The bureaucrats and politicians at GM and the bureaucrats and politicians in DC are carefully and politely carving up the cadaver that was once GM. The autopsy is being performed in Washington behind closed doors, perhaps in the Rayburn building. The scenario could play out like this: While GM executives sit out in the hallway, UAW bosses sit in secret sessions with Congressional Democrats, pounding the table and demanding that they and their union members be compensated for delivering the vote. Democrat party leaders scratch their collective heads, trying to figure out a way to put money in the hands of unions without rewarding automotive execs for sub-par performance. This is no easy task, even for experienced enablers of parasitic behavior like those on Capitol Hill.
Meanwhile, the remaining GM execs are in a huddle trying to figure out how to save their jobs or cobble together a nice golden parachute that doesn’t draw too much attention from the media, the unions or the clowns in Congress. Rick Wagoner’s exit package will be closely scrutinized. They’ve already thrown white collar retirees to the wolves - the government will likely take over the non-union retiree pension programs and slash pension payments and benefits. The media won’t report on it.
President Obama has, in his infinite wisdom as Supreme Leader, appointed a leftist social scientist as the auto czar. Not a car guy. Not an engineer or a corporate finance guy, but a socialist academic who’s never held a real job in his life. Edward Montgomery has never had to deliver a product on time, on budget, with repeatable quality and show a profit – not even an ice cream cone. There is no evidence that Edward Montgomery has ever changed the oil in his car, much less displayed any knowledge of automobiles or the industry. Instead, Edward Montgomery will become the most powerful automotive executive in US history so that he can preside over the ‘equitable’ distribution of money to the UAW and skilled trade unions. He’s certainly not interested in having GM or Chrysler throw off a profit, because he probably doesn’t even understand how that happens. Therefore, GM’s new board of directors, hand-picked by Mr. Montgomery, will probably be composed of radical environmentalists, labor union representatives, academics, ‘victims’ of corporate excesses and ‘community’ leaders. GM will become very much like the old Soviet Union’s state-run enterprises - cranking out sub-par goods at outrageous prices. In fact, the Democrats can probably still find some old, disgruntled Soviet apparatchiks that can show them how best to milk the system for all it’s worth.
GM and possibly Chrysler will be forced to build cars designed by bureaucrats and social activists. These vehicles will make the infamous Soviet-era Trabant look stylish by comparison. Of course, most Americans won’t buy them, prefering to pay a carbon-credit tax on a real car made elsewhere — like Japan, Korea, India or China. The Obama administration will then give these unwanted GM cars away to undeserving wards of the state, who’ll leave them lying by the roadside once they have a flat tire. And the American taxpayer will be on the hook for this entire mess.
But, it’s too easy to blame Obama and the Democrats for the mess. After all, they’re just taking advantage of a situation they didn’t create. No, that happened on Rick Wagoner’s watch, along with an entire gang of GM exec’s that just plain didn’t do their job. The UAW’s attitude is understandable to a degree - they can’t save GM even if their members worked for free. It’s not the union’s fault that GM management wasn’t looking ahead, that it wasn’t nimble enough to create a car company that could roll with the punches like a Honda or Toyota. Yes, the car business has been cruel to everyone, but Toyota lost $2 billion in 2008, while GM lost something north of $40 billion. Both firms sell about the same number of vehicles.
GM points to ‘legacy’ costs such as retiree benefits. Toyota has similar costs. Its labor force is actually older than GM’s and Japan also mandates similar retirement benefits for unionized auto workers. The money is distributed differently, but the numbers are similar. The same is true for German autoworkers who receive 80% of their working salary during retirement. And yet, both the Japanese and German automakers are in better shape than GM.
The blame is to be shared equally by GM management and UAW/skilled trades union bosses. On the part of GM management, a chronic shortage of vision and leadership allowed the company’s bureaucracy to bungle forward, oblivious to the realities of the marketplace. On the union side, the UAW and the skilled trades unions did their level best to create work rules that hampered productivity and ballooned the cost of tooling up for a new vehicle. They were adamant about preserving jobs in order to protect that flow of dues into union coffers. Too bad it backfired on them. GM’s senior management was too timid to confront the unions and demand more cooperation. Much like the state and federal government, union bosses could not grasp the fact that more productive union workers would make the car companies more profitable and they would in turn build more manufacturing plants. Those plants would need more workers. Instead, union bosses dug in their heels and insisted on increasingly unproductive work rules and procedures that hamstrung automakers and gobbled up available cash.
Why would the unions do such a thing? It would seem short-sighted and self-destructive. Because, union workers and union bosses were firsthand witnesses to the bad decision-making emanating from GM’s executive suites. Those decisions cost them jobs and opportunities. When a new product fails, like GM’s infamous Pontiac Aztec, management doesn’t get laid off or fired. Assembly line workers do. When GM’s board of directors approves investment in a new vehicle line, executives aren’t called on the carpet when it doesn’t sell. Instead, white collar and blue collar workers are asked to make sacrifices and the auto suppliers are told to cut their prices. The automotive industry as a whole has been making sacrifices for the better part of two decades. GM’s senior management has not.
So, when GM is on the ropes, executives shouldn’t expect too much help or sympathy from the UAW or the supplier base, even though the fate of both are closely tied to the failing giant. On the political front, GM has bellyached for years about the unfair trade advantages held by imported brands. Those arguments began to fall apart when imports set up manufacturing facilities in the US while GM continued to move jobs overseas.
It’s likely that GM will go the way of Hudson, Kaiser, Studebaker, Rambler and the venerable Hupmobile. There’s nothing griven in stone that says a corporation must live forever. Big corporations are like miniature civilizations. They possess their own culture, social pecking order, rules of etiquette, ways of doing things. And like any civilization, they have a birth, a period of vibrant growth, maturity and finally, a decline followed by death or dismemberment. Younger, more aggressive corporations feed on the remains. In the end, GM’s demise may give rise to smaller, nimbler carmakers that can remain competitive in the world markets. Propped up by government, GM will simply remain a huge and costly socialist experiment, draining the country of resources that could be put to better use. Steamships and the Pony Express are gone, along with buggy whips and hoop skirts. As unpleasant as it may be in the short term, maybe it’s time for GM to ride off into the sunset. In this case, the pieces will be of greater value than the sum of the parts.
Date: April 1, 2009 @ 4:29 pm
bravo! terrific synopsis of what’s gone down in this sad city and industry. it’s still hard to believe that something as large and seemingly indomitable as GM could sink. but i’m sure that’s what the passengers on the titanic thought when they hit the iceberg.