The Joys of Ownership

Like most Americans, I’m now a reluctant owner of a once powerful automobile company. My investment has been made for me (and it will likely continue to mabe made in the years ahead), but profits are about as likely as UAW members voting Republican.

I’ve written previously about GM’s decline—a decline that began when hubris took the place of good management decisions and when an deeply entrenched corporate culture refused to adapt to a changing market and competitive landscape. In actuality, it's a very sad story, but that doesn’t relieve the company and its unions from suffering the consequences. It looks like they won’t, and that’s a really big problem.

Writing in the NYT, David Brooks identifies the core problem precisely—a company culture that is incapable of change:

Bureaucratic restructuring won’t fix the company. Clever financing schemes won’t fix the company. G.M.’s core problem is its corporate and workplace culture — the unquantifiable but essential attitudes, mind-sets and relationship patterns that are passed down, year after year.

Over the last five decades, this company has progressively lost touch with car buyers, especially the educated car buyers who flock to European and Japanese brands. Over five decades, this company has tolerated labor practices that seem insane to outsiders. Over these decades, it has tolerated bureaucratic structures that repel top talent. It has evaded the relentless quality focus that has helped companies like Toyota prosper.

As a result, G.M. has steadily lost U.S. market share, from 54 to 19 percent. Consumer Reports now recommends 70 percent of Ford’s vehicles, but only 19 percent of G.M.’s.

For all of the fanfare, President Obama’s rescue plan for GM is DOA. Brook’s writes:

[T]he elemental facts about the Obama restructuring plan are these: Bureaucratically, the plan is smart. Financially, it is tough-minded. But when it comes to the corporate culture that is at the core of G.M.’s woes, the Obama approach is strangely oblivious. The Obama plan won’t revolutionize G.M.’s corporate culture. It could make things worse.

First, the Obama plan will reduce the influence of commercial outsiders. The best place for fresh thinking could come from outside private investors. But the Obama plan rides roughshod over the current private investors and so discourages future investors. G.M. is now a pariah on Wall Street. Say farewell to a potentially powerful source of external commercial pressure.

Second, the Obama plan entrenches the ancien régime. The old C.E.O. is gone, but he’s been replaced by a veteran insider and similar executive coterie. Meanwhile, the U.A.W. has been given a bigger leadership role. This is the union that fought for job banks, where employees get paid for doing nothing. This is the organization that championed retirement with full benefits at around age 50 …

Third, the Obama approach reduces the fear that impels change. The U.S. government will own most of G.M. It would be politically suicidal for the Democrats, or whoever is in power, to pull the plug on the company — now or ever. Therefore, the current managers can rest assured that they never need to fear liquidation again …

Fourth, the Obama plan dilutes the company’s focus. Instead of thinking obsessively about profitability and quality, G.M. will also have to meet the administration’s environmental goals. There is no evidence G.M. is good at building the sort of small cars the administration demands …

Fifth, G.M.’s executives and unions now have an incentive to see Washington as a prime revenue center. Already, the union has successfully lobbied to move production centers back from overseas. Already, the company has successfully sought to restrict the import of cars that might compete with G.M. brands …

Sixth, the new plan will create an ever-thickening set of relationships between G.M.’s new owners — in government, management and unions. These thickening bonds between public and private bureaucrats will fundamentally alter the corporate culture, and not for the better …

But not to worry, my fellow Americans and I now own a once viable company, and it looks like we’ll be an owners for the rest of our days. Return on investment—yeah … right.