Monday, March 30, 2009

Give the Big Three A Break

Give the Big Three A Break

I happen to have the good fortune of being a homeowner in the Detroit suburbs and former employee of an automotive supplier. I quit that job four years ago disgusted by the hyper-conservative (by conservative I mean eager to preserve the status quo, not necessarily politically conservative), hyper-cautious, cowardly decision-making practices that inevitably prevail (I managed a small electronics engineering group). Automakers always want to stick with whatever makes money today, and never want to take a chance on what might be profitable tomorrow. And they are relentlessly (mindlessly?) focused on cutting production costs at the expense of investing in innovation. I had smart, hard-working engineers in my group who were eager to attack tough problems. But they hardly ever got the chance because my bosses just wanted to wring every dollar they could out of the products we already had and offer nothing new even when our customers (Ford, GM, Chrysler, Audi, VW, etc.) specifically asked for it. We perpetually tried to re-sell the customer a product that wasn't up to the customer's demands by repackaging and "repositioning" it -- that is telling the customer the product was something it wasn't. So we spent a lot of time tweaking superficial details instead of getting in front of the real problem that confronted us: an aging product line.

A lot of smart talent was wasted because it was underutilized even when we had the money to act. Now the money is gone, and most of the talent that could leave did. What's left are those that couldn't get out (not necessarily because they're incompetent, though some are, but perhaps their families are settled here and they didn't want to bail on the devil they knew in exchange for one elsewhere they didn't know; or maybe their homes are "underwater" and moving is no longer an option).

I remember visits to the assembly lines where our products were used, and sometimes failed. I would accompany engineers on troubleshooting missions. The people I encountered on the assembly lines worked hard -- physically hard -- often in a noisy, rank environment. Many were older than I, and looked a lot more tired. But they were always eager to help us geek engineers get our product working, even if it meant added work and inconvenience for them. And they didn't do it because someone told them to. They smiled and offered to help, and they offered useful suggestions for how to make the product better and in turn improve the quality of their product. They care about what rolls off the line, I have no doubt about that. They earn their pay, and they earn the profits that pay much larger salaries to others, too. Standing next to a cacophonous testing bay where cars slid every thirty seconds onto rollers and were accelerated to 70 m.p.h., surrounded by eye-watering smoke from burning rubber, I realized pretty soon where the money came from for my cushy salary. The line workers always knew it, yet they never seemed to make that an issue, they just wanted to keep working. (And this wasn't considered a tough place to work, try slamming heavy, unwieldy dashboard assemblies into place all day.)

So, while my group spun its wheels making cosmetic changes on an outdated product, and assembly line workers busted their humps three shifts a day, management followed the quick buck doing the same thing my engineering group did: repackage and reposition. They produced the gas guzzling SUV's that indulgent consumers awash in credit demanded. There never seemed to be a plan for what to do if gas prices suddenly spiked and consumers decided they preferred something less profligate. And we all knew gas prices would spike.

And then gas prices did spike and I thought, "Hallelujah!" Detroit's finally going to start selling their little cars. And there was a brief blast of enthusiasm for them. Until the economic crisis kicked in and sales dropped 30%, 40%, 50% compared to just a year ago (WSJ: Auto Sales).

Well, the assembly line workers didn't induce the economic crisis; neither did the engineers. Sure, the Big Three would have been in trouble if gas prices remained high, but they would have bumbled their way along as they always have. They would have contracted, as they have been for years, but they wouldn't have gone over a cliff. It was not the Big Three that suddenly did themselves in (although executive incompetence was slowly dragging them down) it was a bunch of criminally greedy bankers and securities traders that sent us all over a cliff. But the criminally greedy bankers are not the ones crashing on the rocks. And to add further insult to injury, unions -- the only thing that ever moved working stiff living standards in a positive direction -- are being demonized. In the past, union wages might have gotten out of hand for some workers who could rack up a lot of overtime, but those are exceptions, and management -- hungry for for quick profits -- often made incremental wage concessions to unions while at the same time outsourcing thousands of their jobs (see UAW Timeline). Pensions got out of hand because management and politicians (bankrolled by management) wouldn't support Walter P. Reuther's plan to consolidate and nationalize pensions so younger workers would subsidize older ones. I agree union negotiators sometimes overreached, but it was while they watched executives overreach several orders of magnitude more severely. Still, unions are not, and never were the problem with American industry. It's greedy incompetent, lazy, parasitic executives that sold us out for a quick buck and brought American hope for future prosperity to its knees.


  1. From everything that I have seen of most corporations, and I have seen a few (Wall Street, Energy, Manufacturing, Government contractors), they have become hiding grounds for overpaid, overeducated managers who focus on budgets rather than on their people and their product. I, for one, lay a significant part of the blame on our culture and educational system that is more adept at creating managers rather than engineers. That is why I believe that any long-term change, if one is possible, will not come in a year or two but in decades and will occur only once we have a society focused on creation and innovation rather than on increasing shareholder value (which as Steve Jobs has aptly demonstrated is also better served via a better product).
    I feed sad for Michigan and manufacturing in this country. While it appears Wall Street is critical to fix the immediate crisis (and it is), in the long run it will be manufacturing that will save us. To parapharase Mark Twain, we cannot all pay our bills by doing each others laundry.
    Thanks for saying what needs to be said. Good luck to you, your beautiful state, the people of Michigan and the Big 3.

  2. Thanks for your thoughts, I especially agree with regard to manufacturing slipping away. It was our long term path to broad economic prosperity.

  3. I just routed myself here via your Reader Comment to the June 11, 2009 New York Times online article "U.S. Takes on Insular G.M. Culture".
    Your views, all that you say, is as accurate and succinct as anything I've read. Maybe more so. I am a designer who returned to central Ohio after 20 years in Traverse City. While I didn't work in or with the auto industry, your observations could be transposed verbatim to virtually any major corporate or institutional client I have ever worked with. At the top (or more precisely among the mid-level managers on up to the top), it has always been about not rocking the boat, which in the design and creative process is deadly.
    Wonderful blog. Thank you.

  4. That's why darwinain capitalism time and time again is the best possible economic model. I beleive that sefety nets are needed toc acth the fallen once there out, but all these organizations have for years sheltered behind government, regulatory and other structural wind breaks. Think of all that talent that would have been released to form new and budding companies, if the too big to fail could actually be left to fail. The true waist is all those who have been trapped in the dinasours, thinking they wree safe. In other fearicly competative parts of the economy, America is a world champion value producer, with world class products, and business models.

    As to who runs organizations, some lessons in industrial history is in order, smaller and younger companies tend to be run by engineers, but larger one's are not, that's because management is a skill set in of itself. Every social worker i've met is convinced that the worlds problems could be solved with more social workers, ditto for librarians and ditto for engineers.

    Lastly, the obsession with manufacturing, from an economists point of veiw, is a parrelel to the shortsightedness, you witnessed with the management at your former company. A focus on what worked at some period in the past, and a yearning to bring it back, to current conditions that are very different. Manufacturing, like agriculture before it, and Information Technology now, is simply a phase in a sequence of economic evolution. Like in agriculture before it, productivity and efficiency gains have been steadily shrinking the required manufacturing base. Look around you, we have no shortage of stuff, the old saw about making things is rubbish, the same was said for growing things, and it will be soon said for thought work as well. So the complaint is about who's making it. Most importantly, what you make is more critical than how much manufacturing you have.

    Beyond the prowess of a Beoing, Caterpillar, medtronics, and apple. Google, or Pixar, produce world class products with huge margins and global appeal, that maintain high wages for their workers. They have very little competition. The millions of people worldwide who will pay to use their products, will be busy producing the other parts of that equation, from the DVD players on down to the fabric in the cinema seats. All those others have much more competition and lower margins subsequently lower wages. It is a very well established system of weralth creation via free trade, and we have bennefited massively from it. It is a profound shame that very few Americans really understand the extent to which so much of our prosperity has been built on open systems and open trade. But that is a question for our education system.

  5. Thanks for the comments.

    By way of reply to the last, I just added a post where I attempt to clarify my pro-domestic manufacturing, anti-free trade position. Find that here:

    I've gotta say I really take issue with "It is a profound shame that very few Americans really understand the extent to which so much of our prosperity has been built on open systems and open trade."

    Define prosperity. Do you mean a tiny minority benefiting at the expense of the vast majority? As far as I can tell, that's what has happened since our trade deficits really went through the roof (even excluding oil). Middle class wages have been stagnant for 30 years!