Bookshelf
Trying to Turn the Corner
General Motors now supports five retirees for every active employee.
General Motors Corp.'s reporting of alarming fourth- quarter results yesterday underlined one salient fact about the trouble in Motor City: Of the Big Three auto makers, GM is in by far the biggest trouble. Ford Motor Co. has cash and Chrysler LLC has an Italian suitor ready to absorb it as a North American arm of its business. But GM -- which suffered a net loss of $9.6 billion last quarter, $30.9 billion for the year -- needs $2 billion from taxpayers next month, in addition to the $13.4 billion it has already received, or it's off to bankruptcy court.
In 1953, when the GM chief executive at the time, Charlie Wilson, told Congress that what's good for America is good for General Motors, the fate that the company currently faces was unthinkable. Back then, GM employed more people than lived in Delaware and Nevada combined, and the company owned about 50% of the automotive market. When President Dwight Eisenhower needed a defense secretary, he chose Wilson. GM unquestionably mattered.
Despite what legions of skeptics might believe, William Holstein thinks that's still the case. His "Why GM Matters" is well-timed: Plenty of folks would be relieved to hear a convincing case that counters the drumbeat of dire reports about GM. The figures can be daunting. The company now supports five retirees in the U.S. for every active employee. The pool of people collecting pensions from GM nearly equals the population of Wyoming and will likely exceed half a million in 2009. Production of the company's trademark products -- trucks and SUVs -- fell 70% in January. And it's hard to find evidence to counter the grim news.
Still, Mr. Holstein has taken on the task. A business journalist who has periodically written about the U.S. auto industry in recent years, he spent nine months in 2008 visiting the corporate headquarters and traveling to GM outposts in Europe and Asia. He interviewed a broad range of employees -- factory workers, engineers and top brass, including Chief Executive Rick Wagoner. While Mr. Holstein labored, GM ran out of cash.
As sometimes happens when a reporter is granted unusual access within a company, Mr. Holstein seems to have become a captive of GM's corporate thinking. On the basis of his reporting, the author says, he believes "that GM, with the benefit of federal loan guarantees, will reach a point at which it is very competitive." He adds: "Federal assistance will not be wasted."
Like Mr. Wagoner, Mr. Holstein argues that GM is still too big too fail -- he doesn't dwell on the possible benefits is company declares bankruptcy, sorts out its costs and returns to the marketplace. The carnage would simply be catastrophic, he says, if a company with 6,200 dealers, 47 assembly plants and 1,500 suppliers in North America were allowed to go under. "On a national scale, there are other multipliers to consider," he says. "If GM spends a dollar to buy a particular part, that dollar is then used to buy a subpart or to pay workers at the parts supplier, who go into their communities to buy food or housing."
Mr. Holstein supports this simple thesis by taking readers to places that GM loves to talk about: the studios where the Chevrolet Volt is being developed; the office in Shanghai from which the auto maker is refining its assault on the Chinese market; the design shop for the forthcoming Chevrolet Camaro. He even burns a chapter discussing the virtues of Onstar, the money-losing, subscription-based navigation and communications system that was once heralded by Mr. Wagoner as central to GM's future.
Mr. Holstein tells readers about people like Burt Wong, a 35-year-old vehicle designer who is celebrated in the China chapter for helping adapt a Buick model to meet local demand for gaudy luxury. Mr. Wong was one of the key people behind a global design project that resulted in a new Buick LaCrosse, due to the market this year, that is meant to appeal to Chinese and American buyers alike.
But Buicks and Camaros and plug-in Chevy Volts are all unprofitable ventures for GM. The author might have been better able to gauge whether GM will continue to matter if he had stopped by the treasurer's office -- the wheelhouse on GM's sinking ship. Fritz Henderson is barely mentioned in the book, even though he is the chief operating officer who has spent the past three years scrambling to fix broken operations such as the parts maker Delphi Corp., GMAC financing and Saturn Corp. Chief Financial Officer Ray Young, who couldn't convince the credit markets to lend GM money last summer, doesn't even make an appearance in "Why GM Matters."
We do meet Harry Clay, though. He is a GM assembly-line worker who builds station wagons in Lansing, Mich. Mr. Clay provides some insight into the sort of thinking that prevails at the company. "I can't blame it on the managers," Mr. Clay says. "I think it's a set of circumstances lined up like the perfect storm -- the economy, weakened dollar, a global system. And I blame the lawmakers." (The gripe against Washington by auto makers is that cries for help on trade policy, research subsidies and health care have been ignored, while environmental zealots have had a disproportionate amount of influence over the creation of costly emissions regulations.)
Mr. Clay is 34 years old. Depending on his employment history, he could be eligible for one of GM's gold-plated, union-mandated retirements in less than 15 years. Between now and then, if the company continues its present practices, he will pay little for health care and have the assurance that a bountiful pension will greet him as he settles in for most of the second half of his life.
But this sort of insupportable financial burden for the company does not draw Mr. Holstein's criticism. Like Mr. Clay, the author blames GM's woes on lawmakers -- and short-sellers, private-equity firms, Wall Street analysts, ill-informed reporters and villains from past GM management teams. But not the current managers and certainly not the United Auto Workers union. Mr. Holstein surely means well with "Why GM Matters," but at a time when it is essential for taxpayers to gain a clear understanding of what's at stake in the automotive crisis, it doesn't help to look at the matter through a rose- colored windshield. That approach is what helped Detroit drive straight into its current predicament.