I grew up in Flint, MI, and it has always been a General Motors town. When I was a kid, the city had more than 300,000, high employment and arguably the best Community School System in the world. I left in the late ‘60’s and returned in the late ‘70’s to a place that was a shadow of its former self.
Flint has always been a General Motors town. It grew because of GM, prospered because of GM and now it is close to death because of GM. The community of Flint has seen it all, and paid for it. And the country has helped pay for it as well:
- Between 1976 and 1996 GM was granted $1.8 billion worth of tax abatements and eliminated 40,000 jobs
- GM has not given a dime back
- In August 2008, GM got Flint’s OK for more abatements
As close as I can estimate, more than 80,000 people have been laid off since the late ‘70’s. This YouTube video gives you a feel for what I am talking about.
Over the years, high labor costs have been blamed for a lot of the Big 3’s woes, and the United Auto Workers have taken the heat. But the UAW didn’t get over on anyone. Management has always protected the right to run the business, and management explicitly agreed to the bargaining agreements that increased worker pay and benefits. When sales no longer supported these wage and benefits, management cut labor costs. To my knowledge, cutting executive pay was never discussed.
Over the last thirty years, the Big 3 have had quality problems and made poor decisions about products and markets. They’ve produced gas-guzzlers and lobbied the government against requirements for better fuel economy standards. Company leaders have shown little leadership in the global auto industry.
So last week the Big Guys from the Big 3 show up in Washington to press Congress for more taxpayer money. I agree with New York Times columnist Thomas Friedman, who says, “I don’t want to see Detroit’s auto industry wiped out, but what are we supposed to do with auto executives who fly to Washington in three separate private jets, ask for a taxpayer bailout and offer no detailed plan for their own transformation?”
To add insult to our injury, the Washington Post reported last week that these CEOs got defensive about the pay for senior management -- in the face of wage and benefit concessions by the UAW last fall.
It appears as if the bailout for the auto industry will happen. Too many other stresses on the economy exist to allow these major employers to slide into bankruptcy. My hope is that solid strings – ropes even – will be attached to any money they get from the government.
- Senior management should admit their responsibility in contributing to the mess
- They should back that up with executive pay reductions and a pay system overhaul
- GM should commit to a timeline for repayment of the “loan” with interest
- They must develop a business strategy focusing on cost-effective, environmentally friendly automobiles
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