In an op-ed in the New York Times this morning Robert Lowenstein writes a number of things I agree with about U. S. auto companies, generally, GM in particular:
General Motors got into the dubious habit of steadily increasing worker benefits. In 1961, G.M. was able to get away with a skimpy 2.5 percent increase in wages by also guaranteeing a 12 percent rise in pensions. Such promises significantly burdened the company’s future. As workers lived longer, the cost of fulfilling pension commitments rose. And health care costs exploded.
By the 1980s, it was clear that the Big Three automakers faced a serious threat from Japan. But General Motors and the U.A.W. were locked in a mutually destructive embrace. G.M., fearing the short-term consequences of a strike, continued to grant large increases in benefits — creating an intolerable gap between its costs and those of its foreign competitors. Union officials feared to face the rank and file without a big contract.
It wasn’t just General Motors in the abstract or automakers, generally, who were at fault. It was bad, short-sighted management in which all that was important was their current executive benefits package or today’s stock price. That has been the problem in the auto industry, that has been the problem in the airline industry, and that’s been the problem in any number of other industries.
There was something in the op-ed that surprised me, however:
The automaker is weighing yet another round of layoffs — and maybe even a fire sale of venerable brands like Buick and Pontiac.
That’s extremely surprising to me. To the best of my understanding GM is profitable in every market except North America and in many growing markets, particularly in China, Buick is a big seller. If Buick goes on the block, this sounds a great deal like more of that bad, short-sighted management I was talking about.
Wimpy, pictured above, is one of the peripheral characters from the Popeye comic strip who famously “would gladly pay you Tuesday for a hamburger today”. I can’t think of any better emblem for too many American managers. They already got their hamburger. Now where’s the beef?
Consider that the most profitable arm of GM, GMAC, was put on the block a couple of years ago. GM has no problem eating its seed corn. Moreover, GM has the most blighted management and employee relations of any company I have ever seen, and that’s saying something. If GM doesn’t collapse entirely within two decades, I’ll be astounded.
Yeah, that astounded me, too, Jeff. My guess at the time was that there was water on the books.
Hey, maybe they’ll bring back the Oldsmobile!
Don’t ask me what I drive.
C’mon now, short-sighted unions deserve at least as much credit….
Tully, short-sighted unions deserve AT MOST as much credit. While I am no fan of present day unions, simply blaming the unions has been a shield to protect crappy management for 30 years now.
There’s a difference between the level of responsibility that can be assigned to unions and that to company management. It’s the job of union officials to get the best possible deal for their members. Union officials are just doing their jobs.
Managers, on the other hand, have the responsibility for increasing shareholder value. They haven’t done their jobs.
When it comes right down to it, everything that management says about the unions is true. And everything that the unions say about management is also true.
Maybe saurian management that wants to continue producing traditionally American (i.e. hugely oversized and fuel-inefficient) vehicles, in an environment of rapidly increasing fuel prices, has something to do with GM’s problems. I won’t be crying.
It’s the job of union officials to get the best possible deal for their members. Union officials are just doing their jobs.
Dave, it’s hardly the best possible deal for their members if it kills the Golden Goose. Union officials should also be expected to have a long-term perspective.
It’s a question of relative priorities, Outis. It seems excessive to me to ask that union officials be more concerned about the survivability of the company than the company’s managers are.
It seems excessive to me to ask that union officials be more concerned about the survivability of the company than the company’s managers are.
True enough, which is why I think the management deserves no less than half the blame, and probably more. But if management changed its position, would the unions change theirs?