Wednesday, November 19, 2008

As "Big Three" Plea for Aid, Re-Watch Roger and Me

According to today's Wall Street Journal:

"Senate Democrats introduced legislation that would set aside $25 billion to help the [auto] industry, drawing from the $700 billion fund created to stabilize financial markets. The legislation would allow the auto companies and parts suppliers to receive 'bridge loans' of at least ten years with favorable interest rates. But there is resistance among many senior Republicans and the White House. If no decision is made this week, the issue will be kicked over to the new 111th Congress."

However, there is Senatorial resistance to approving the loans, and for good reason. The auto industry's problems literally span my life. In the late 1940s (I was born in '54) Peter Drucker wrote Concept of the Corporation in which he was mostly complimentary about the firm but raised questions about its labor relations and social responsibility practices. In the mid 1960s Ralph Nader wrote Unsafe at Any Speed, which was critical of the Pinto and the Corvair, and GM's response was to try to frame Nader with a hooker. In 1972 John Z. De Lorean and J. Patrick Wright published On a Clear Day You Can See General Motors, which mocked GM's incompetent and manipulative management. By the late 1970s, the Big Three had failed to respond to the lean manufacturing and quality management initiatives of Toyota and other Japanese manufacturers. In 1980 Congress bailed out Chrysler with a loan guarantee. In the 1980s, the "Big Three" made some quality gains, but soon fell back on the strategy, which seemed bizarre and lame to me at the time, of manufacturing huge SUVs and ignoring quality. In the late 1980s, C Jackson Grayson and Carla Grayson O'Dell wrote American Business: A Two Minute Warning in which they described GM robots painting themselves instead of the cars, and hugely expensive robotized plants that were too inflexible to be competitive. In the late 1980s Michael Moore came out with Roger and Me. One of the themes of Roger and Me is GM's insistence that it is a private corporation and owes no special allegiance to the public or to its employees. In the film as elsewhere the firm opines that the moving of a large percentage of its plants to Mexico is a private, profit-maximizing decision and the public has no right to criticize its use of plant relocations or layoffs. But if plant relocation and layoffs are private decisions, why should the public be concerned about GM's bankruptcy risk?

In contrast to GM, Toyota provides lifetime employment to its employees and has moved a number of plants to the US. Toyota does not complain about labor or fixed costs, but has been criticized for the inflexibility of lifetime employment. GM has laid off workers throughout its history yet now complains about pension and health insurance costs.

Most readers of my blog are not probably fans of Michael Moore. I too disagree with his dream of imposing a Cuban-style $250 per year health program on Americans, or a French-style program that WOULD NOT provide for sewing any of the fingers back on (if you saw Sicko you know what I'm talking about).

Nevertheless, Roger and Me is a good movie, and it should be mandatory for all the Democrats eager to provide subsidies to firms that have insisted on the importance private property rights.

The following is Siskel and Eberts's review of Roger and Me from 1989. General Motors went bankrupt in the 1910's, and the DuPonts took it over in the 1920s and ejected the CEO, Willy Durant. Is GM a firm that has looked out for Americans? Is it a firm that you or I really want to support out of our hard earned money? And why can't they build cars that Americans want to buy?


Jason said...

The UAW needs a little tough love. It derailed the Cerberus deal at Delphi. Today GM suffers a loss of about $2,000 per vehicle sold. On the other hand Toyota whose employees are not part of the UAW earns a profit of about $1,200 per vehicle sold. If GM was able to operate with labor prices near Toyota’s it would have pocketed an additional $29,715,200,000.

GM bailout nonsense

Anonymous said...

Seen Michael Moore on Larry King last night?