Randy's Corner Deli Library

02 June 2009

The Dichotomy of the Failure of GM

The bankruptcy today of GM is instructive for America in dichotomous ways. The first part of dichotomy are the political calculations that had to be a consideration by the President in deciding to shepherd GM, an iconic, albeit ossified American institution, through what is essentially a prepackaged Chapter 11 bankruptcy, while fighting the perception that the bailout money that had been given to GM in exchange for a 60% interest in the company didn't go to "CEOs" and other upper management who rode GM into the ground. The other part of the dichotomy are the questions of leadership that must have been asked by this President. What I mean by this is essentially this: which tough and thoughtful policy decisions -- questions a leader would ask -- were in fact asked by the President, apart from the political considerations, and what principles, what recognitions, undergirded those questions?

First, the political considerations and their ramifications. If President Obama would have left GM simply to completely fail and not have provided the bailout money he did, can there be any question of the immediate economic devastation wrought in the middle part of this country? I think not. Even with more than adequate funding for mass buyouts to auto industry employees, the damage to the social fabric (on a macro level)and the psychology of millions (on a micro scale) would be further harmed. There is already desperation in many areas of the country.

Why is it that the phrase "If it's good for GM, it's good for America" still holds sway in 2010? Quite possibly, it's because this country has been under the delusion, since the victory in WWII, that it can do no wrong. I would argue that we are far enough away from WWII that we need to enter a new phase of American economic history, one which recognizes that unfettered, laissez-faire capitalism in the information age (as opposed to the industrial age) simply does not work. Workers need a decent wage, family leave protection, health care, paid vacation and a pension. If these things are at all questionable these days, I cannot understand why, unless you believe that workers who do not take vacations regularly are more, not less, productive, that workers who are healthy are less productive, and the promise of some kind of retirement at retirement age are rights that the government should somehow ensure are in place for workers is likewise disposed to disincentivize workers. On the contrary. These things incentivize workers to greater productivity. We cannot go back to what labor standards and ways of viewing industry as a whole, to the end of WWII.

While it's true that there has been significant workers' rights legislation, what hasn't worked is the way companies like GM do business in 2010 until catastrophe was "this close" to millions of families.

GM in 2010, as opposed to its halcyon days when to have an American car was a point of pride, not necessarily shame, is a shell of its former self. It got used to Americans buying American because of the simple fact that we were, and are, Americans. Sooner or later, even Barnum's sucker, born every minute, gets sick of getting hit over the head with a mallet while the Germans and Japanese, and to some extent, the Italians, have taken what we in America used to do pretty well, and have improved on it to the extent that they do it better.

So the questions that had to be asked by the president were: should America figure out something else to make? From that question arises a slew of others: what will be the product(s)? What kind of workers do we need for this industry if it is to succeed on the order of BMW, Mercedes or Toyota or Nissan and the like? What kind of management retraining will be required of those new MBAs in or just coming out of school who will head these organizations in the future? Are they taking lessons from Toyota and BMW, or is jealousy and embarrassment getting in the way of admitting failure and taking advice from those who have succeeded in doing what you only wished you could do?

The resolution of the dichotomy, in which on one hand we consider the political ramifications of putting millions of Democratic voters into a further state of shock, all the while fighting a battle against the perception that the money given went straight into the pockets of undeserving "CEOs" and other upper management, and on the other what must be the knowledge on the part of the President and his advisors that, for example, the plant at Ypsilanti, Michigan, which used to turn out B-24 Liberators and other items of war during WWII, is not the future of this country unless massive institutional change in the way that American automotive manufacturers do business. World War II is over. It's time to recognize that ways of doing business "the American way" isn't always without its faults.

I imagine that based on what is happening now, it will take at least another five to ten years for this country to redefine its manufacturing bases. At this point, we are floundering. The bankruptcy of GM is simply a symptom of a deeper issue that no-one was paying attention to until fairly recently: the need to wake from the hubris-inspired way of doing business that was the result of out-manufacturing every country in the world and winning WWII. Time to get lean and mean again, and that will not be without pain.

Randy Shiner

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