Streetwise
Lauren Rudd
Sunday, November
16,
2008
Inability to Compete is Management Failure
The domestic automotive industry is not just in trouble, it
is being hoisted on its own petard of incompetency. Consider what John DeLorean,
a 17 year veteran of General Motors wrote back in 1979 in his book, “On A
Clear Day You Can See General Motors.”
“Our inability to compete with the foreign manufacturers is
more due to management failure than anything else. Past management spent our
lush advantage extravagantly...the system and management are stifling
initiative. Leadership and innovation are impossible...Not only is management of
no help, most of what they do is wrong...Isolated executives find their markets
taken away by competitors attuned to the wants and needs of the public.”
GM’s edifice of superiority began well before DeLorean. In
1953, during his confirmation hearing for Secretary of Defense, the
then-president of GM, Charles E. Wilson, was asked if it were necessary could he
make a decision that would be good for the country but bad for GM. He replied
“Yes, I could. But I can’t conceive of one because for years I thought what was
good for our country was good for GM and vice versa.”
In June 2000, GM CEO Rick Wagoner described a GM’s corporate
future as "fewer cars, more trucks." Ford's former CEO Jacques Nasser was busy
upgrading the décor on the corporate jets while the Ford Taurus, once the
best-selling car in America, was falling well behind the Toyota Camry and the
Honda Accord.
Auto executives are not alone in their abject disregard for
anything but short-term enrichment that is frequently personal in nature. Too
often companies have seen senior management indulge themselves as product lines
and markets deteriorated. That indolent, self-indulgent and fractious behavior
has resulted in the American public being subjected to a form of virtual
blackmail with corporate monoliths touting Armageddon and the loss of tens of
thousands of jobs if Congress does not start shoveling money their way.
“The lifeboat is coming. We just have to keep rowing,"
Chrysler Vice Chairman Jim Press said in a briefing for dealers that also
discussed the automaker's lobbying for government support. Oh and by the way,
Chrysler does not release financial information to the public. However, it is
more than willing to take public money with a smile and a tip of the hat.
Chrysler Vice Chairman Tom LaSorda has said that the lack of
disclosure is one of the strengths of both Chrysler and its owner Cerberus.
Cerberus is a secretive hedge fund chaired by former Treasury Secretary John
Snow and its board includes former Vice President Dan Quayle.
It seems that bailing out American International Group for
$150 billion so that its executives would not miss a spa treatment or golf date
has opened a Pandora’s Box. The latest at the trough is American Express, now
suddenly a bank holding company with a request for $2.5 billion.
The Federal Reserve has lent out approximately two trillion
dollars. No, we do not know where the funds were placed, or how they were used,
or if we, the taxpayers, will ever see a dime of our money again.
Ask yourself what would happen if we did not bail out the
auto industry? Most of its workers would likely find employment with foreign car
manufacturers. You know, the ones that are building plants in the U.S. designed
to keep costs low while turning out fuel efficient vehicles. The market for cars
will not go away, or the workers that make them, just the inefficient
manufacturers.
A free capitalist economy separates those capable of creating economic value
from those who are unable to compete and subsequently go out of business. From
an investment perspective, it is those efficient forward looking companies that
you want to seek out and invest in. Given today’s market environment, they
should be easier to find than ever, as we will see next week.
