Fixing GM Via Collectivism?

Member Group : Reflections

I don’t want to sound like an old geezer, but I remember the days when General Motors had no trouble creating plenty of excitement and glamour each fall with its annual model changes.

My idea of a good date back then on a September night was to ride around to the local car dealers and climb the cyclone fences to get a sneak peak at the new models before they hit the showroom floors.

It was a time of Pontiac Bonneville convertibles, Thunderbirds, Mark V Continentals, Corvettes, new suburbs, growing prosperity and a sky’s-the-limit American cockiness, the late 50s and early 60s, and Cadillac was tinkering with V-16 engines and ever-bigger tail fins in its concept cars.

Gas was cheap, the chrome was thick, Bobby Darin was on the radio, and I had a 1959 Chevy Impala convertible, the one with the spread wing trunk. It was three-tone – fire engine red car, white wings, black cloth top.

Mechanix Illustrated was impressed: "This big Impala (and it’s bigger than the Cadillac of ten years ago)" has "the most radical styling of the new model year," a bold design that "will be the talk of the automotive year."

"The rear-deck treatment is pure Louis Armstrong –gone, man, gone!" continued the Mechanix review. "The view from the rear is strictly Spaceship 1989. It carries tremendous horizontal fins which hover over teardrop-shaped tail light clusters to give the whole thing a kind of two-story effect. My first reaction when I saw this rear flight deck, which curves downward from either side in a slow V, was ‘what a spot to land a Piper Cub!’ It’s crazy, but craziness is good taste."

Not "craziness in good taste." It said "craziness is good taste." Even Mechanix Illustrated was feeling the vibrations of the coming liberation of the 60’s.

Now it’s begging time, following several decades of building nondescript cars with overpriced labor, a line of GM cars all sharing the same bodies, universally boring, so you couldn’t tell a Pontiac from an Oldsmobile without reading the name on the trunk.

Mark LaNeve, head of sales and marketing at General Motors, wrote the begging letter last November to GM’s 6,500 dealers across the nation, asking each one to call, write or e-mail their representatives in Congress to ask for money.

With GM saddled with $62 billion in debt and bleeding red ink last year at the rate of $85 million per day, LaNeve asked the dealers to go to the federal government with cups in hand: "As we’re in the midst of the deepest crisis our industry has ever faced, GM’s priority is on seeking support from various U.S. government agencies and Congressional leaders."

Once a symbol of the success of American capitalism, once the world’s largest industrial company, GM is now subsisting on $15.4 billion in federal loans and asking for $11.6 billion more.

A shell of its former self, a company that once controlled more than half of the U.S. car market, GM is now offering a revamping plan for the approval of its federal overseers that includes the elimination of another 21,000 union jobs, i.e., a 30 percent cut from the current level of its factory workforce, the closing of another 13 plants, a reduction of nearly 50 percent in its number of dealerships, the killing of the Pontiac brand, a halt Saturn in production by the end of the year, and the selling off of Saab and Hummer. Only Chevy, Buick, Cadillac and GMC will remain.

When it’s all over, General Motors expects to have only 38,000 union workers, i.e., less than 10 percent of its 395,000 unionized workforce in 1970, and hopes, somehow, to not fall below its current 18 percent share of the U.S. car market.

As part of its restructuring plan, in order to get relief from pension payouts that cost more each year than GM’s capital spending for new models, GM would pay stock to a trust fund managed by the United Auto Workers union to pay for retirees’ health care costs. That would leave the union owning an estimated 39 percent of the company.

Add another 50 percent of the company that will go to the Treasury in exchange for forgiving approximately $10 billion in federal loans and GM becomes Collectivized Motors, 89 percent owned by the U.S. and the UAW.

And that’ll stop the red ink? The inefficient will somehow turn efficient?

Ralph R. Reiland is an associate professor of economics at Robert Morris University in Pittsburgh.
Ralph R. Reiland
Phone: 412-884-4541
E-mail: [email protected]