Friday :: Jan 27, 2006

Is We Learning?

by Marie

What the hell has Detroit learned in over three decades? How many times does the American passenger vehicle industry have to go through boom and bust cycles before they simply admit that they aren’t interested in building anything but gas guzzling monsters that will become less and less in demand as oil becomes more and more precious? That they would be perfectly content to reap profits from ownership stakes in foreign automakers and financing the purchases of those vehicles (preferably domiciled offshore to avoid taxes).

My favorite cartoon from the 1980’s was two students sitting in the back of a college classroom with a professor at the blackboard drawing graphs. One of the students learns over and says, “Things? He’s talking about making things. I don’t want to make things, I want to make money.” That’s Detroit.

And they will make the most money off those “buy American” vehicles that the government will continue to buy even if there is nothing American about them except for the emblem slapped somewhere on the it. Once the transformation is complete, they won’t even have to bother having their corporate offices in Michigan. They too can move south for more clement weather (unless the effects of global warming speeds up, floods the south and Detroit turns into part of the tropics ).

They’ll be happy to continue supplying muscles vehicles for the Neanderthal portion of the US population and reaping the big profits from them. They don’t care who builds them or where they’re built as long as they are built at the lowest possible cost. And the worker squeeze is now on. It has practically become chic for US corporations to blame their problems on their “legacy pension and medical care costs.” What a load of crap -- they knew decades ago (actuaries are very competent) what the costs would be down the road and were supposed to fund those future costs. In the late 1990’s corporations began using “irrational exuberance” rates of return for the those funds. This allowed them to under-fund them in those years and that reduced cost increased profits to the corporations. Anybody (or conservative financial analysts like me) that read corporate 10K reports could see that this practice was creating a future disaster. Many professional pension and medical plan administrators and accountants issued warnings about it. Federal regulators, the FASB and the AICPA did nothing about it.

Detroit may not have learned how to build and sell reliable, fuel efficient cars, but they paid close attention to how the airline industry got rid of their legacy costs and won the first rounds of wage concessions (with more to follow). But unlike the airlines, Detroit can offshore all production work and therefore, ultimately will have more power over their workers.

Americans still harbor the fantasy that corporate America cares about workers. They never learned that the only reason corporate America became “kinder and gentler” was because they were forced to do so once workers became sufficiently organized and the New Deal ushered in legal protections for workers. In the collective opinion of America, corporations came to equal good, and only individual employees and unions could be bad. It was a major and expensive effort for California teachers, nurses, firemen etc. to push back and beat the Ahnold last year.. Unfortunately, the UAW has nothing left with which to fight. It’s thirty years too late to blame Detroit for not making enough good products. Once the union bosses and workers lost their souls and became Reagan Democrats, the die was cast.

Marie :: 12:23 PM :: Comments (7) :: TrackBack (0) :: Digg It!