So where do the CEOs of General Motors (NYSE: GM), Ford (NYSE: F) and Chrysler go when they need to turn their companies around? Are they huddled in their boardrooms in Detroit, planning sales strategies with top executives? Are they cracking the whip in their design studios as they seek to build the perfect car? Nah. They go where every other corporate bigwig goes when there's trouble afoot: Washington, D.C., home to the world's most dependable source of capital -- the U.S. Treasury.
This week, Rick Wagoner of GM, Alan Mulally of Ford and Bob Nardelli of Chrysler are testifying before Congress as they go fishing for $25 billion in funding to help develop more fuel efficient cars. Now that the SUV craze is over and Detroit has consumed the hundreds of millions in fat profits those trucks produced, the car companies find that they failed to save for a rainy day.
It's more than a little ironic that the one-time powerhouses of the American economy are begging the federal government for help. Major corporations have spent the last 40 years fighting government involvement in the economy -- the Big Three fought government rules requiring seat belts, for goodness sake. And GM played a major role in defeating national health insurance decades ago, among many other sins committed in the name of maintaining the glorious free market. But when they hit a wall, the corporate powers know just where to go -- and it's certainly not to the free market. No, Uncle Sam is a far more reliable source, especially in hard times. So much for free market capitalism.
The only problem is, with the bailout of AIG among others, Detroit may not like its place at the end of the state capital line. And the Big Three had better hope that voters don't start wondering why the government is spending the limited capital of the American people on an industry that is currently dedicated to lowering the wages and eliminating the benefits of its workers.
I certainly don't want to see large American companies go out of business. I just hope that they repay the generosity of the tax-payers with something other than low wages and canceled pensions.
UPDATE: In response to a question in the comments about GM's role in opposing national health insurance, you can start reading about that shameful history in a New Yorker piece by Malcolm Gladwell. Here's an excerpt:
In 1945, when President Truman first proposed national health insurance, they [union leaders] cheered. In 1947, when Ford offered its workers a pension, the union voted it down. The labor movement believed that the safest and most efficient way to provide insurance against ill health or old age was to spread the costs and risks of benefits over the biggest and most diverse group possible. Walter Reuther [the national president of the U.A.W at the time]...believed that risk ought to be broadly collectivized. Charlie Wilson [president of G.M.], on the other hand, felt the way the business leaders of Toledo did: that collectivization was a threat to the free market and to the autonomy of business owners. In his view, companies themselves ought to assume the risks of providing insurance.If that's too 'liberal media' for you and you need something more academic, try For All These Rights: Business, Labor, and the Shaping of America's Public-Private Welfare State (Princeton, 2003) by Jennifer Klein, a labor historian at Yale. Please send your revised analysis to me after you do a little reading . . .











Reader Comments (Page 1 of 1)
9-17-2008 @ 8:42PM
Nathan Young said...
this should fall under Paulson's Lehman strategy, not his AIG/Fm/Fm/Bear strategy. These guys not only should have seen this coming, anyone with half an MBA learned about the mistakes the auto industry made in the 70's.
9-17-2008 @ 8:46PM
A D said...
BS, the American government was who looted the profits of GM, Ford and Chrysler.
Stupid regulations, inept defense of the dollar againt Asian economies who blatantly have manipulated currency and you blame the auto workers? Blame the traders and the lazy instead.
9-17-2008 @ 8:52PM
A D said...
BTW, Mr Rainey,
Lets see you provide some documentation about how GM fought national health care.
Here's the truth, you made that up. You lied and now you are being called out.
So when does the lying start or stop? I say your whole blog is a lie and you are too.
Prove me wrong but I know you won't.
9-17-2008 @ 11:19PM
Arpit said...
Many of the posts gets repeated again in the RSS feeds of bloggingstocks. Please try to get rid of this !
9-18-2008 @ 2:54AM
gumbo koontz said...
I dont care about the politics of GM and Ford . All I care about is good stock prices to go along with good dividends. UAW has to provide this to shareholders but never did. That is why GM and Ford is at all time lows... UAW called the management incompetent but said nothing of the hundreds of billion dollars that the management had put away for the UAW pension funds. I dont know how old you are but if you are a young person, you had no idea how dreadful it was every four years when UAW and the management met to renew contracts. It was always a bummer year for shareholders every time. UAW was once one million and half workers strong and it is less than half million workers now. Doesnt it sound to you like the surrender of UAW? UAW chose to play the musical chairs all along. If you dont think GM or Ford should freeload Uncle Sam for a few billions, then you can ask UAW to lend billions to GM and Ford out of UAW pension fund that is not used at all... I still like driving GM or Ford cars and earning excellent dividends.. You are a real wussy wimp for giving up on GM and Ford!