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All four of my grandparents were lifelong General Motors employees and my father worked there when he was young. Accordingly, its recent collapse has been a topic of conversation in my family. Today, its market cap fell to 1.88 billion dollars. That means that my company, IAC, could buy GM with the extra cash sitting in its bank account. Insane.
Here’s the email conversation I had with my Dad today, in case you’re interested hearing a somewhat inside perspective.
Me: My take: take it to bankruptcy, pay the creditors, reorganize. No point in throwing money at something that’s broken.
Dad: Not as easy as it sounds. The late great USA. Dems owe the unions for votes. Reorganization has already been implemented. Legacy costs and union benefits costs are astronomical for Ford and GM. Toyota pays about $47/hr per employee, GM about $80/hr in salary for people WORKING NOW. Health care and retirement benefits are killers for US auto plants, not Jap plants because they are too new for retirees. Which Democrat is willing to tell the unions their negotiated contract is void? Not Obama. He’s too smart for that.
Me: Well, he’s got a smart team of economic advisers assembled. Hopefully people like Warren Buffet and Larry Summers can explain the reality of the situation in clear terms. GM is a health care charity. It needs to turn back into a business.
Dad: Your point that GM is a health care charity is exactly correct. When companies are businesses they do well and make money and everybody thrives. When I was a kid all my health care costs were provided by GM, never a nickel out of my parents’ pocket. GM was referred to as Generous Motors. Our country lived in the immediate post-war era which is almost incomprehensible to people today. No foreign competition (it’s hard to make stuff when someone is dropping atom bombs on you). Our country had a surplus of everything. A 4-year old car was usually in the junk yard or sold to used car dealers from the South. They called it planned obsolescence. All natural resources imaginable.
So the unions said we want more and we really don’t want to work and you can’t really fire us or we will strike and you will be out of business. I know — I was there on the production line turning out crap as a member of the union. So the companies treated the unions the way the drug dealer treats a high priced lawyer - merely a cost of doing business. All were happy for a while.
But as you know that scene did not last forever. But both parties lived in never never land and pretended that all would be OK forever.The government did not help matters either.
So here we are today watching the birth and death of a country and its industrial might. Maybe we are all to blame and just can’t see it. Maybe we became too successful and greedy and lazy. Of all the millions of people you know, do you know of anyone who works in an auto plant or in any capacity where they actually make something? Selling insurance and stock to each other doesn’t count.
The joke in Russia used to be, “We pretend to work and you pretend to pay us.” Maybe our joke should be, “We pretend we WANT to work and you pretend to WANT to pay us.”
A health care charity indeed.