Thursday, April 22, 2010

Being General Motors

Although many Republicans were against the bailout of the U.S. auto companies, GM has repaid the $8.1 billion dollars it received nine months ago from the American and Canadian governments and saved some one million jobs according to analysts if GM and Chrysler were allowed to fail. During this time a management guru wrote on his blog that GM should be allowed to fail and that we should move on, investing instead in technology and service. I was vehemently opposed to this. Technology and service, whether produced by big or small businesses or sole proprietors, will not create enough jobs alone. We need to make things again. Our concentration on technology and service has created this debt economy by diluting the middle and excluding many from viable jobs. The AP reports that "GM CEO Ed Whitacre announced the repayments Wednesday at GM's Fairfax Assembly Plant in Kansas City, Kan., where he said GM is investing $257 million in that factory and the Detroit-Hamtramck plant." Oh, Detroit so desperately needs this investment and America needs to regain its status as a great industrial nation. We need to re-evaluate our sense of capital. Let's wish GM and Chrysler well.

12 comments:

Big Mark 243 said...

I have never understood how technology is supposed to create jobs. It relies on so many other factors and many of them are geared towards how profit can be created by using less labor.

Also, not everyone can be an engineer. Making sure that there is a spot in the labor market for those who develop skills that does not translate into tech skills is as important if not moreso, to the job market place.

zorro said...

For a time, Al Franken had a daily talk show on Air America Radio. One time, he had Tom Friedman on as a guest and Friedman was pushing his whole 'the world is flat' thing. Franken pointed out that many of the people who pontificate about "service economy: and the 'creative class' are just writers. They make nothing and only write and are not affected one iota by their own philosophy. Franken made a point not to be antagonistic when he asked the question. But he really wanted a response from Friedman. He didn't get one. It really irks me when high profile people push capitalism's 'creative destruction' and so forth when they are never hurt by the downside. In fact, because they make their living from selling this philosophy, the actually benefit from it.

Judith Ellis said...

Good points, Mark. I love technology. It has improved our lives immeasurably. Although, I'm not too sure that all the social networking has truly made us more social. There is a place for technology and service and there is a place for manufacturing. Manufacturing produces more tangible products to be sold in a real market and it does not allow for "instruments" such as the string of dubious non-value alphabet derivatives that created a fake market.

Judith Ellis said...

Zorro - That is an incredibly aware question that Franken asked. Thanks for telling the story. I think that it is a mistake to take everything that anyone says as true, especially those who speak for a living and who we most regard. The spoken word is powerful. Often times a sense of arrogance and pride is attached to these, as they have the power of persuasion through theatrics to compel people to action. With regards to the management guru in question, I do not think it is true of him. But I am aware of this particularly in pastors. But as pastors, management gurus and writers on book tours, etc., play an important role and I respect them for the role they play. I do not, however, believe everything they say.

chesapeake said...

If only that money were the whole story! The rest of what they owe is not in the form of a pure loan, but rather a 60+ percent government stake in the company, an investment with no guaranteed return.

And we'll see if it is indeed true that the money was paid back with company profits and not the 13.4 billion dollar escrow account funded by the government. That question is waiting to be answered.

I'm all about seeing GM succeed. But let's make sure the facts are in order before we pat the company on the back. I do wish the best for your city, as always.

-chesapeake

Judith Ellis said...

Chesapeake - The fact that taxpayers still own GM shares is not the issue here, but that they are on the way to profitability is, saving a million jobs along the way. Before the infusion of capital, the auto industry lost more than 400,000 jobs in 2008 alone, which was not the fault of management alone, but the greater economy.

Yes, there needs to be major changes with regards to how these companies do business and some changes have been made. There also needs to better collaboration with the unions when they return back to greater profitability, although the race to the bottom may not ever be possible in comparison to production in Asia and perhaps Africa--next.

As a taxpayer, I would rather own stock in something tangible than in an alphabet soup array of derivatives, for example, that have no known value concocted by Wall Street quants. With the bailouts to Wall Street, we received no dividends but billions of dollars in bonuses were issued to the near silence of Congress.

If we can bolster Chrysler and GM long enough for them to get on their feet and not layoff more employees, keeping this complex industrial business in the U.S., it may be worth it--that is, our not receiving great dividends as shareholders. There seems to be a greater trade off here.

There is also a greater issue here that deals with our fundamental sense of capital and the laws that govern it. We can lend nearly a trillion dollars to Wall Street banks that deal in non-tangibles and 20 billion or so to the car companies that actually design and build something and complain. But no one is talking about "guaranteed return." Yes, I hope that a better deal was struck for the taxpayers here than with Wall Street.

By the way, Detroit is not the only city where small businesses and auto suppliers would have been greatly impacted by the liquidation of GM and Chrysler. So, considering the jobs saved and keeping complex manufacturing in the US, a pat on the back I will most certainly give.

Go GM!

chesapeake said...

The greater economy of the US, that is. I can't pretend to sit here and shake my head trying to puzzle over why GM went under, because I don't own a GM car. Never have, and likely never will. People in America didn't stop buying cars over the last four years. They just weren't buying American-made cars. There are reasons for that. Do I think that millions of people should have lost their jobs? I would never wish for that to happen, but the reality is, I was never a GM customer. And customers are a large part of business success.

The saving of a million jobs is great. My point is that presenting that fact to the American public as a "we've done a really great job with our own profits so far" isn't the whole story. I just want the facts to be out there, whatever they may be.

And I have to say that you are teetering on the edge of a Straw Man argument by bringing up the Wall Street investment in such a way, since that was not part of my original argument. But since we're discussing where we want our taxpayer money to go instead, I'll bite. Here's my own wish list: decrease the insane amount of useless positions within the government bureaucracy, give more funding to healthy food programs in public schools and decrease the ridiculous regulations on how school lunches must be served. Or how about infrastructure improvement? Even make the post office open for one *more* day a week, not one day less, since that plan will surely make that fine US institution defunct. Decreasing service will render it fully unable to compete with the private sector companies of UPS and FedEx.

I would rather not have had the government go anywhere near Wall Street, I agree with you completely. But that doesn't invalidate my point about government holding such a large stake in a (well, formerly) private company. This whole notion of no one expecting it to be "a guaranteed" investment is just absurd. Money has to come from somewhere. I'd like to think that the people behind the wheel of all this (or formerly behind the wheel, GWB, I'm lookin' at you) at least hoped that there would be a monetary return. Hence the term investment. As my father is fond of saying, "it's an 'and' world, not an 'or' world".

The idea was to hand out money to repair the company from the inside, so it could stand on its own feet again. So simply saying that the jobs were saved, but we're not worried about a return on the investment is indicative of a mindset that the company won't actually turn around. It *all* works together: healthy company means longer-term stability for workers, means more profits, which means an eventual return on taxpayer investment. Even if this is in the long-term, that's fine. But long-term is important. Putting a band aid on it and rescuing people's positions temporarily is not good for anyone, taxpayers and employees alike. So yes, I *do* expect an return on the investment. As should you, because a monetary return means that the company has truly succeeded, not just for the sake of a catchy advertising campaign and a few minutes of good press in a 160-character culture.

Judith Ellis said...

Chesapeake – Thank you for your reply. I shall respond in this regard:

"People in America didn't stop buying cars over the last four years. They just weren't buying American-made cars. There are reasons for that."

Over the last four years car sales of all brands in America have dropped considerably. But the prevailing argument over the last decade has been that American cars are not as well built as foreign cars or are not as safe, but this simply has not been the fact. GM has won many awards over the last decade and Chrysler and Ford have also. In my opinion, their problem has been a marketing one. While every sale begins with a single buyer, the fact that you have never owned a GM car is not indicative of all sales in the US.

"The saving of a million jobs is great. My point is that presenting that fact to the American public as a "we've done a really great job with our own profits so far" isn't the whole story. I just want the facts to be out there, whatever they may be."

It is fine that you have presented your point, your story to make the one here "whole" in your opinion. But it does not negate or make irrelevant the story already presented. It is not a matter of hiding the facts or even negating them, but concentrating on an important aspect without which the country would be in a far worse condition with regards to employment. The auto industry lost 400,000 thousands jobs in 2008 alone. Jobs were saved, families can stay in their homes, and these will pay taxes instead of collecting unemployment.

"And I have to say that you are teetering on the edge of a Straw Man argument by bringing up the Wall Street investment in such a way, since that was not part of my original argument..."

Perhaps it is youth, but I think your response is perhaps focused a bit too much on you or perhaps those in your demographic. (Actually, it is the boomers who are spending more than any during this recession.) While my response is largely response to your comment, I do believe that in open discussion it is fine to elaborate on others issues that perhaps are pressing to the writer. The reply is not merely about your comment, but also my thoughts. If you have been here any amount of time you would realize that topics often expansive.

One does not need to only focus narrowly on a response to any one comment or another. This is not a bait and switch or a desire to cage or to win or lose an argument. It is a discussion. This is my desire here, at least. The expansion in discussion on taxes that you have presented here is largely agreeable. But it is your tone that is a bit off-putting from the "Straw Man" to "But since we're discussing where we want our taxpayer money to go instead, I'll bite."

Judith Ellis said...

To continue...

"This whole notion of no one expecting it to be 'a guaranteed' investment is just absurd. Money has to come from somewhere. I'd like to think that the people behind the wheel of all this (or formerly behind the wheel, GWB, I'm lookin' at you) at least hoped that there would be a monetary return. Hence the term investment. As my father is fond of saying, "it's an 'and' world, not an 'or' world."

Regarding GM and our investment, it has repaid the loan back with interest. (I like your coy elementary investment definition—cute.) But as I said in my comment above and in many other posts, I hope that Congress did a better job on the taxpayers' behalf than they did with Wall Street. This means securing our stake in the company best it can. But I still assert that the fact that 1 million jobs were saved is indeed crucial to our present economy. I agree with your father. Sometimes, however, it is indeed not possible to do the "and" as I’m sure he can attest that being in leadership for as long as he has been sometimes requires the choice of an "or." Years in leadership should teach wisdom. I am not certain that with Congress this is always the case.

"The idea was to hand out money to repair the company from the inside, so it could stand on its own feet again. So simply saying that the jobs were saved, but we're not worried about a return on the investment is indicative of a mindset that the company won't actually turn around."

When you have commented here you often have such a purist idea of how capitalism works without seemingly a real knowledge of its history. You often write as if government does not enable some and disable others by the laws it passes and the historical structures it has built. You often write as if "the wealth of the nations" has not been built on the backs of others and not merely the pull yourself up by your bootstraps farce. Legislation and looting have been exactly how "the wealth of nations" has been largely built.

You often write as if the treasury since the first secretary Alexander Hamilton in 1789 to the very present does not enable some corporations and individuals and disable others. You often write as if war is not big business in which taxpayers profit certain corporations and individuals. I think I may be able to hear you now: What does this have to do with a company’s ability "to stand on its own feet" and our "return on investment?"

Money has always been handed out and the return on investment of jobs in this case in this great recession is an investment well worth it in my opinion. But I agree and repeat as I have said above and proven in many, many posts here that Congress could have better enacted policy in the bailouts that would have better served the American taxpayers, especially with regards to Wall Street. So, again, I agree with your dad that in some cases with regards to the bailout that there should have been an "and" and not an "or." But all cases are not created equal and we have to weigh each one wisely and separately.

chesapeake said...

I enjoy all of this so much, Judith! You're awesome.

I wrote out a response and it got too long. Rather than dominating the comments here, I thought I would post it on my own blog and link to it here:

http://chesapeakewrites.blogspot.com/2010/04/to-amazing-judith-ellis.html

You've inspired me! Thanks again for the dialogue.

:-)

Judith Ellis said...

Chesapeake - You are such a talented thoughtful young lady and I am always happy when you have been through. By the way, you may always write and write and write here and I will read with interest and probably have something to say. Please know this.

chesapeake said...

Thank you. Technology can be awesome sometimes. :-)

By the way, you have an awesome name. Your first and last name flow and fit very nicely together.