The Death of GM: A Much Needed Wake-Up Call

I came of driving age when gas was under a dollar and we owned two American cars -- both models made by GM. My father, who holds a doctorate, was raised in a union household and taught my brother and I to buy American products as that meant American jobs that kept our economy strong. Three decades later, my parents, their children and their grandchildren all own Toyota's, including a few Priuses. What happened?

If you look at the auto manufacturing and economic timeline over the past generation, American innovation lost out to ivory-tower group-think, short term profits that benefit a changed executive compensation structure based on stock incentives and the unwillingness by industry to lead and innovate. We all know this, we saw it happening -- why didn't Detroit?

This is not a worker problem, it's a management problem. Autoworkers produce quality products. It was management that decided what those products would be. This is not a union problem, this is a bond-holder problem. Unions gave concessions, bond-holders found it more profitable not to. And buying American no longer guarantees American jobs -- not because of the global economy, because our government doesn't fairly protect the flow of products coming into this country by having tariffs similar to those countries importing U.S. goods.

Americans are great innovators, but our success has made us lazy to address the layers of issues that keep innovation relatively flat and controlled. Let the Death of GM as we know it, give rise to a stronger U.S. manufacturing base that is not harnessed by lobbyists, unfair trade laws and weak industrial leadership.

Comments

[DennyCrane]

I remember when GM tried to guilt us into buying their cars, telling us to "Be American, Buy American." Sorry, but if you want my money, you have to earn it. That was the problem with GM and the other domestic brands. They never really worked for it. They produced junk, whined about unions and global competition, and fought environmental and safety standards. They did everything but produce a quality product.

[TheMadHedgeFundTrader]

If you can wqke the dead. The fat lady finally sang. General Motors (GM) is gone at last. Don’t look at the share price, which now trades in pennies, down from $90. Look at the labor force, which has shrunk from 360,000 to 39,000 on its way to 18,000. I sat at Ralph Nader’s knee (because there were no chairs) 40 years ago, who wore his unfashionable trademark white shirt and pencil thin tie. He was fresh from the runaway success of his book Unsafe at Any Speed, which castigated GM for its Corvair, which had the unfortunate tendency to explode when hit from behind. Even then he was predicting the demise of GM. Companies that recklessly kill off their customers and produce inferior products at high prices can’t last, he said. Fuel efficiency and the environment came later. Many people considered him a communist then, for bashing GM was considered unpatriotic by most and treasonable by some. No doubt J. Edgar Hoover’s FBI was following his every move. I think that Obama should now make Nader a director of GM, along with that other GM hater, Michael Moore.
www.madhedgefundtrader.com

[KillTheMessenger]

King Ralph took a long time (too long, indeed) to be right on this one. He might not be alive by the time "the New GM" folds, though.

:-)

[vhhezinereg]

Oh boy -- it would have helped your credibility if you had your evil auto companies straight. It was the Ford Pinto that exploded when hit from behind.

[swift goat pet for truth]

The problem for GM started when they stopped promoting Engineers to upper management and started heavily promoting accountants.
Accountants who looked only at the next business cycle as their universe.

[KillTheMessenger]

You would think, though, that accountants would have been unhappy about selling product below cost. But they weren't. To be honest, I don't think they promoted either. It looks like they only promoted short term investors. Wait... even that does not work! Maybe they promoted idiots? Yep... that fits!

[drymartini1]

exactly KTM.

I hate public blaming accountants for crappy management running a company to the ground.

I doubt any accountant worth his salt was feeling pretty good when the book value of equity turned negative for companies like this. Accountants by profession, practice and nature (in general, exeptions do exist) follow conservatism (the accounting kind, not political term :) ) when estimating financial decisions.

I doubt the accountants were happy when the upper management was issuing insurance wraps on CDO's and collecting premiums on CDS's. its idiots running a business who were doing that.