Monday, June 1, 2009

GM, bankruptcy, the self-referential problem, the Red Wings, and brains vs. brawn

General Motors has declared bankruptcy. I'm not going to link to any of the zillion of articles on it, because it's too depressing to have to read about it yet again.

Except for Dan Neil's article. He has a great take on it, recounting GM's glorious couple of decades, the '50's and 60's. He has an intriguing idea as to what was the turning point for GM:

I have my own theory. In 1999-2000, GM had a golden opportunity to right its ship by backing Democratic presidential candidate Al Gore. This might seem counter-intuitive. . .
Yes and no. It is counterintuitive in the immediate sense, because Al Gore wasn't really a Detroit kind of guy. He is quite the egghead, very cerebral and sensitive. The quintessential liberal intellectual type. But he was in favor of universal healthcare, which, as Neil points out, could have saved GM a bundle.

I think Neil is capturing something here, although he doesn't quite put his finger on it.

Something else happened in Detroit over the weekend, much more trivial, but a reason for celebration: the Detroit Red Wings won the first game of the Stanley Cup playoffs. Neil's colleague on the sports pages, Helene Elliott, put it this way:

the Red Wings on Saturday withstood the young Pittsburgh Penguins' energetic middle period by using their brains as much as their brawn.
Brains vs. brawn. The classic human dilemma. Whether to conquer with brute force or win through better planning and strategy. Hands vs. head. Football players vs. computer geeks. White collar vs. blue collar.

Pickup truck vs. sedan. Gas-guzzling but macho vs. small but efficient.

The Big Three have spent the last few years making oodles of money off of pickup trucks and big cars. I think the reason for this may be found in the ranks of their employees. GM, Ford and Chrysler have something like a million retirees. They have several hundred thousand current employees. Their dealers and parts suppliers employ another several hundred thousand. Throw in their retirees, and you easily have at least another million. Most of those employees and retirees have families, spouses, wives, kids, parents, brothers, sisters, etc.

Almost all of those people get a discount when they buy a new American car.

Then there are people who have other reasons to buy American cars, like politicians. If you are an elected official in Michigan, and you want to keep your job, you drive an American car.

I'm guesstimating here, but let's say that there are somewhere between 6 and 7 million people in this country with a direct economic interest in buying an American car. At least two million employees and retirees of the Big Three, their dealers and suppliers. Each of those has an average of two family members who buy a car. That's another four million, for six million. Then another million miscellaneous. 6 to 7 million. Most of them with some kind of discount. Let's say each one buys a new car every three years (Big Three executives used to be famous for getting a new car every year). That's two million cars a year going to this customer base. Until recently, cars were sellling at an annual rate of about 16 million a year in the US. If the Big Three were selling half of that, they were selling 8 million cars a year. 2 million of those would be a quarter. So a quarter of the Big Three's cars were being sold to people with a direct economic interest in buying American cars. People, in other words, who were already sold on them, and needed very little convincing.

Talk about insular. Most of those cars were being sold to blue collar workers, or retired blue collar workers. In other words, old white guys with little education beyond high school. How many black lesbians with advanced degrees do you think there are among the Big Three retirees? Not a whole lot.

Sound familiar? Big Three employees, retirees, and, effectively, customers, were and are the same constituency as the Republican party. It is no coincidence that the GOP and the Big Three are collapsing at the same time. It is, on the other hand, intensely ironic that Obama is the instrument of destruction of the one, and yet the savior of the other. Irony is 9/10th of the law.

Brawn vs. brains. The GOP and the Big Three represent brawn. Muscles. It is also no coincidence that Dick Cheney has emerged as the face of the Republican party these days, after being so invisible during the Bush administration. It is also no accident that Bush, his father, and Cheney were all in the oil business. They represent the "brute force" school of capitalism (although maybe "school" in the wrong word). Men (and it's almost always men) make money by the application of brute force - drilling for oil, mining, making steel, or, as (I think) Alfred Sloan put it, "bending metal and thereby adding value to it."

It is no coincidence that Cheney is the most forceful advocate of torture, the ultimate application of brute force to try to get something done, and that he is spending so much time attacking Obama. Obama represents brains. Obama represents the triumph of the intellectual, the egghead, the geek. But at this moment in history, he also represents a repudiation of the "brute force school," essentially because he has already begun to expose the flaws of that approach to life.

GM has failed in part because its employees believed their own hype, that there was something special about American cars. There are special American cars, sure - the Corvette, the Mustang, the Jeep. Those are arguably the three most iconic American cars ever - each has been made for decades. And each is a very macho car.

My family history is deeply intertwined with that of Detroit and the automotive industry. One of my great-grandfathers was the construction foreman on Henry Ford's mansion. My paternal grandfather started out life as a coal miner, moved up to the assembly line at Ford, went to trade school at Ford, and became an engineer. He only finished eighth grade, but all four of his kids went to college, and three of them have Master's degrees. I was going to be the first one in the family to earn a Ph.d.

My grandfather worked hard on the assembly line. But he also worked hard to make sure that that was exactly the kind of job that I would never have to have. I disagreed with my grandfather on just about every topic in politics, but I am forever grateful to him.

The old white guys whose world is disappearing are scared and angry because they don't understand this new world, and they don't feel like they have a place in it. What many of them don't appreciate, and what the rest of us should be grateful for, is their role in creating it.

Brains has triumphed over brawn because that is what brawn has been working towards. Not just in America, but all over the world, and not just in the last few years, but forever.

History always marches on, but sometimes it tramples. Conservatives celebrate capitalism because it holds people accountable. But they don't like the process of being held accountable any more than the rest of us.


bucket trucks said...

Once again a general motors history lesson with facts and figures, however the elite class of individuals who ran this company distroyed it by design. How could they complete with other car companys when they knew full well from there accountants many years ago they were top heavy. The global elite are collapsing the econnomy and the industrial complex of the united states for a reason. A one world government.

Martin said...

You mention that representatives in Michigan buy American... but I remember a Harpers Index entry that showed a surprising number of representatives who reported owning a domestic car in their homestate, and an import in Washington. So it's ok to own a BMW as long as your constituency doesn't see you drive it every day.

JohnTEQP said...

It's possible that there are representatives from other states who drive American cars at home and foreign cars in Washington. Here in California, you could get away with that. In Michigan, all it would take would be one campaign ad with a politician driving a foreign car, and their career would be over.