The
Guts Of America
Falls On Hard Times
By Jim Taylor
19 November,
2008
Countercurrents.org
When I was growing up, there wasn’t much choice about cars. Detroit iron – in Canada, Detroit iron built in Ontario – dominated the roads.
It was commonly said, “What’s good for General Motors is good for America.”
Today, it might better be rephrased: “What bad for General Motors is bad for America.”
General Motors once was America’s largest corporation.
Today, Fortune 500 has demoted GM to fourth place, behind Wal-Mart, Exxon-Mobil, and Chevron.
Globally, GM drops to ninth. Arch-rival Toyota takes fifth place.
How the mighty are fallen
During the past week, Detroit automakers revealed they are burning more than $2 billion a month to maintain operations. GM warned that its cash reserves could sink below the minimum needed to operate by year's end, unless it gets a share of the $700 billion handout to banks.
In the third quarter of 2008 – the three-month period ending September 30 – GM lost $2.5 billion; Ford, $2.9 billion. In the last two years, GM lost $12.3 billion. Its share of the U.S. auto market shrank to 24 per cent; 30 years ago, it had 46 per cent.
More significantly, it’s running out of operating cash reserves. GM has only about $16 billion left. Ford is only slightly better off.
As a person who still bothers picking up pennies off the sidewalk, I find it hard to imagine those figures. A million still feels like an enormous number to me; a billion is beyond comprehension.
But there’s nothing imaginary about the changes afflicting General Motors.
Back in 1970, GM was the nation's largest employer. It had 350,000 workers. Today, Wal-Mart has over a million.
Back then, GM’s union contracts averaged $17.50 an hour plus health, pension and vacation benefits and cost-of-living increases.
GM still has around 350,000 workers, still heavily unionized. If I read the figures correctly, GM’s total wage and benefit package is now worth around $65 an hour. Some people will say that’s the problem – those damned unions have priced the company out of business.
Corporate life cycles
I suggest a larger picture.
A well known graph demonstrates the typical corporate life cycle. It’s called a bell curve.
At its founding, every company struggles.
As the company prospers, the line showing growth soars upward. The company innovates; it expands; it diversifies. Rules and regulations seem largely irrelevant – just get the job done!
As the company matures, the curve levels off. The company rides on its reputation. It brings in standardized policies, procedures. A hierarchical management structure develops.
Then it starts to age. Sales decline. The company cuts back on its products and services. Morale plunges. A rigid internal structure handicaps effective change.
Business analysts say that unless such a company can find new products, new markets, and new incentives, the bell curve will plunge more and more steeply towards oblivion.
GM seems to me to fit that model. Having been the world’s largest automaker for 77 years, they developed cast iron between the ears. They were unable to adapt, to change, to respond flexibly to new situations. While other carmakers went nimble, GM stayed ponderous. While others went light, GM piled on pounds.
Locked in its own ruts
More broadly, GM may symbolize American industry as a whole.
The American auto industry’s reaction to the OPEC oil embargo of the 1970s is revealing.
The Nixon administration imposed national speed limits and fuel economy regulations. Detroit responded with the classic pattern identified by Dr. Elizabeth Kubler-Ross in her ground-breaking book, On Death and Dying.
First, denial. You can’t do this to us, they told Washington. We can’t do what you expect.
Next, anger. Car companies launched a massive advertising and lobbying effort against the new rules.
Then bargaining, a search for compromises. Give us longer, the industry pleaded. Ease the conditions. Grant some exemptions...
Eventually, when bargaining failed, depression. Auto sales plunged as American cars struggled with makeshift solutions that robbed performance.
In the end, of course, American automakers accepted the new normal, and started building the best cars they had ever produced. But it may have been too late. Because in the meantime, Honda and Toyota had accepted the challenge. They developed cars that produced more power from smaller engines, using less gas, without a patchwork quilt of add-ons.
A tangible symbol
America, you may remember, did not take kindly to the upstart Japanese imports. I recall driving from Saginaw towards Detroit at the end of a holiday weekend. The I75 was a thundering herd of huge American cars, an irresistible conveyer belt hurtling along at a steady 75 mph.
I was driving an early Honda Accord hatchback. I felt invisible. And incredibly vulnerable.
Once upon a time, I recall, I too lusted for big Detroit iron. Then, around high school graduation, I had a conversion experience. I got turned on by agile little British sports cars – MGs, Triumphs, Austin-Healeys, Jaguars...
German cars were too pricey for my tastes -- champagne on a beer budget -- but I’m still hooked on Jaguars.
So I have no emotional attachment to General Motors. Unlike some of my friends who will buy Buick sedans and Chevrolet trucks until they’re buried in small-block coffins, I do not feel emotionally threatened by GM’s current troubles.
But neither do I rejoice in those troubles. Because if GM fails, the guts will go out of America.
For generations, Americans could identify with their cars as tangible symbol of American prowess. There, they could say, we built those! That’s us!
They will not do the same with a big-box Wal-Mart store or a fast-food McDonald’s franchise.
Ford is in only slightly better shape than GM; Chrysler is in worse shape. Neither cannot replace GM in America’s psyche. Nor can Japanese or European cars. American pride will be seriously wounded if the only cars it can buy are called Hyundai or Mitsubishi.
As GM goes, I fear, so goes America.
Jim Taylor is a Canadian with over 40 years experience
in mass communications. His columns are archived at http://edges.canadahomepage.net;
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