 33 major brands, and that number is rising all the time.

With the explosive growth of smartphones worldwide, many investors thought they would ride Corning's dominant cover glass to massive investment returns. That hasn't played out yet, as mobile growth has failed to offset declines in the company's core business. In this brand new premium research report on Corning, our analyst walks through the business, as well as the key opportunities and risks facing it today. Click here to claim your copy.

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Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more insight into markets, history, and technology.The Motley Fool recommends Apple, Corning, and General Motors. The Motley Fool owns shares of Apple and Corning. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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