"...for years I thought what was good for the country was good for General Motors and vice versa.''
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GM President Charles E. Wilson before congress 1953
"What's good for General Motors is definitely not good for America..."
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San Francisco mayor Joseph Alioto before congress, 1960s
Readers at DKos know well that GM (along with Ford and Chrysler) are teetering on financial collapse and will seek government bailout - with the news yesterday that GM is fully drawing down its existing lines of credit, it is left with income from dwindling sales and asset sales to generate liquidity, at a time when sales are collapsing (the biggest Chevy dealership chain in the nation closed its doors the other day). There is a lot of discussion over Twitter about whether GM might just flop.
I am no GM fan, but the potential collapse of GM adds to my jitters about this economy. Still, there are ways the situation could turn so that the Charles E Wilson vision supersedes the Joe Alioto one. The key concept to me is this: we get an equity or management stake for a period of time in GM in exchange for financial help. More below the fold.
First, the news:
In parallel to the big Wall Street bailout, we have been hearing murmurs about much smaller bailouts of the Big 3 automakers recently. I knew this was bad news on the horizon, but had not paid much attention - till I was alerted to this news via discussion threads on twitter:
GM Empties Credit Facility
At present, GM has no lines of credit open and is totally dependent upon income from sales to stay afloat, or from sales of large subsidiaries or facilities to generate `liquidity', at a time when sales are down, and the largest Chevy dealership chain in the country closed its doors. There is definitely a backroom buzz about the possibility of Chapter 11 for GM.
It has been discussed quite a bit recently, in the news and here on DKos, that the Big 3 will come with hands extended to congress, to access credit lines in the tens of billions. With the scale of the bailout, that sounds like small change in some ways, but it is still remarkably large and characteristic of the difficult economic times we now face.
Next, the quotes - and why I have been no fan of GM
Charles E Wilson
The quote from Charles E Wilson has an interesting context - he was in line to be Dwight Eisenhower's Secretary of Defense, and held LOTS of GM stock, so was asked about the potential conflict of interest in becoming a high government official:
Wilson's nomination sparked a major controversy during his confirmation hearings before the Senate Armed Services Committee, specifically over his large stockholdings in General Motors. During the hearings, when asked if as secretary of defense he could make a decision adverse to the interests of General Motors, Wilson answered affirmatively but added that he could not conceive of such a situation "because for years I thought what was good for the country was good for General Motors and vice versa." Later this statement was often garbled when quoted, suggesting that Wilson had said simply, "What's good for General Motors is good for the country." Although finally approved by a Senate vote of 77 to 6, Wilson began his duties in the Pentagon with his standing somewhat diminished by the confirmation debate.
Wilson had done a great job in harnessing GM for the defense industry needed to win World War II, and that is the background for Ike's nomination.
Even at that time, the notion that what was good for GM was good for America was not universally accepted. Those of you who have seen the excellent PBS documentary `Taken for a Ride' will know what I am talking about.
That documentary tells the story of how GM with partner companies set about to dismantle large tracts of mass transit in the US, including the famous Los Angeles red line trolley. The strategy was enacted in the 1920s by the GM president and later philanthropist Alfred P. Sloan, who saw at the start of the 20s that just 2 of 10 americans had cars and that without breaking US mass transit he could not readily advance that ownership. The synopsis of the strategy was this: where they could do so, GM mounted a two pronged attack on trolley lines: 1) buy them up from the cities, make the service reduced and spotty, and replace them with noisier, exhaust spewing buses with a deliberately lousy schedule so that GM made money in the interim off the buses themselves (and owned the National city Bus line that promulgated this problem!), and 2) mount a propaganda campaign about the need to modernize the trolley lines.
As an added bonus, the interstate highway system was initiated in the 1950s by the Eisenhower administration, with national security being given as a STRONG reason for its necessity. It has not gone unnoticed that Ike's defense chief then was former GM President Charles Wilson. More on this below.
The teardown of the trolley systems was pretty complete by the end of the 1940s and early 1950s. While we cannot attribute all of Los Angeles's sprawl and tangled, jammed freeways to the car culture spawned by Alfred Sloan's vision, it is interesting to contrast that city with San Franciso, where I live, which is compact (it came of age in the mid-1800s with the gold rush), and has been named the most walkable city in the US.
Enter Joe Alioto.
Joseph Alioto, former mayor of San Francisco
The forces seeking to expand the interstate highway system were relentless, declaring eminent domain in city after city and pushing through the interstates. Now I use the interstates a lot, don't get me wrong. But it is undeniable that the building of the interstates has helped proliferate the car culture and in many cases created urban eyesores, such as the way Interstate 5 rips right through the narrow city of Seattle and effectively divides it in two.
What Alioto did was to say "NO". He famously said the above quote to congress and successfully fought the expansion of the interstate into San Francisco (I80 ends as the Bay Bridge enters San Francisco). He said (I paraphrase) `If you want to come to our beautiful city, do so, drive through our neighborhoods' but NO to any big interstate running through the most famous parts of the city. (Ultimately I280 does take a brief cut through the southern tier of the city, and US 101 is a pretty big freeway that takes you from the bridge south, but in the bulk of SF there are NO freeways, and the Loma Prieta quake of 1989 did away with the eyesore Embarcadero double decker).
In the intervening years, GM has not always been wonderful. Michael Moore crested to fame of course with his documentary Roger and Me, assailing the plant closings with jobs sent abroad in his hometown of Flint MI, and chasing down Roger Smith, the GM chairman to discuss his union busting tactics and factory closings.
Clip from "Roger and Me"
We went to war in Iraq, which has been confirmed to have something to do with oil, and what did GM do? Introduce the gas guzzling Hummer 2 to great fanfare!
GM Hummer 2
California tried to get the automakers to build zero emission cars, and GM built what is hailed as a great electric car, the EV1, but they secretly HATED it!
Trailer for ``Who Killed the Electric Car''
GM, Ford, Chrysler (and Toyota and others) have REPEATEDLY fought increases in fuel mileage standards over the years.
And now, to add insult to all this injury, the current GM vice-chair for global product development is, like Sarah Palin, a global warming denier!
I will add my own personal observations from years of travel and rental cars, which is that GM cars like so many American cars, generally lack the attention to detail and integrated assembly practices in manufacture that make, e.g., Hondas and Toyotas such great cars to own and drive in my opinion.
Put all these complaints in a row, and you find me lining up behind Joe Alioto, ready to yell at the federal government for even considering a massive loan to GM.
Denouement: How what's good for GM COULD be good for America
The culture for innovation at GM
GM, far more so than Ford and orders of magnitude more so than Chrysler, has maintained a genuine and innovative research and engineering culture.
For example, when the cobalt prices in the Congo spiked in the early 1980s, threatening to multiply the production expenses for electric motors used in cars dramatically, GM research scientists pioneered the development of a new neodymium-iron-boride permanent magnet that beat the socks off those based on samarium and cobalt.
The EV1
That translates to cars. The EV1, while not universally praised, was quite a car and fully developed by GM. Prior to the new GM hybrids such as the Saturn Vue, all the hybrids out there were based upon the excellent Toyota technology - Honda licensed it for the Civic and Accord hybrids, Ford licensed it for the Escape SUV. GM developed their own version of hybrid technology. To that they added some innovative features (standard on the big SUVs like the suburban) of resting cylinders that were not needed at cruising speed. They are, to my knowledge, the only company to use this.
And, of course, there is the Volt. I will admit, the prospect of the Chevy Volt is the first thing to have me excited about American cars in, well, since I was a kid loving muscle cars in the 1960s.
The Chevy Volt
It has been diaried many times here at DKos (a recent one is here), but the Volt, due in 2010, is a really bold concept - a hybrid car for which the internal combustion engine is NOT central, and for which the range problem of pure electric vehicles is overcome by a gasoline driven generator that charges the batteries when driving.
The possibility of 100 miles per gallon off this baby is really in reach.
And to return to Michael Moore and Flint Michigan?
GM wants to build a new plant in Flint to manufacture the new electric motors for the Volt!
Now that is nice, but truth in advertising - the $370 million plant will retain just 300 jobs. Nice, but I am sure the big guy from Flint will not get overly excited about the net impact of the plant. Still, it is a nice touch.
The twin needs of reducing dependence upon oil and mitigating, if is not too late, climate change
We can add to the discussion here the concerns that we as a nation, for our security, and for our economy must reduce our dependency upon oil (forget the foreign label - we have just got to cut it out!).
And climate change is really upon us. As noted, depressingly, on Friday by Occam's Hatchet,climate change may be accelerating much faster than we thought. James Hansen has exhorted the next POTUS and congress to act quickly:
The difference is that now we have used up all slack in the schedule for actions needed to defuse the global warming time bomb. The next president and Congress must define a course next year in which the United States exerts leadership commensurate with our responsibility for the present dangerous situation.
All of these things are, perhaps fortuitously, intertwined. If we turn to alternative energy and transportation technologies, we can as Barack Obama says, generate a new economy and LOTS of new jobs in this country while driving down emissions. It is a challenge AND an opportunity.
What then from GM (and Ford and Chrysler)?
Clearly, there are still lots of jobs in this country associated with the Big 3, even with the shipping of factories abroad. Their collapse would be a huge blow to our economy. We have every reason to consider seriously helping them.
But when we helped Iacocca and Chrysler in the early 1980s, we only asked that he pay the loan back and get the company back on track, which he did, at least financially. I know the political - and environmental - climates at the time were different, but we should have gotten back more from Chrysler than crappy K-cars, wooden paneled LeBarons, and the first impetus to get Americans onto SUVs. Chrysler, you may recall, bought up Americah Motors in 1987 and used the Jeep line as the latest version of big cars to sell to Americans once the oil lines of the mid 70s were a thing of memory.
If GM, Chrysler, Ford want help from the American people this time, we need to demand something in return. We need a stake in the management, and perhaps equity, of these corporations. With that leverage, we need to demand that they make cars that reflect the needs of our time (low emissions, high mileage cars like the Volt) and that to the extent we can avoid penalties associated with the worst aspects of the trade treaties we were locked into by congress and Clinton in the 90s, we need to demand that those companies build new factories to make those cars in the US.
Once the companies are reorganized to make cars like this, once the American economy is back on its feet, once we see emissions of greenhouse gases going down dramatically, then we can consider relenting some of our ownership or management stake in these companies.
To those would say this is too big an intrusion on sovereign multinational companies, I have to say this: fuck free market ideology. Free market ideology has gotten into this deep economic hole. We need to use the leverage of these federal bailouts to torque the economy in the direction that will be sustainable for our citizenry and the climate crisis.
If we do that, then what's good for GM will be good for America.