Fixing GM - Fools Errand or No Choice Proposition

General Motors is not the behemoth is once was but it certainly employs a lot of people directly as employees, indirectly through its thousands of suppliers or even more indirectly through the earning power of these people that are kept gainfully employed spending money and keeping our floundering economy afloat. After scorning its lackluster models for years, many of us feel we should just let it die. Then again, since we all seem to be trying to keep our necks above water, if this Titanic does indeed go down will all be sucked into the vortex behind it. Hank Paulson thought the Lehman debacle would be a manageable bankruptcy. After all, they had months to prepare for it. Instead it blew a hole right through our financial system seizing up our money markets and leaving us tottering. Right now, with our economy listing heavily to port, can we sustain another torpedo shot in the bow? I am not ready for that, but is there anything that all the kings horses and all the kings men can do to put this cracked up company back in shape?

GM is a screwed up company for many reasons - its unions, its management and the government of the United States.

Having worked in a union shop, with UAW no less, I have personally seen what transpires under the union label. The basic mode of operation that describes the union shop I worked in was to milk the company as much as possible while doing as little as possible in the hope that management would relent and give them paid, time and half and double time overtime. When a union employee, usually a younger employee, wanted to do more than what was expected of him - he was actually disciplined or ostracized by the other union members. Since seniority is king in a union shop, these workers were inevitably weeded out. Last hired - first fired! Senior union members were free to read newspapers, phone in stock orders or in one memorable episode work on machining custom knife blanks into machetes with rosewood handles. In order to get work moving management resorted to a TLO - temporary lay off. In a TLO the generally older union guy agrees to stay home, "Laid off" on 90% pay, receiving money from state unemployment insurance and the rest from the company, only to go back to work in a few months. Later, more and more work was just outsourced to avoid them. Younger workers found their career prospects were gone. This month the site of my former plant is being bulldozed, a national historic site that built much of the equipment that won WWII.

The unions have complicated the work rules, rewarded workers purely on seniority ruining any incentive to get the work done leaving them incapable of competing against foreign workers that are all too willing to do whatever it takes to get themselves ahead. The only way to get ahead in a union shop is to play the game and bank the years until you are untouchable - or so you thought until the whole industry dies. Pension, retiree medical and other benefits are similarly skewed so that GM and the other US auto makers are at a considerable cost disadvantage with any other producer. Note that Toyota and other foreign companies actually produce cars in the USA - in states like Alabama far from the UAW stronghold of Michigan - soon to be a howling wasteland.

Let us not forget management. GM management is like most management in the United States - they mostly care about short term numbers and not making good products or taking care of customers. Listening to the siren song of Wall Street when times are good leaves them in the dust when times turn bad. Fuel efficient cars - we can't do those, there is no market for them because gas is cheap. They seek to maximize profits and their own bonuses. Since we import something like 70% of our oil, their business model was totally dependant on cheap oil prices. Risk management - bah humbug, profit maximus rules the day. Is this the first time this has happened to the US auto industry? No, back in the 70s we saw the same sorry story. Detroit got waxed then just the same and when oil went back down they resumed business as usual. These auto makers are so adverse to change they lobbied for years against seat belts. Then they lobbied against higher fuel efficiency standards.

Lastly, United States government does not make it easier for any company to compete in a world marketplace. Most countries do not burden their job producers with high taxes and the need to provide health care for their workers. These two strikes put them at a distinct disadvantage. Business taxes are very high in the USA, and this is part of the shell game. Everyone thinks that someone else is paying this tax. Instead it is paid for by consumers in higher cost and employees in jobs lost to cheaper regions. As even McCain stammered out about Ireland - lower taxes is one of the tools that the emerald isle used to attract foreign companies to relocate there - which they did. We get the reverse of the coin - our companies flee. The other huge burden of health care, is paid by the people in the form of taxes in other countries, or in the case of China perhaps not at all. This anomaly owns its existence to WWII where wage and price controls forced companies to use their benefit package as the means of attracting scarce workers.

The US also let Detroit whine and complain about fuel standards and other things that would inconvenience their bottom line. Instead the USA ignored the fact that we have slipped from being a self-sufficient nation to being a nation at the mercy of foreign powers. Our political leadership is clueless and only interested in short term electoral advantages.

It is interesting that the democratic party has endorsed the concept that strengthening unions will help us restore our economy in a global marketplace when these same unions have helped crippled our economy and made us noncompetitive. They intend to push legislation that will allow union organizers to force employees to vote in open ballot on whether their plant should be unionized. Vote no and have your tires slashed, your home vandalized and be ostracized in public while receiving anonymous phone calls. Its been a long time since the service department at Ford was a goon squad tasked with beating up union organizers. Now it seems coercion is to be a legitimate tool of union organizers. All in this land of freedom. Barak Obama has stated he will sign this type of legislation.

I don't know how much success the government will have in running the auto industry. Even this new administration seems about to make some very bad decisions.

We are all stuck between a rock and a hard place.