Even when we know what is right, too often we fail to act. More often we grab greedily for the day, letting tomorrow bring what it will, putting off the unpleasant and unpopular.
~Bernard M. Baruch
We all knew the GM Initial Public Offering was coming. I was not a fan of bailing out the auto companies, but I thought I would feel at least a little happy to see them exit bankruptcy and list their shares again. After all, I live right across the river from Detroit. GM used to have a sizeable presence here in Windsor.
In fact, just a short drive from my home, I can stand at the edge of the Detroit river and look directly at GM headquarters. It used to be called the Renaissance Center. I can remember when it was built, although I was only in Grade 2 at the time. There was a lot of hope that the gleaming set of towers would spruce up Detroit’s downtown core – and its dusty image.
For a while, it seemed to do just that. The towers lit up the skyline. GM took over the RenCen as its headquarters in 1996. It seemed appropriate to have their head offices front and centre in the Motor City. After all, much of the economic activity for the whole cross-border region revolved around the Big Three.
I don’t need to tell you that when the auto industry dried up, a lot of jobs in the region were lost, either as a result of plants closing or because of the collateral damage to parts suppliers and other automotive offshoots. When people don’t have money to spend, almost every portion of the local economy suffers, from smaller shops to restaurants and strip malls.
Who’s to blame for the collapse of the North American auto industry is a hotly debated, highly emotional topic – especially around here. My personal opinion is that two main factors contributed to the failure of Chrysler and GM:
- Poor Management: The cost structure of these companies was so out of whack that it’s no wonder they ran into serious trouble. They produced vehicles that were simply not as popular as those made by other automakers. Instead of listening to the market, they continued to pound out the gas guzzlers. They also produced too many vehicles and were forced to use incentives to sell them. Management compensation exceeded performance by a wide margin.
- Excessive Labor Entitlements: While many would publicly deny it, I’ve heard a lot of stories about workers doing next to nothing, or working at a snail’s pace, and happily collecting super-sized pay cheques, cushy benefits, and enviable pensions. While many claimed that the recent coverage about auto workers smoking pot and drinking on their lunch hour was an isolated incident, it came as no surprise to those of us who grew up with many similar wink-and-nod anecdotes. What was surprising to me was that these people had the nerve to carry on with these traditions even after receiving billions from taxpayers and nearly losing their jobs.
Both management and labour can come up with a list of reasons why the other is to blame. Neither one seems to have any idea how they might have contributed to the collapse of the industry. Neither side seems to care that they took a lot of smaller players down with them, and that those companies didn’t receive taxpayer bailouts. They didn’t survive, and their employees lost their jobs.
The Renaissance Center
Suffice it to say that I did not find the coverage of the GM IPO as uplifting as I thought I might. In fact, I felt so viscerally upset by it that I had to turn it off. The coverage on CNBC came off like an infomercial rather than a legitimate news story. Even the NYSE got into the act, playing the sound of a Camaro engine revving at the opening bell on Thursday.
So GM did experience a renaissance of sorts on Thursday. But when I look at the Renaissance Center now, all I see is the big kid who pushed a lot of others down to get to the front of the line, and now wears a gold star for good behaviour. I wonder how those who lost their jobs and pensions because of the auto industry collapse felt watching GM’s corporate and union leaders celebrating? How about the people at Ford, who fixed their company before it imploded, but may not have a balance sheet as pristine as GM’s, since Mr. Mulally and company received no taxpayer subsidies?
While I’m happy that some of my neighbours were able to keep their jobs, I’m saddened by the irony of celebrating the phony rebirth a failed corporation. It would be different if GM had honestly rebuilt its business over time and was able to offer shares on its own merit. It didn’t. It filed for bankruptcy, took billions of dollars in taxpayers’ money, wiped out bond holders and rewarded behaviour that’s supposed to be punished in a true capitalist system. Now those of us who have no pension are struggling to save for our retirement on our own while being asked to fund the pensions of our neighbours as well. That just doesn’t seem right.
Hope for a Real Renaissance
I really would like to gaze across at the RenCen and see it as a true symbol of a capitalist renaissance. What would that look like? It would likely involve an economic climate with the following elements:
- Greater diversification of industries in this area, including tourism, transportation, science, engineering, and the arts.
- Corporations that get into trouble are put through a normal bankruptcy process that doesn’t involve taxpayers.
- Corporations that are deemed too big to fail are either broken up or we have an orderly wind-down plan in place for them. The trouble at the Big Three was years in the making. There was plenty of time to see it coming and come up with a decent plan to deal with it.
- Encourage new entrants into the industry. Reward those with the most innovative, cost-effective designs and business plans.
The Windsor-Detroit border crossing is one of the busiest in the world. We have a lot to offer geographically. It just seems like we should be able to revive our economy without relying on failed business models to do so.
That’s just my 2 cents. What’s yours?