Politics as usual continues
Despite a massive bailout of the auto ind. ustry, TARP for the financial industry, and stimulus for yet-to-be-defined infrastructure projects, our economy continues to limp along. Politicians continue to fret over high unemployment as they brace themselves to face the voters in November. Their short-term mindset coupled with the focus on either maintaining or gaining control of Congress has created much uncertainty. Add the uncertainty as to business costs associated with health care reform, financial regulation, and the "Bush tax cuts" to the mix and there is a mountain of uncertainty. No wonder businesses are reluctant to hire and consumers are reluctant to spend.
I do not see the Republicans as the proverbial knight to the rescue. They do not seem to have a plan other than attempting to capitalize on our economic travails. Many Americans continue to struggle yet our politicians are staking out positions in order to win seats in Congress.
Economists continue to point to this uncertainty and the dysfunctionality in Congress as perpetuating our economic duress. But in DC, it is a politics as usual.
Even if Republicans gain control of the House, I do not see that as a guarantee that things will improve.
However, there may be a glimmer of a new mindset emerging New Jersey Governor Chris Christie is administering much needed strong medicine to its fiscal house. When confronted by those whose programs he proposes to cut, Gov. Christie repeats his mantra of "I am not against your program. We cannot afford it". Hmmm. Fiscal responsiblitity -- what a novel idea.
I do not see the Republicans as the proverbial knight to the rescue. They do not seem to have a plan other than attempting to capitalize on our economic travails. Many Americans continue to struggle yet our politicians are staking out positions in order to win seats in Congress.
Economists continue to point to this uncertainty and the dysfunctionality in Congress as perpetuating our economic duress. But in DC, it is a politics as usual.
Even if Republicans gain control of the House, I do not see that as a guarantee that things will improve.
However, there may be a glimmer of a new mindset emerging New Jersey Governor Chris Christie is administering much needed strong medicine to its fiscal house. When confronted by those whose programs he proposes to cut, Gov. Christie repeats his mantra of "I am not against your program. We cannot afford it". Hmmm. Fiscal responsiblitity -- what a novel idea.
Lessons Learned
I definitely recommend the book "Crash Course" by Paul Ingrassia. The author provides an excellent insight as to the ills of the auto industry, its perennial denial of these problems, the distrust between unions and management, and the ultimate day of reckoning. The auto industry's crash was truly the result of "hubris borne of success" that Jim Collins expounds upon in "How the Mighty Fall".
How many businesses can survive by paying workers 95% of their compensation by not working; by offering lifetime health insurance at no cost; providing executives with two new leased cars per year; by having such ridiculous work rules so that workers wait and draw overtime pay until the person with the right job title fixes a broken machine?
Hopefully, the auto industry has learned from its close brush with death. However, its history and track record would seem to indicate otherwise. At times, I found myself shaking my head at those heading the auto ship as it steamed full ahead towards the waterfall of collapse.
Nevertheless, there are many lessons that we can learn from studying this storied and troubled industry, both from a professional and personal perspective.
How many businesses can survive by paying workers 95% of their compensation by not working; by offering lifetime health insurance at no cost; providing executives with two new leased cars per year; by having such ridiculous work rules so that workers wait and draw overtime pay until the person with the right job title fixes a broken machine?
Hopefully, the auto industry has learned from its close brush with death. However, its history and track record would seem to indicate otherwise. At times, I found myself shaking my head at those heading the auto ship as it steamed full ahead towards the waterfall of collapse.
Nevertheless, there are many lessons that we can learn from studying this storied and troubled industry, both from a professional and personal perspective.
A Tale of Two CEO's
Both men were at the pinnacle of power in corporate American, heading up the two largest auto companies. Rick Waggoner was at the time CEO of GM while Bill Ford, a family scion, headed Ford Motor Company.
In 2006, a few GM board members were having doubts as to whether Waggoner was the right man to lead GM's turnaround amid mounting debt, declining d market share, and a natural tendency to avoid clashing with the UAW. There was a movement afoot to replace him which he was able to dodge. There questionable accounting practices which he was able to survive. Then, there was the potential alliance with Nissan/Renault which Waggoner had evaluated by his own management team, versus an outside financial consultant. His management team was able to convince the GM board from pursuing the alliance. In so doing, Waggoner saved his job which was the whole purpose of conducting an in-house evaluation.
In 2006, Bill Ford had come to the stark realization that he was not the man to lead Ford. He was at the top because he was a Ford. Displaying unusual personal courage, humility, and self-awareness, he decided to step aside to find another CEO. He pursued Boeing's Alan Mulally as his replacement as CEO. Mulally, who had helped turnaround Boeing's problems, insisted that Ford serve as Chairman before accepting the job.
In 2008, GM along with Chrysler went to Washington DC to ask Congress to bail them out. Ford had taken its medicine under Mulally and had begun to turnaround thereby eschewing any federal assistance. In 2009, Waggoner was forced out at GM.
In 2006, a few GM board members were having doubts as to whether Waggoner was the right man to lead GM's turnaround amid mounting debt, declining d market share, and a natural tendency to avoid clashing with the UAW. There was a movement afoot to replace him which he was able to dodge. There questionable accounting practices which he was able to survive. Then, there was the potential alliance with Nissan/Renault which Waggoner had evaluated by his own management team, versus an outside financial consultant. His management team was able to convince the GM board from pursuing the alliance. In so doing, Waggoner saved his job which was the whole purpose of conducting an in-house evaluation.
In 2006, Bill Ford had come to the stark realization that he was not the man to lead Ford. He was at the top because he was a Ford. Displaying unusual personal courage, humility, and self-awareness, he decided to step aside to find another CEO. He pursued Boeing's Alan Mulally as his replacement as CEO. Mulally, who had helped turnaround Boeing's problems, insisted that Ford serve as Chairman before accepting the job.
In 2008, GM along with Chrysler went to Washington DC to ask Congress to bail them out. Ford had taken its medicine under Mulally and had begun to turnaround thereby eschewing any federal assistance. In 2009, Waggoner was forced out at GM.
First exposure to unions
My brother and I used to deliver the Richmond Times-Dispatch in the 70's. We used to pick up our papers at a local grocery store. One morning, we came across a pay stub of an employee who was union worker at Allied Chemical. What struck us was the union dues withheld from this employee's paycheck. I do not recall the exact amount but it stood out as being significant. My brother tried to explain to me the benefits of union membership. All I could remember was the union dues. It just did not seem fair.
I will admit that I believe unions have improved what was once awful and even horrific working conditions in this country. They have improved the standard of living for most Americans. They have championed benefits that flowed into other industries. However, their legitimate mistrust of management and desire to get the best for their rank and file caused them to overreach. This overreach coupled with management's extravagance, hubris, mistakes, and missed opportunities brought the auto industry to its knees in 2008.
In "Crash Course", the author chronicles the life of a UAW member who worked over 30 years at Chrysler. Despite its close calls with bankruptcy, this worker and his fellow union members believed that Chrysler would always bounce back from the brink and be around for them. Call it naivete or hubris, like those
who proclaimed the Titanic as "unsinkable", perhaps those at Chrysler and elsewhere have fallen into a flawed mindset: that "The Big 3" would always be around and the US government would never let them fail.
The free market, a truly free market, is like Darwinism. Though insensitive to human suffering, it can weed out the weak and inefficient businesses, even our auto industry. They have had their chances to change their ways only to revert back to behavior which continues to bedevil them. Perhaps allowing GM to fail in 2008 would have been just the wake-up call they needed. Sadly and owing to their dismal track records, I do not believe that the UAW and auto industry management will change.
I will admit that I believe unions have improved what was once awful and even horrific working conditions in this country. They have improved the standard of living for most Americans. They have championed benefits that flowed into other industries. However, their legitimate mistrust of management and desire to get the best for their rank and file caused them to overreach. This overreach coupled with management's extravagance, hubris, mistakes, and missed opportunities brought the auto industry to its knees in 2008.
In "Crash Course", the author chronicles the life of a UAW member who worked over 30 years at Chrysler. Despite its close calls with bankruptcy, this worker and his fellow union members believed that Chrysler would always bounce back from the brink and be around for them. Call it naivete or hubris, like those
who proclaimed the Titanic as "unsinkable", perhaps those at Chrysler and elsewhere have fallen into a flawed mindset: that "The Big 3" would always be around and the US government would never let them fail.
The free market, a truly free market, is like Darwinism. Though insensitive to human suffering, it can weed out the weak and inefficient businesses, even our auto industry. They have had their chances to change their ways only to revert back to behavior which continues to bedevil them. Perhaps allowing GM to fail in 2008 would have been just the wake-up call they needed. Sadly and owing to their dismal track records, I do not believe that the UAW and auto industry management will change.
Too big to fail?
This expression was popularized in the business presses beginning in 2008 when the world economy was spiraling downward. Bear Stearns was not allowed to fail. Lehman Brothers was allowed to fail. The government intervened and bailed out AIG, GM, and Chrysler.
As I continue to study "Crash Course", I find myself amazed as to the mismanagement, the greed, the union tactics, and how both the unions and management essentially killed the golden goose. Recoginzing that there were national defense implications coupled with a potential domino effect throughout the auto industry, I am beginning to wonder whether we should have allowed both automakers to fail. I temper this feeling with the concern as to the impact on the states of Michigan, Ohio, and others, and its citizens had GM and Chrysler been allowed to go under. Perhaps there is a moral hazard associated with company behavior if they know that the federal government will step in and catch them from falling despite imprudent business decisions.
More later as I continue with "Crash Course".
As I continue to study "Crash Course", I find myself amazed as to the mismanagement, the greed, the union tactics, and how both the unions and management essentially killed the golden goose. Recoginzing that there were national defense implications coupled with a potential domino effect throughout the auto industry, I am beginning to wonder whether we should have allowed both automakers to fail. I temper this feeling with the concern as to the impact on the states of Michigan, Ohio, and others, and its citizens had GM and Chrysler been allowed to go under. Perhaps there is a moral hazard associated with company behavior if they know that the federal government will step in and catch them from falling despite imprudent business decisions.
More later as I continue with "Crash Course".
November Elections
Typically, I vote Republican except when I voted for Chuck Robb over Marshall Coleman in the early 80's.
I was a true Reaganite and was proud to have him as our President. Though I disliked President Clinton, he was a consummate politician and had put the country on the road to fiscal discipline. He squandered his 2nd term.
In the 80's, the Democrats' alternative to "Reaganomics" was its failure. In the 90's, the Republicans' response to Clinton initiatives was to stop or stall their passage. But, there was the "Contract with America". Today, the current Republican leadership does not seem to have a plan other than to regain control of Congress. That could foster in yet another period of gridlock.
So, as we approach an important mid-term election, the uncertainty that it is creating and the potential gridlock the results could engender has certainly fostered an atmosphere of drift, uncertainty, and even fear. Our nation is years away from recovering from the "Great Recession", yet our politicians are focused exclusively on either holding the majority in Congress or regaining the majority.
I fear that regardless of what happens, we'll see more polarization and politics as usual to the detriment of our citizens and a growing economy. There are, however, a glimmers of hope in the horizon. There seems to be an emergence of younger Republican governors and leaders who understand the importance of fiscal responsibility and are acting accordingly. Let's hope they and others answer the clarion call to get our country back on the right fiscal road lest we see a complete collapse in our economy due to unsustainable debt.
I was a true Reaganite and was proud to have him as our President. Though I disliked President Clinton, he was a consummate politician and had put the country on the road to fiscal discipline. He squandered his 2nd term.
In the 80's, the Democrats' alternative to "Reaganomics" was its failure. In the 90's, the Republicans' response to Clinton initiatives was to stop or stall their passage. But, there was the "Contract with America". Today, the current Republican leadership does not seem to have a plan other than to regain control of Congress. That could foster in yet another period of gridlock.
So, as we approach an important mid-term election, the uncertainty that it is creating and the potential gridlock the results could engender has certainly fostered an atmosphere of drift, uncertainty, and even fear. Our nation is years away from recovering from the "Great Recession", yet our politicians are focused exclusively on either holding the majority in Congress or regaining the majority.
I fear that regardless of what happens, we'll see more polarization and politics as usual to the detriment of our citizens and a growing economy. There are, however, a glimmers of hope in the horizon. There seems to be an emergence of younger Republican governors and leaders who understand the importance of fiscal responsibility and are acting accordingly. Let's hope they and others answer the clarion call to get our country back on the right fiscal road lest we see a complete collapse in our economy due to unsustainable debt.
"Crash Course" by Paul Ingrassia
Just started this very interesting book on the American auto industry, its beginnings, its ascent, and its recent collapse. So far, this former Wall Street Journal writer is providing an objective view of why the industry has fallen on hard times. Like most failures of this magnitude, both management and the union contributed mightily to the collapse. There certainly was here "hubris borne of success" as Professor Jim Collins wrote in "Why the Mighty Fall".
Instead of watching the competition, demographics, and consumer preferences, Mr. Ingrassia writes that management and unions spent their time trying to outsmart each other.
For example, GM used to have separate restrooms for blue collar and white collar workers; the latter having more amenities. The UAW, on the other hand, negotiated job banks whereby seasonally laid off workers earned 95% of their regular compensation for doing nothing. From that came, "inverse layoffs" whereby more senior UAW workers took the seasonal layoffs so that more junior worker had to work rather than drawing 95% for doing nothing.
I will admit my anti-union animus. Often times they have overreached. They have perpetuated mediocrity and slothfulness. Seniority has its place but it should not supplant worker performance, innovation, and productivity. However, management certainly made its share of mistakes.
I often wonder if our auto industry is just the microcosm; that maybe America, overall, has fallen into this same "hubris borne of success" syndrome.
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